Photographers - North Carolina Department of Revenue

Photos
h
andd Photographers
h
h
Revised 3.3.2015
The NC Department
Th
D
t
t off R
Revenue provides
id thi
this iinformation
f
ti as a
courtesy to help keep you informed. As tax laws change, the
application of the information provided may change as well. This
information is general and summary in nature, and should not be
construed as advice for your specific situation. If you would like to
obtain specific
p
tax advice which is bindingg on the Department,
p
, you
y
may follow the procedure for requesting a letter ruling, which is
located at www.dornc.com.
2
• Business Registration
• Photos and Photographers
• Sales
S l & Use
U T
Tax Obli
Obligations
i
•
•
•
•
Privilege Tax
Withholding Tax
Record keeping
p g
Resources
3
For the
updates
in
h latest
l
d
North Carolina Tax Law that
mayy effect yyou and yyour
business, please sign up for
E-Alerts at:
http://www dornc com/el
http://www.dornc.com/el
ectronic/taxupdates.html
4
5
Business Registration
• Complete Form NC-BR, Business Registration Application for
Income Tax Withholding, Sales and Use Tax, and Machinery and
Equipment Tax
• Register using one of the following methods:
• Register
R
O
Online
l
• Go to http://www.dornc.com/electronic/registration/index.html
• Use Web Fill
Fill-In
In Form
• Go to http://www.dornc.com/downloads/sales.html > NC-BR>web fill-in to
enter information online and print a completed form to mail to the Department
• Fill out Paper Form
• Order online at http://www.dornc.com/forms/order.html ; or”
• Pick up Form NC-BR from one of our service centers
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Business Registration
Online
Benefits:
• Free
• Easy step-by-step
instructions
• Receive account number
in minutes
http://www.dornc.com/electronic/registration/index.html
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Business Registration
• Business Registration Application for Income Tax
Wi hh ldi SSales
Withholding,
l andd U
Use T
Tax, andd M
Machinery
hi
andd
Equipment Tax
8
Business Registration
Form NC-BR Sales and Use Tax Section, and Machinery and Equipment Tax Section
9
Understanding Sales & Use Tax Obligations
10
Sales and Use Tax
• Every person engaged in business in North Carolina
is required to collect and pay sales or use tax on
retail sales or leases of tangible personal property
and certain digital property not specifically exempt
by law.
• Some services are also taxable.
11
Sales and Use Tax
• Use taxes are due by businesses on tangible personal property and certain
digital
g property
p p y ppurchased or leased inside or outside this State that is
stored, used, or consumed in North Carolina. Use tax is due on taxable
services sourced to North Carolina.
– For example: A restaurant in N.C. buys an oven from a Virginia vendor. The
Virginia vendor ships the oven to the restaurant in N.C.
N C and does not charge tax
tax.
The restaurant in N.C. owes use tax. The vendor is not obligated to charge N.C.
sales tax if he does not have a physical presence in this state.
• Use Tax rates are the same as sales tax rates
• Taxpayer can claim a credit for sales or use tax due and paid to another state
if other state allows a similar credit to NC.
• Businesses report use tax on Form E-500, Sales and Use Tax Return
• Businesses not registered to remit sales and use tax must register by
completing Form NC-BR, Business Registration Application for Income Tax
Withholding, Sales and Use Tax, and Machinery and Equipment Tax.
12
Sales and Use Tax
Tax Rates:
• General state rate: 4.75 %
•
•
•
•
•
•
Sales and purchases of tangible personal property not subject to a preferential rate.
Receipts from leases/rentals of tangible personal property
Receipts
p from rentals of hotel/motel rooms, lodgings,
g g etc.
Receipts from laundries, dry cleaning
Receipts from satellite digital audio radio service
Certain digital property that is delivered or accessed electronically,
electronically is not considered
tangible personal property, and would be taxable under Article 5 if sold in a tangible
medium.
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Sales and Use Tax
Local and transit rates of sales and use tax as of
October 1, 2014:
2% - 72 counties
2.25% - Alexander, Buncombe, Cabarrus, Catawba, Cumberland, Davidson,
Duplin, Edgecombe, Greene, Halifax, Harnett, Haywood, Hertford, Lee, Martin,
Montgomery New Hanover
Montgomery,
Hanover, Onslow
Onslow, Pitt
Pitt, Randolph
Randolph, Robeson
Robeson, Rowan
Rowan, Sampson
Sampson,
Surry, and Wilkes
2.5% -Mecklenburg County (2% local rate and 0.5% transit rate of sales and
use tax)
2.75% - Durham & Orange Counties (2.25% local rate and 0.5% transit rate
of sales and use tax)
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¾ Sales of frames, films and other articles by photographers, photo finishers or others
to users or consumers are subject to the 4.75%
4 75% general State and applicable local
and transit rates of sales or use tax.
