15th Sep2011

Get legal or get out!

by Christine

This is THE most important article you should read.

  • Are you charging money?
  • Do you have a vendor’s license?
  • Do you report photography income to the IRS (via your annual 1040) ?

If you said “NO” three times, we’re good. If you said “YES” three times, we’re good. If you had a mix of  answers, we have serious issues and the rest of the article is for your benefit. All others are excused.

If you are charging money, you are making an income from photography and you need to:

  • Charge and remit the proper sales tax (after applying for your vendor’s license).
  • Claim your profit on your personal income tax and pay the appropriate income tax on the additional profit.

And here it comes…

EXCUSE: I only charge my costs, so I’m not making any profit.

RESPONSE: Then get a vendor’s license. Collect sales tax on the “cost” you are charging. Remit the sales tax. When you file your 1040 with the IRS, claim the income and then claim the expense that equals the income, thereby causing a net income of $0, which will not affect your income tax owed. Easy peasy.

EXCUSE: I am donating my time and materials and the client is donating the money to cover it

RESPONSE: You have got to be kidding me. The IRS is going to have fun with you.

EXCUSE: The client is buying everything and I am just doing the work for free.

RESPONSE: Call your CPA and see if this will fly with the IRS. It might, it might not.

To get a vendor’s license, you need to contact your county offices. (This is USA guidance, I have no idea how it works elsewhere). They cost around $25, but there might be some variance.

After going this route, you will need to be vigilant in recording every financial transaction. Keep track of all income, all expenses, all products you buy to re-sell to clients and all people you pay to help you with your work (retouchers, assistants, etc). Also keep track of any miles you travel for the purpose of photography (trips to shoots, trips to the bank, post office or any other errand related to your business).

You will find that if you are asking for help from other photographers, having your vendor’s license and conducting your business legally and properly will go a long way in the eyes of your competition and peers and they will be more willing to share with you and chat.

That goes for me, too.

The ONLY way that you are exempt from having a vendor’s license while receiving income for photography is if you are employed by someone else as a regular employee or as a subcontractor. At the end of the year, your income is reported via either a W-2 or a 1090 that you receive from the entity you are doing the work for. The first 4 years I was a photographer, I operated under this exemption, as I was a freelance photographer for 2 newspapers and they sent me a 1090 at the end of each year. I did not operate a studio at the time.

So – get your vendor’s license, pay your sales tax and income tax and we’ll all hold hands and sing Kumbaya!

17 Responses to “Get legal or get out!”

  • What about insurance? In Mass. we don't have a vedors lic. but you do need to set up an account with the state to submit sales tax that you collect, and to be exempt from sales tax on product purchase to resell.

  • Greta S.

    Thanks! 🙂

  • Greta S.

    Forgive me as well, as I am also having a blonde moment. When you say ‘vendors’ license, you do not mean ‘business’ lic, right? You mean an actual license to sell photos? Because it is kind of confusing for me. I am also confused whether or not I need a tax I.D. #…

    • In the state of Ohio, they’re called Vendor’s licenses. It is the license where you inform the state that you are in business and selling items that require the customer to pay sales tax on. In turn, you hold onto these sales tax payments and submit them periodically to your state. I’m not sure if they’re called vendor’s licenses in all states. I will do some more research on that, but I suggest you contact your county courthouse and ask to speak with the clerk of courts office and verify if you have the correct paperwork.

      • Greta S.

        Thanks. I am in Georgia, and so far I have my business lic (since May, still trying to find confidence to start!). But still trying to figure out if I need a vendor’s lic and/or tax id#.

        • The tax ID requirement depends on if you are a sole proprietor or not. If you are a sole proprietor, you will be using your social security number. You should probably touch base with a CPA to make sure you are doing the right things. Also see the article on Sole Proprietorship vs LLC vs S Corp from the other day. It will be in the “Legal Issues” category.

          • Greta S.

            Thanks. I have a CPA in mind, but always worried about someone else’s hands regarding money. How do I know who to trust? And if I am doing it p/t is it worth getting a CPA for? Sorry for all the questions here….

          • Your CPA doesn’t necessarily handle any money – they help you keep your financial paperwork in order and help with tax filings,etc. If you want to hire someone for your business (like an office manager or treasurer) you should make sure that they are bonded through an insurance company.

  • Melissa

    I’m having a blonde moment, so forgive me (I’m begging you!). When you say vendors license, is that the “card” you have to be sure to place in a visible place for all of your clients to see (I’m currently forgetting what it’s titled)? Or am I missing something important? I think I say yes to all three of the questions, but…. Just want to be sure I’m on the up n up!!

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