creative entrepreneur morgantownTuesdays Together Morgantown is a group of creative entrepreneurs who meet on the 2nd Tuesday of each month to connect over a variety of business topics. March’s topic was Accounting and Finances.  Download the full guide here.

We were so happy to welcome Beverly Ryan from Northstar Accounting and Financial Services to share her expertise and answer some of our questions.  Knowing that this is such an important (and confusing) topic for many creatives…and we had some snow storms in the area…we accepted questions both in the Facebook group and at the meeting.  Thanks to everyone who had a shared a question and helped to educate us all.  Here’s a brief summary of the meeting.

Accounting and Finance Basics

This topic can be super weighty.  In the past, we’ve always had a few people leave the meeting feeling like they were going to jail.  So let’s get that out of the way right now: you’re not going to jail.  Taking care of your taxes feels scary, but it’s not.  What you don’t want to do is neglect to start doing things properly out of fear, or ignore those notices when they come.  Even if you get audited, that doesn’t mean you’ve done something wrong.  But you do need to get your financial house in order, so that if it does ever happen, you can find the documentation you need to make everything as painless as possible.

Developing a strong financial plan for your business will help to ensure success in the future, and set you on the road to financial stability in retirement.

Tools for Creatives and Small Business Owners

I always recommend that the first thing you outsource in your business is your accounting and tax preparation.  Tax codes can be complex, and it’s great to have an educated, experienced professional to help you get on the right track.  Additionally, we use Quickbooks to track our income and expenses, which makes it easy to run reports and projections for our business. This month’s guide has a ton of other recommended tools as well!

Questions from the Meeting

What do you do for sales tax if you have a hobby that you expect to make less than $600 on?  Do you need a license?

There are 4 different things at play here: licensing, sales tax, income tax, and the $600 myth.  First, the $600 line in the sand is a myth/misunderstanding.  If you’re accepting money (no matter how little) for goods or services you should be licensed, claim your income, and collect and remit sales tax.  WV actually makes it pretty easy to get started, so get your license and get started through the State of WV Business website.

This will also get you started on how to properly claim your income and file sales tax.  In the beginning, you’ll likely only need to pay taxes on this annually.  You may be asked to pay quarterly or monthly as your business grows.

The $600 misconception is common and likely comes from the amount that you can pay a contractor before being required to issue them a 1099.

Do I have to collect sales tax on my products or services?

The answer to the is almost always yes.  The State of WV has a short list of things which are exempt, but digital photography and video services (and most other creative services) are not on it! We often hear that if you only do digital work and don’t provide prints, USBs, or DVDs, you don’t have to charge tax, but this is not true in WV.

If you are a writer of a print magazine and sell advertising, or sell advertising on your website, these things are exempt, so you don’t need to charge sales tax for those.  Print advertising is listed, but I called the WV Sales Tax office to inquire about digital advertising and was told it also falls under the advertising exemption.  Please confirm this with your CPA and give the tax department a call for yourself.

Do you collect sales tax on shipping and handling?

Yes.  Calculate sales tax on the total amount you charge your client (not your actual shipping costs). So if you charge your couple $30 to account for the shipping supplies, time, and postage, that is the taxable amount, not just the $10 you pay to ship the item to them.

….where the vendor purchases delivery or shipping service from the common carrier and the customer pays to the vendor the cost for shipping and handling, the total amount of all such shipping and handling charges is taxable to the customer because the customer is purchasing such services from the vendor.

What’s right and wrong when it comes to working in multiple states? My business is in one state, but I do work in all several states…who gets the tax money!?

This one is SUPER tricky, and I’m not going to pretend to understand it.  I’m just going to regurgitate what Beverly shared with us (which is also what my own CPA recommends) and the polite gentleman at the state tax department confirmed for me.

WV is a destination based sales tax state.  This means that if you sell products online, then ship them to your out of state customer, you do not collect WV sales tax.  You’ll need to consult a tax professional to figure out if you have a nexus in that state and need to collect and remit sales tax to that state. Of course, if someone from within the state of WV purchases, you will need to collect and remit WV sales tax and any applicable municipal taxes to the location of your customer.

It gets tricky when you are basically providing a service…often an expensive service that is not paid at the point of providing the service.  The destination-based rule is transactional: it applies at the time of the transaction.  There are times that we will book an out of state client to film a wedding in a different state than where either of us lives, or out of state clients (so when they pay, they are out of state) who come to WV for their wedding.  In this case, you apply WV sales tax at your home rate.

What is Use tax?  Does it apply to me?

creative business morgantown

Use tax is a sales tax on purchases made outside one’s state of residence on which no tax was collected in the state of purchase.  A common example for most photographers in WV: if you’ve ordered from B&H Photo, you were not charged sales tax.  You should claim these purchases and pay use tax for them.  Use tax applies to both businesses and individuals.  Never heard of it?  You’re not alone.  A lot of people are completely unaware, but this is definitely something that you need to track and pay for your business.

Our next meeting will be April 10 (location TBA).  Our April Topic will be “Inquiry Nurturing”. We’ve got a great line up of topics for the year, and we’d love to see you at one of them! Want to get connected before our next meeting? Join our Tuesdays Together Morgantown Facebook group!

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