•
Gross receipts
G
i from
f
sales
l off photographs
h
h iincluding
l di allll charges
h
ffor ddeveloping
l i or
printing by commercial or portrait photographers or others are subject to the
4.75% general State and applicable local and transit rates of sales or use tax. Taxable
gross receipts include sitting fees charged to a customer who ultimately purchases
photographs or other tangible personal property.
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•
Digital
Di i l code
d as defined
d fi d pursuant to G.S.
G S 105-164.3(7a)
105 164 3(7 ) is
i a code
d that
h
gives a purchaser of the code a right to receive an item by electronic
delivery or electronic access. A digital code may be obtained by an
electronic means or by a tangible means.
means A digital code does not
include a gift certificate or a gift card.
•
Delivered
D
li
d or accessedd electronically
l
i ll means ddelivered
li
d to, received
i d bby or obtained
b i d bby
the purchaser by means other than tangible storage media. Delivered
electronically is delivery by download, email or other method while
accessed electronically is delivery by online access generally
accompanied by a password or digital code.
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¾ The
andd applicable
Th following
f ll i digital
di i l property is
i subject
bj to the
h 4.75%
4 75% generall State
S
li bl
local and transit rates of sales and use tax: (1) an audio work; (2) an audiovisual
work; (3) a book, a magazine, a newspaper, a newsletter, a report, or another
publication; (4) a photograph or a greeting card.
card
¾ The 4.75% general State and applicable local and transit rates of sales and use tax
applies
li to digital
di i l property that
h is
i delivered
d li
d or accessedd electronically,
l
i ll iis not
considered tangible personal property, and would be taxable under Article 5, Sales
and Use Tax, if sold in a tangible medium. The tax applies regardless of whether the
purchaser of the item has the right to use it permanently or to use it without
making continued payments.
http://www.dornc.com/taxes/sales/impnotice_digital_property09.pdf
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•
•
A purchaser receives digital property when the purchaser takes possession of the property or makes first
use off the
comes first.
h property, whichever
hi h
fi (skip
( ki space))
A sale of digital property is sourced as follows:
• (1) When a purchaser receives digital property at a business location of the seller, the sale is sourced
to that business location.
• (2) When a purchaser or purchaser’s donee receives digital property at a location specified by the
purchaser and the location is not a business location of the seller, the sale is sourced to the location
where the purchaser or purchaser’s donee receives the product.
• (3) When (1) and (2) do not apply,
apply the sale of digital property is sourced to the location indicated
by an address for the purchaser that is available from the business records of the seller that are
maintained in the ordinary course of the seller’s business when use of this address does not
constitute bad faith.
• (4) Wh
When (1)
(1), (2)
(2), andd (3) ddo not apply,
l the
h sale
l off di
digital
i l property iis sourcedd to the
h llocation
i
indicated by an address for the purchaser obtained during the consummation of the sale, including
the address of a purchaser’s payment instrument, if no other address is available, which use of this
address does not constitute bad faith.
• (5) When (1), (2), (3), and (4) of this subsection do not apply, including the circumstance in which
the seller is without sufficient information to apply the rules, the location will be determined based
on the address from which the digital good was first available for transmission by the seller.
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¾ Purchases by commercial or portrait photographers of items they use
in their business are subject to the 4.75% general State and applicable
l l andd transit
local
i rates off sales
l andd use tax unless
l exempt bby llaw.
Examples are general office supplies like desks, chairs, pens, staples,
paper clips, etc…
¾ Purchases by commercial or portrait photographers of machinery or
machinery
h
parts or accessories usedd in the
h manufacture
f
off
photographs are exempt from sales and use tax and subject to the 1%
pprivilege
g tax with a maximum tax of $80.00 pper article.
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¾ A sitting fee charged to a customer who does not purchase any photographs or other tangible
personal property is not subject to sales or use tax.
¾ A copyright fee that entitles a purchaser the right to reproduce a photograph does not
constitute part of the gross receipts from the sale of the photograph and is not subject to
sales or use tax when the charge is separately stated on a customer’s invoice and in the
vendor’s
d ’ records.
d
¾ Sales to commercial or portrait photographers of materials which become an ingredient or
componentt partt off th
the fifinished
i h d picture
i t iincluding
l di mounts,
t fframes andd paper are nott subject
bj t
to the tax.
