Photo business taxes

I obtained a photography business license last year. My county imposes an annual "personal property" tax on all equipment used in the business. This includes the obvious such as cameras, lenses and lighting equipment but also computers, disk drives, monitors, printers, and furniture. This policy has made me think twice about investing in new equipment for the business knowing that I will be paying taxes on it forever. (Of course I still pay income tax on any earnings).

Of those who pay "personal property" taxes on their equipment, do you think this is a good or bad idea? I realize local governments need revenue but I think an enlightened government would want businesses to invest in new equipment to generate additional revenue which could then be taxed rather than discouraging such investment.

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Chip Scavone

I've heard of some places doing this on real personal property (as opposed to business property).

My thought is you pay one way or another - community services cost what they cost. This may be in lower income tax and higher personal prop tax, no personal prop tax and higher property tax, or taxes on other things - many communities here charge a 'mercantile tax' of 1% of a business's total annual sales.

Also remember that the tax should be deductible on your federal income tax as an expense (for sure if you itemize).

I feel the same about my insurance - I updated my schedule with the agent yesterday and having added more lenses, and having lenses just worth more (replacement cost) is going to cost me $57 more this year in premiums.

At least most of what you have at issue can be calculated purely on numbers - will the new printer save you more money than the extra tax will cost you - sorta thing.
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If I knew how to take a good picture I'd do it every time.

I would assume that any items you have would have a marked rate of depreciation... ie: if you have a 1Ds Mk II that cost $8,000 in Jan of 2005 that you would not still be paying $8,000 worth of tax on it 6 years later. This is where having a good accountant is helpful because they would know all the loop holes and may be able to say "oh this type of equipment you can claim a x year depreciation cycle, which allows you to cite a y% loss in value each year, after x years you no longer have to declare it at all, and under this law you may be able to deduct that y% loss in value from your income tax..." They would also be able to advise you better on purchasing new equipment such as knowing if you would be able to deduct some of the money spent as reinvestment, and if that would outweigh the extra property tax burden, or if the property tax burden would outweigh any tax savings.

Before purchasing any equipment the entire cost of ownership should be evaluated. I work for a very large institution, and when purchasing equipment (often these cameras are around $50,000 list price) business rules require the entire cost of ownership over 5 years must be accounted for, which means taxes, consumables, occasional re-calibration, additional staff needs (training, extra hours,) and usually means buying the extended warrantee that only suckers tend to buy, but that way we know know what the device will cost and can fully account for it. It's annoying and probably a bit of bureaucratic over-kill but a much scaled down version of this should be thought of for small business purchasing equipment. You can't just look at the sticker price. "Ok, if i buy this camera it has bigger files so I'm going to have to add on extra for more/bigger memory cards, my computer is already bogged down with the files from the current camera, so I'm going to have to buy some more RAM and put a new hard drive in the computer, I'm going to need a new case to fit this camera and the old one, the camera uses a different type of battery so I have to add a spare battery for back up, and it's going to cost me an extra $x in taxes over the next 5 years... so I need to budget for all that and not just the cost of the camera."
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~K

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If I knew how to take a good picture I'd do it every time.

Hire an accountant... let them worry about the numbers and you worry about taking pretty pictures.
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~K

I was being sarcastic.

Seems every newbie thinks they can buy a 'nice camera' and be in business and life will be swell.

If you read the post I replied to you can see that if all you want to do is take pretty pictures then get a job as a photographer. Running a business requires many skills and much work.

As for 'an accountant' - what do you want? A bookkeeper, a CPA, a tax expert? All can be considered accountants but each does something different. All cost you money and none care as much about your business as you do.

The first year I went to my CPA for year end taxes I asked him who adds up the receipts for the year - he said he's be glad to do it at $75 an hour.

Your money, your time, your choice.

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If I knew how to take a good picture I'd do it every time.

Chip Scavone said:

I obtained a photography business license last year. My county imposes an annual "personal property" tax on all equipment used in the business. This includes the obvious such as cameras, lenses and lighting equipment but also computers, disk drives, monitors, printers, and furniture. This policy has made me think twice about investing in new equipment for the business knowing that I will be paying taxes on it forever. (Of course I still pay income tax on any earnings).

Click to expand...

Just a reminder:

Al Capone didn't go to jail for his killings, smugglings, gambling, racketeering... He went to jail for tax evasion. He went to jail for not paying his taxes.

It's dumb from them, tax the businesses that keep people employed, but if you don't like it, move or pay your taxes. They have big sticks and they can be painful...

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Thanks
http://foto-biz.com
The Business of Being a Photographer -- Lightroom Q&A -- Canon 7D

It sounds like you didn't fully investigate the different types of businesses and how they relate to taxes and personal liability. An LLC has become a popular type of business to prevent the business side from having access to your personal affects.

