Hey Photographers! Last month, we wrapped up a blog series aimed at something that consumes so much time and energy from wedding photographers: post production! If you missed it, Part 1 is here. This week, we’re continuing a series that caused us SO much headache in the early days of our business: How to Officially and Legally Start a Photography Business!

 

Once you start making some real money with your photography, you may want to consider establishing a legal business entity. For the sake of organization, liability, legitimacy and tax-efficiency, this is the direction many photographers will go after a year or two of making money. And if you hope to go full-time in your photography one day, you’ll need to do this sooner or later!

 

Although establishing a business can seem like a daunting task, it’s actually more simple than it seems. Follow the steps in this blog series to go from side-hustler to business-owner!

 

How to Officially Start a Photography Business 3: Pay “Sales and Use” Tax Each Month

Although no one loves taxes, you don’t need to hate them either! At least in the Commonwealth of Virginia, Sales and Use Tax is a relatively small financial burden, but one that you have to keep up with every single month. Here in VA, all you have to do is go to Virginia’s tax website, and click “File My Sales and Use Tax” under the “Businesses Section”! Keep in mind that you’ll need the EIN number that we talked about last week, so if you don’t have one yet, refer back to Part 2 of this series!

 

 

What is Sales Tax?

Let’s start with the one that most people already understand: sales tax. Unless you live in Alaska, Oregon, Montana, New Hampshire or Delaware, you’re probably used to paying sales tax on almost everything you purchase at a store, restaurant, or other brick-and-mortar business. This is a tax that the consumer pays to a business, and the business then pays to their state government. If you purchase a movie ticket for $10, and your state has a 5% sales tax, the movie theatre will charge you $10.50, then pass that extra 50 cents on to the state. And they’d do it exactly how we’re going to show you today!

 

However, this is where we need to pause and introduce a VERY important caveat. Some states enforce a sales tax on digital goods, and some do not. If you’re in an industry whose main deliverable product or service is digital (like, oh, digital images, for example), you may or may not be required to charge and then pay the government sales tax on that digital product. It varies wildly from state to state, but this article is a great place to start! Then, you should consult a professional, like a tax accountant, rather than taking a guess or taking legal/tax advice from the internet 😉 Keep in mind your local government could also have rules here!

 

Whether you have to charge sales tax on your digital goods or not, unless you live in one of the five states we mentioned at the beginning of this section, you will have to charge sales tax on any physical products (like prints or wedding albums). But only if they’re being delivered within your state! So if someone purchases prints from us and they also live in Virginia, we charge them sales tax. If they purchase prints from us, but they live in any other state, we don’t charge sales tax.

 

 

How to Keep Track of Sales Tax

If this all sounds complicated, it doesn’t have to be. To be completely honest, we let Pixieset handle all of this for us! Like we mentioned in Part 6 of our last series on Post Production, we use Pixieset as our gallery service when we send photos to clients. When they purchase prints through their own customized Pixieset gallery, they’re automatically charged sales tax, if applicable, by Pixieset! We just get an email that basically says, “Hey, someone ordered these prints, and we’ve taken care of everything! The money will show up in your PayPal account shortly”. (Click here to sign up for a Pixieset free trial, and get an additional 0.25 GB free!)

 

Then, at the end of each month when it comes time to pay our monthly Sales and Use tax, we just need to know much we sold in prints that month, and the Virginia tax website calculates the rest! Because we keep track of all our accounts (see Part 1!), this process only takes a few minutes each month.

 

 

When filling out the form on the VA tax site, we just enter our gross income, then the amount that’s exempt. If you booked $8,000 in jobs, plus sold $1,000 in prints, then your “gross sales” would be $9,000. If you live in a state where there’s no sales tax on digital products, then you would list $8,000 as “state exempt sales”. That way, you’d only pay sales tax on the $1,000 of prints. If you don’t live in one of those states, then none of your income is exempt, and you’ll pay sales tax on all $9,000 of income.

 

 

What is Use Tax And How Do We Keep Track of It?

“Use Tax” is a bit more foreign to the average person. Remember how we said earlier that if we sell a product to someone in another state, Virginia can’t collect sales tax on that product? Does that mean that those prints will go un-taxed? Well, not quite. In theory, the person who is accepting those products sales-tax-free from another state should then pay “use tax” on them to their own state. What that means is that if you make purchases from another state (think online purchases) and don’t pay any sales tax, you should report that and pay it here.

 

Let’s give you a concrete example to make this easier. Let’s say Sarah and I are looking to buy a new camera. If we go into our local BestBuy and purchase it, we’ll pay sales tax right there in the store. The same will probably happen if we buy it on BestBuy’s website, because BestBuy will be sending us the camera from within the state of Virginia. However, if we go to Amazon.com, we might find the same camera for the same price, but without sales tax. Wohoo! Easy savings! Right?

 

Technically, no. You’re now responsible, as a business-owner, to report the cost of that camera, and pay “use tax”. So, each month, you should keep track of any purchases you made from out of state and paid no sales tax on, and report them when you pay “Sales and Use” tax.

 

 

Trust me, we know how un-sexy talking about taxes are, but the last thing you want is to be in business for a few months or a year, and get a letter from your state telling you that you’re behind on your taxes and will be audited as a result! In our opinion, it’s always better to be as honest and informed as possible, and just do the right thing from the beginning.

 

We’ll be taking a break from this series for a few weeks (or months?) in anticipation of an incredibly busy spring of travel, weddings and engagement sessions! But stay tuned, because we’ve still got a lot go business to cover!

 

Want More?

 

Click HERE to get your free copy of our eBook: “5 Essential Tips for Turning your Side-Hustle into a Full-Time Photography Business.” You’ll also be subscribed to our newsletter, so our newest content, weekly encouragement, and exclusive offers will be delivered right to your inbox!

 

 

—

 

 

Check out the other segments in this blog series!

• How to Officially Start a Photography Business 1: Start Keeping Track
• How to Officially Start a Photography Business 2: Establish an LLC
• How to Officially Start a Photography Business 4: Get a Business Bank Account
• How to Officially Start a Photography Business 5: Get Business Insurance
• How to Officially Start a Photography Business 6: Prepare For (And Pay) Self-Employment Taxes