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F
Form
E-500.
E 500
21
• Breakdown of county tax required if sales in
more than one county or if filing online.
– Form
F
E – 536 (S
(Schedule
h d l off County
C t Sales
S l andd U
Use T
Taxes))
g p has in-store pphoto
• In JJanuaryy 2014,, XYZ Photographer
sales of $500.00 and digital photo sales of $224.73. The
store is located in Wake County (6.75%). The digital sales
were emailed to the customer and were downloaded in
Edgecombe county (7%).
• Complete the monthly E-500 form and E-536 form for
XYZ Photographer for the month of January 2014.
23
Make sure you provide your legal
name,, address,, pperiod and ACCOUNT
NUMBER for accurate processing.
NOTE: ALL gross receipts should be
reported.
24
Taxable purchases and receipts should
be
applicable
b broken
b k down
d
li bl tax rates.
25
Make sure you sign the return and
provide
d a working
k contact number.
b
John Doe
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Filing Frequencies
• Quarterly: taxpayers who consistently owes less than $100 per month
• Reports and payment are due by the last day of the first month after the quarter ends
(April, July, October, January)
• Monthly: taxpayers who consistently owes $100 but less than $20,000 per
month
• Reports and payment are due by the 20th of the following month
• Monthly (with Prepayment): taxpayers who consistently owes at least
$20 000 per month or more
$20,000
• Reports and balance of tax owed are due by the 20th of
the followingg month
• Prepayment due on the 20th of each month
• Taxpayer may choose to pay:
• 65 percent of the amount of tax owed the previous month
• 65 percent of the amount of tax owed for the same month in the preceding year
• 65 percent of the average monthly amount of tax owed in preceding calendar year
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http://www.dornc.com/electronic/salesanduse.html
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P i il
Privilege Tax
T
Privilege License
Who Must File
Privilege License
¾
A photographer, a canvasser for any p
photographer, or an agent of a photographer in g p ,
g
p
g p
transmitting photographs to be copied, enlarged, or colored. ¾
A licensed photographer having a located place of business in this State is liable for the license
of business in this State is liable for the license tax on each agent or solicitor employed by the photographer for soliciting business.
photographer for soliciting business.
P i il
Privilege
License
Li
¾ State privilege license taxes are imposed for the privilege of carrying on the business, exercising the privilege or doing the act named in Article 2, h
d
l
Schedule B of the Revenue Laws of North Carolina. These privilege license taxes are in addition to
license taxes are in addition to any regulatory or qualification requirements to engage in the practice of a profession business
practice of a profession, business or trade.
Privilege License Rates
¾
The privilege license tax is an annual tax and is due by July 1 of each year. The license tax is not prorated, instead, the full amount of the license tax is due when a person begins to engage in an activity for which a license is required at any ti
time during the fiscal year, July 1 –
d i th fi l
J l 1 June 30. Licenses are J
30 Li
renewable annually (Form B‐202A) by July 1 and no grace period is allowed before penalty accrues.
¾
Where any person, firm, or corporation is engaged in more than one business, trade, employment, or profession that is subject to State license taxes under the provisions of this
subject to State license taxes under the provisions of this Article, such persons, firms, or corporations must pay the license tax prescribed in this Article for each separate business, trade, employment, or profession.
Understanding Withholding
Tax obligations
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North Carolina General Statute 105-163.2
An employer shall deduct and withhold from the
wages of each employee the State income taxes
payable by the employee on the wages.
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p y
• Employer
• An employer is any person or business for whom an
individual performs any service as an employee.
• Employee
• Anyone
y
who performs
p
services for a person
p
or business
if the person or business can control what will be done
and how it will be done. If the employer-employee
relationship exists, calling it something else or signing a
contract does not change the status.
37
G.S. 105-163.1(13)
The term wages generally has the same meaning for
NC as it does in Section 3401 of the Internal
Revenue Code, except that it does not include the
amount an employer
l
pays an employee
l
ffor
reimbursement of ordinary and necessary business
expenses.
expenses
38
p y must furnish the employer
p y with a signed
g
• An employee
North Carolina Employee’s Withholding Allowance
Certificate, Form NC-4 EZ or Form NC-4. The federal
f
form
W-4
W 4 cannott be
b usedd as a substitute.
b tit t A nonresident
id t
alien must use form NC-4 NRA in lieu of Form NC-4 or
Form NC-4 EZ.
• If the employee fails to furnish the certificate, the employer
must withhold tax as if the employee is single with zero
withholding allowances.