RedFox88 said:

It sounds like you didn't fully investigate the different types of businesses and how they relate to taxes and personal liability. An LLC has become a popular type of business to prevent the business side from having access to your personal affects.

Click to expand...

It's probably not a "personal property tax," it's probably a "business property tax" that would be levied on anything used in the business. I doubt they levy an annual property tax the television set in junior's room or the family washing machine.

Even a sole proprietorship should fully separate business equipment from personally used equipment to keep tax matters straight.

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RDKirk
'TANSTAAFL: The only unbreakable rule in photography.'

Since I have a business license it is counted here as business tax. I pay county taxes on equipment and state sales tax on state taxes..but my tax return (because it is not incorporated) covers my regular job plus photography is added to it. I suppose each state is different. I do not buy any new equipment unless I really need it. Now that Obama Care is in effect, unless it is repealed, every purchase you make now over $600 requires a form to be filled out. Yep, some wise senator stuck in a health care bill the requirement of a new federal business form to be filled on for every purchase over $600 and this is for small businesses.

It's just another way for gov'mnt spies to keep their eyes on every little thing we do.

My reply was also sarcastic. You also need to hire a manager to manage all the people managing your money.... The nice thing is, after you pay all of these people, you won't have any money so you won't need them.... errr, wait a minute...
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~K

RDKirk said:

RedFox88 said:

It sounds like you didn't fully investigate the different types of businesses and how they relate to taxes and personal liability. An LLC has become a popular type of business to prevent the business side from having access to your personal affects.

Click to expand...

It's probably not a "personal property tax," it's probably a "business property tax" that would be levied on anything used in the business. I doubt they levy an annual property tax the television set in junior's room or the family washing machine.

Even a sole proprietorship should fully separate business equipment from personally used equipment to keep tax matters straight.

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RDKirk
'TANSTAAFL: The only unbreakable rule in photography.'

Click to expand...

The official phraseology in my locale is "Business Tangible Personal Property" and it applies only to equipment actually used in the business.
Chip Scavone

Yep.

It's a tough call - how much can you do 'acceptably well' yourself vs hiring an expert and paying them to do it?

If I thought hiring a would make me more than they cost me I'd do it. But one has to then think like a big corporation - line vs staff.

Someone to edit your pics, sell your pics, frame you pics or take pics is line personnel and it's usually easy to bean count their value.

Management, HR, legal, accounting, marketing (for the most part) are staff positions and many consider them like leeches, sucking the lifeblood from a business.

Most seem to agree as the owner of a business your best to use your talents at the highest value point in the biz - could be shooting pics or selling or something else. The biz is your idea and you're the owner so automatically you're a manager - of 'stuff' for sure but perhaps eventually people too.

I'm a one person biz - but I have an assistant (she assists at weddings and some studio shoots, sells portrait images, second shoots at weddings, has learned to edit images in LR, retouch in PS, order images, do sports paperwork from beginning to end, and even do some marketing stuff (which she really hates doing) - so I'm training her, doing HR stuff (payroll and taxes and insurance), keeping her busy at work, scheduling her, checking up on what she does at times... On some league shoots I've got a crea of 6 folks (whom I must find, train, schedule, manage and pay), plus I have senior reps that 'work' for me - I have to keep them motivated, educated and up to date on what I'm doing senior pic wise too.

And all anyone seems concerned about is what lens or body is best, huh?
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If I knew how to take a good picture I'd do it every time.

they're going to repeal that - it's this stupid partisanship crap - somebody stuck that (and other things in) to help it 'fail', to make people hate it.

Technically now you have to do that for some businesses - your lawyer and accountant or anyone not incorporated you pay over $600 to - anyone that you pay 1099 type wages too - perhaps people should be doing it TO you as well! I know one college I've shot for in the past sends me a 1099 statement every year because I am not incorporated.

Practically nobody does it and it's not enforced - but its the law.
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If I knew how to take a good picture I'd do it every time.

It's more annoying paperwork, but for most of us photographers, it's not that onerous. It's not "every purchase," it's "every supplier" that you do $600 of business with annually.

There are six suppliers that I regularly do that much business with a year: A couple of labs, a frame shop, a couple of photo materials stores, a couple of hardware stores. There might be three others that get as much business from me from year to year, so I expect I'd have to send out 10 forms per year.

It's an annoyance, but it's not going to force me out of business. OTOH, I'm already saving a bucket of ducats by keeping my daughter on my health insurance for another couple of years while she keeps trying to find a job.

If you hire second shooters or other professionals, you should already be providing them with 1099's.

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RDKirk
'TANSTAAFL: The only unbreakable rule in photography.'