Is Desktop Publishing Taxable?*
So, is designing business cards and a brochure for a client taxable? It's a service (design) and a tangible product (the cards and brochure). One state may view your professional services as exempt from sales tax while another may see the combination of services and tangible property as a wholly or partially taxable property.
In the State of Maine, for example, according to provisions applicable to Advertising Agencies and Graphic Designers, your fabrication services might not be subject to sales tax if the client supplies all the materials. Minnesota specifically lists graphic design studios, desktop publishers as being possibly exempt from sales tax for some advertising and creative promotional services including creation of ads, brochures, fliers, and table tents, if certain critera are met.
New York State also exempts some sales of promotional materials (brochures, etc.) whether the client directly or indirectly supplies the materials. For those states where I was able to decipher the regulations, it would seem that most services/products produced through Desktop Publishing are usually subject to sales tax.
Are you a newsletter publisher (a publication for which you charge a per issue or subscription rate)? In some states newspapers are exempt from sales tax but that exemption may or may not extend to newsletters. In the State of Massachusetts, "Periodicals such as newspapers and magazines are generally exempt. Newsletters, however, generally are not treated as newspapers and may be taxable."
Texas (where I live) specifically includes the following services as taxable: creating Web pages, word processing services, producing reports from client's data, and scanning documents. If you have any doubts about what is or is not taxable for your business, contact your local tax office for clarification.
Exemptions and Collections
You can also apply for a sales tax permit or exemption which allows you to purchase some items without paying sales tax yourself. These might be materials that you will resale (with tax) to customers, such as special paper purchased for creating newsletters or brochures.
You should also contact the taxing authority in your state to determine whether or not you must impose sales tax on sales to customers outside your own state. This too can vary.
Once you collect the tax from clients, what do you do with it? How you handle local and state taxes is determined by where you live. The Department of Revenue or other appropriate taxing authority for your state can tell you what forms you need, how often and where to pay collected sales tax.
Some State Web sites have rules online describing what is taxable, downloadable forms, local tax rates, and other useful resources so check the sites for this information as well as other state taxes that your business may be required to pay. Many states have both official regulations and plain language FAQs and outlines.
US State Web Sites | Canadian GST/HST Taxes
Records/Income | Expenses & Deductions | Income Tax | Quarterly Taxes | Sales Tax
Freelance Design > Starting a Business > Taxes
*This feature deals primarily with procedures and resources for US businesses. For other countries see the table on page one.
IMPORTANT DISCLAIMER: Information in this feature article or contained in the links is provided only as general guidance. Neither About.com nor this Guide can vouch for the accuracy of the advice offered. For specific advice and requirements for your business, please seek the advice of the IRS (or the taxing authority in your country) and/or a qualified attorney or accountant.
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