When Do Videographers Need to Charge Sales Tax?

Determining when to charge sales tax can be a source of confusion for videographers, as the rules apply tax law to a service that is both creative and technical. The core issue is how state and local governments classify the final product delivered to the customer, which dictates if a transaction is taxable. Understanding these obligations is necessary to avoid non-compliance, which can lead to financial penalties and legal issues.

The Tangible vs Intangible Distinction

The foundation of sales tax law rests on the difference between tangible personal property (TPP) and intangible property or services. TPP is defined as property that can be physically perceived—seen, weighed, measured, or touched. Nearly all states with a sales tax impose it on the retail sale of TPP, which includes everyday items from a coffee mug to a computer.

In contrast, services are the performance of labor or the application of expertise for a client. In many jurisdictions, services are not subject to sales tax unless they are specifically listed as taxable under that state’s law. For example, buying a hammer from a store is a taxable sale of TPP, but hiring a carpenter to build a deck is a non-taxable service, as the primary purchase is the carpenter’s labor and skill.

Factors Determining Sales Tax Liability

The method of delivery is a primary factor in determining sales tax obligations for a videographer. If the final video is delivered to the client on a physical medium, such as a USB drive or DVD, many states will classify the entire transaction as the sale of tangible personal property. This means the total amount charged to the client, including all service fees for filming and editing, becomes subject to sales tax. A digital delivery, where the client receives the video via a download link, may avoid this classification, rendering the service non-taxable in many jurisdictions.

When a videographer provides both a service and a tangible product in a single transaction, it is known as a bundled transaction. In these cases, states apply a “true object” or “primary purpose” test to determine taxability. If the state determines the true object was to obtain the physical item, the entire charge is taxable. If the primary purpose was to acquire the videographer’s creative service, and the physical item was merely an incidental part of the transfer, the transaction might be considered a non-taxable service.

Sales tax is administered at the state and local levels, meaning the rules can vary significantly from one location to another. A videographer’s duty to collect tax is established through “nexus,” which is a connection to a state. Nexus can be created by having a physical presence, such as an office or employee. Economic nexus has become common, where reaching a certain threshold of sales revenue or number of transactions in a state triggers the requirement to collect sales tax. Videographers must identify every state where they have nexus and understand the specific sales tax laws in each of those jurisdictions.

Requirements for Collecting Sales Tax

Before a videographer can legally collect sales tax from clients, they must first obtain a sales tax permit from each state where they have nexus. This permit is official authorization from the state’s tax agency to collect sales tax on behalf of the government. Operating without this permit while collecting sales tax is illegal, and failing to collect required taxes can lead to penalties and back-tax assessments.

To apply for a sales tax permit, a business owner must provide specific information on the state’s application form. This includes the business’s legal name and any “doing business as” (DBA) name, the business address, and its legal structure. The applicant will also need to provide their Federal Employer Identification Number (EIN) or Social Security Number.

The application process is completed online through the state’s Department of Revenue website. Applicants will also need to provide details about their business activities, including the types of products or services they sell and an estimate of their projected taxable sales. This information helps the state determine the filing frequency for the business.

The Process of Managing Sales Tax

Once a videographer has a sales tax permit, they must accurately calculate and collect the tax on all taxable sales. The correct tax rate is a combination of the state rate plus any applicable local taxes, such as those for a city or county. This total rate must be applied to the sales price and clearly listed as a separate line item on the client’s invoice. It is important to use the rate effective at the location of the sale, which is often the point of delivery.

After collecting the tax, the videographer is responsible for remitting it to the state by filing a sales tax return. The state will assign a filing frequency—monthly, quarterly, or annually—based on the business’s sales volume. Filing is done through an online portal on the state’s tax website, and the return requires reporting total gross sales, non-taxable sales, and the amount of sales tax collected.

The final step is to pay the collected tax to the state by the return’s due date. Timely filing and payment are required to avoid penalties and interest charges. A videographer should keep detailed documentation of all sales, invoices showing the tax collected, and copies of filed tax returns. These records are required in the event of a sales tax audit by the state.