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• Used
to
U d by
b an employer
l
t
determine the proper amount
of North Carolina state income
tax withholding from an
employee’s pay.
40
41
• Depending on your North Carolina deductions and North
Carolina tax credits you may elect to use the NC-4 EZ.
• Use form NC-4 EZ
• If you plan
l to claim
l i the
h N
N.C.
C standard
d d ddeduction.
d i
•
•
•
•
$15,000 for married filing jointly or qualifying widow(er)
$12,000 for head of household
$7 500 for single
$7,500
$7,500 married filing separate
• Plan to claim no tax credits or only the credit for children. Please refer to
the
NC-4 Part II Schedule 4 of Allowance Worksheet for more information.
• Prefer not to complete the NC-4
• Qualify to claim exempt status
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NC-4 EZ or NC-4
• If the NC-4 EZ does not apply to your specific
situation, you may need to fill out the NC-4 to
determine your number of allowances.
Note: NC-4 EZ will
suffice for most
p y
employees.
http://www.dornc.com/downloads/nc4ez.pdf
43
NC-4 NRA
• Since nonresident aliens generally
are not eligible to take the
standard
d d ddeduction,
d i they
h hhave to
enter an additional amount of
income tax to be withheld for
each payment period on line 2 of
Form NC-4 NRA.
44
g Bracket Tables
• Wage
• Percentage Method
• Annualized Wages Method
• There IS NOT an established “%”
% rate for computing
withholding. Exceptions: 4% for personal services, 5.8%
for supplemental wages, and 5.8% for lottery winnings.
45
• NC-30 provides
• withholding
ithh ldi amounts
t
• detailed information on
q
and
withholdingg requirements
filing and paying
46
Frequency
Quarterly(NC-5)
Monthly(NC-5)
Tax Withheld Per Month
$0.00 - $249.99
$250.00 - $1,999.99
Due Date
Last day of the
first month after
the qquarter ends
15th of the
following month
Exception: December
due date is January 31st
of following year
Semiweekly(NC-5P)
$2,000 or more
Same as
Federal dates
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48
49
• XYZ Enterprise will be filling out its NC-5 for the
monthh off January.
J
The
Th business
b
has
h one employee
l
whose salary is $2,970.00 per month. The
employee’s
l
’ ffiling
l status is marriedd withh 1 allowance.
ll
Please complete the form.
50
51
52
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• Provide each employee a copy of the completed W‐2 or 1099 statement by January 31.
• File the Annual Reconciliation Statement (NC‐3)
(NC
3) and the Department
and the Department’ss copy of each copy of each
W‐2 and 1099 statement by February 28 with DOR.
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NC-3
55
• CD-ROM, DP43 & DP40
• NC-57
NC 57 Computer
C
PPrintout
• Paper documents
• North Carolina DOES participate in the combined
federal/state filing of 1099. However, the
employer must get permission from the IRS.
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Recommendations
57
Keep records for three years
• All books and records (receipts, invoices, cancelled checks, etc.) to substantiate
income and deductions claimed for anyy business.
• All records (receipts, invoices, cancelled checks, etc.) to substantiate itemized
deductions.
• Any other information relevant to your Federal or State returns.
returns
• A retailer’s records must include records of the retailer’s gross income, gross
sales, net taxable sales and all items purchased for resale. Examples of
documents containing this information include (this is not an inclusive list):
•
•
•
•
General Ledger
Sales Invoices
Purchase Invoices
Cash register tapes
•
•
•
•
•
Receipt books
COMPLETE Bank Statements
C
Canceled
l d checks
h k
Credit card statements
Account statements
58
p for at least seven yyears.
Records should be kept
•
•
•
•
•
Names
Addresses
Security numbers of employees or payees receiving payments
Withholding allowance certificates
Amounts and dates of wages and other payments and records of the amount
withheld
• Copies or records of all reports or returns filed
• Records of all payments made to DOR.
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p y must be able to substantiate all information on
• Taxpayers
returns.
• Documentation should be maintained in an orderlyy manner
in an effort to substantiate income, expenses, deductions
and/or credits claimed on any returned filed with the
Department.
• Documentation should be organized, summarized, and
groupedd in an easy to ffollow
ll manner.
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•
•
•
•
•
www.dornc.com
YouTube
T
Taxpayer
A i
Assistance
andd C
Collection
ll i C
Center:
1-877-252-3052
Service Centers across the state
•
•
•
•
•
•
•
•
•
•
•
Asheville
Charlotte
Durham
Elizabeth City
Fayetteville
Greensboro
Greenville
Hickory
Raleigh
Wilmington
Winston-Salem
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