Starting Your Creative Business – Making Sure That You Are In Compliance With Sales Tax Laws

When working with students or people just starting an art business, I ask the question of how many of them have made a sale.  Usually several hands are raised. I then ask them how many of them have a sales tax license and the number of raised hands is usually less.  Just like any business, your art or creative business has to be in compliance with your local and state taxing authorities.

Sales and use tax compliance may get complicated especially if you sell your products or services outside of your local area.  Many taxing jurisdictions require you to collect taxes on the sales of products and/or services.  To make matters more complicated many taxing authorities want to tax the sales you make on the Internet as well.  One thing is for certain: as local and state authorities struggle to balance their budgets and pay for services they are going to be looking for additional sources of revenue – the sales of your art or creative business.

Some tips:

  • Your requirements to collect sales taxes are dependent on:
    • Whether you sell products, services or both.
    • The state, city, county or special district you are located in.
    • Whether the sale is made in your state, city, county, special district or on the Internet.
    • Whether the sale is made outside of your state, city, county, special district or on the Internet.
  • If you have a part time art business and sell your products at festivals or fairs then you may be able to not have a sales tax license by using the festival or fair’s license.  Check with the festival or fair.
  • Contact your state department of revenue for the regulations and forms necessary to get a sales tax license.
  • Discuss your requirements to collect sales taxes with your CPA. They can help you apply for the license you need and make sure that you are in compliance.
  • Contact an accountant who specializes in sales tax. A good resource for sales tax advice is Keith Crichton at Keith Crichton Consulting Services. He is a CPA who other CPAs bring in to help their clients.
  • If you don’t collect the required sales tax from your customers it may be embarrassing to go back to them to collect it or expensive for you if you have to pay it yourself.

By the time you read this article I sure that many changes will have been made to the sales tax laws in some state, county or special district.  It is up to you to keep up with the changes that affect you or have an advisor who will do that for you.  You want to make sure that you are in compliance with the laws and avoid problems so that you can concentrate on what you do best – making creative products and services.

As with any article of this type I am not giving you legal or accounting advice. I expect you to seek competent legal and/or accounting advice and follow it.

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About Neil McKenzie

Neil McKenzie is an author, educator and consultant to artists and arts organizations. He is the author of The Artist’s Business and Marketing ToolBox – How to Start, Run and Market a Successful Arts or Creative Business available in softcover from Barnes & Noble and Amazon and as an eBook from iTunes, Amazon and Barnes & Noble. He has developed and teaches the course “Artrepreneurship” at the Center for Innovation at Metropolitan State University of Denver, and is also a visiting professor at University College at the University of Denver. Neil has over 30 years’ experience as a management consultant and marketing executive, working with some of the world’s top brands. Neil is a frequent lecturer to artists and arts organizations, a guest columnist for Colorado Biz Magazine, where he covers the creative sector of the economy, and the author of several articles for Americans for the Arts, a national arts organization. Follow Neil on Twitter: @neilmckenzphoto