selling prints in a gift shop? (business end)

[lightstand]

I have a chance to place some framed panos I've created in a local gift shop and I'm looking for some advice how to spell out the terms with the shop's owner.  The plain is to decorate part of their walls with my framed work,  however if people want to buy the unframed prints I would ship them out.

Question:  who is responsible for collecting and paying the sales tax?  the gift store owner or am I.  I would want the gift store owner to make the sale of any unframed prints ordered even though I will me suppling and shipping them directly to the customer's address.  Again any insights toward dealing with taxes or terms would be appreciated.

thanks,  jeff

[bill t.]

In New Mexico and I think most other states the legal entity who takes the payment at retail level is responsible or collecting and paying sales related taxes.  You would  be a supplier to a reseller, and would not be required to collect sales taxes, even though you are drop-shipping.  The reseller is also required to file a 1099 on all money he pays to you.  That's how it works with gift shops, galleries, framers, and all places that take a percentage of the payments they collect.

Here you would also be required to have a resale document from the seller, a city business license, and to register with the state tax agency even if you never anticipate collecting taxes from direct retail sales.  And to pay federal tax on income either as an individual or as a business.

There is however a de facto gray area when it comes to restaurants, libraries, community centers, etc that do not take a percentage of the sale.  They may take a check from a buyer and pass it on to you.  In those cases my records and tax filing show that I took a direct retail payment from the buyer for an amount calculated to somewhat less than the check, so that when sales tax is added in the total equals the check amount.  

But if whoever is selling your pieces is taking a cut, insist that they collect and pay sales taxes, because if they ever get audited with untaxed money seen passing through their books it will not be fun.

PS If those are local-interest panos, expect to do well.  

[Wayne Fox]

Like Bill this assumes you are in the US.  His points are well stated the only thing I would mention is under current law, anything that is shipped to a customer that does not reside in your state is not subject to your states sales tax. (This will change in the future - states are all trying to figure out ways to recover tax revenue they are losing because of internet sales).  If the gift shop is audited they may need to provide adequate records to prove the items were actually shipped out of state, so you would be responsible to supply them with those records.  Some businesses just don't bother and some customers don't care, but legally you shouldn't charge them tax if they are from out of state and don't want to pay it because it is being shipped.

In effect you are wholesaling your work to the gift shop, so you need a sales tax license, then need validate the items were sold for resale. I also believe the 1099 only applies if you are basically selling them on consignment, not if he happens to purchase them as inventory for his shop.

[louoates]

Slightly off topic but just to confuse matter further: if you buy items from out of state and are charged no sales tax you are required on many state income tax forms to total those amounts and then pay what's called a personal "use tax" which I believe is your resident state's sales tax percentage. Virtually no one knows about this line on the return but most states, when auditing a businesses' books, concurrent with determining if all taxes have been paid prior to the sale of a business, will assess that tax at that time before signing off on the sale.
 I've been assessed that use tax during both personal and business audits. This use tax has been collected way before the internet was such a major element.

 I would also advise you to get a copy of any re-seller's state resale certificate to make sure you don't stuck with the sales tax in the event they haven't got a current state registration. It happens.

[bill t.]

See?  Piece o' cake!  That's why the Good Lord made tax lawyers.

And practice politely explaining to people that even though you are an artist, that does not make you tax exempt.

I would venture that over half the buyers I deal with directly expect me to NOT add sales tax onto the bill even when they pay with CC or check, or they hand me cash and expect that will cause me to wink-away sales tax.  Sheesh!  On the cash deals I write up receipts with the tax backed out, but still charged.  But I refuse to back it out on checks (where there is some risk of a NSF) or on CC's (where there is a processing fee).

[scrinch]

Most galleries charge a fee from 35-50% of the selling price for exposure in their shop.  Consignment in  gift shops in Maine is 35-40 most often.  Other things to get straight .... payment schedule,  breakage. and missing items.  Make sure you have a good inventory of what you put in the shop and mark off items when they sell.

[alainbriot]

What you describe is a consignement situation.  In such situation you provide inventory to the store and you get paid after merchandise (your photographs in this instance) is sold.  The delay is usually 30 days and typically you receive 50% of the selling price.  The store takes care of collecting and repaying sales tax to the state because they conduct the retail sale.  You are responsible for paying federal income tax on the money you receive from the store.  I advise against shipping the photographs yourself.  Shipping sold items is the store's responsibility since they carry the merchandise, make the sale and collect the money.  

[RFPhotography]

Aside from the tax issues, and on a brief scan I don't see than anyone has mentioned this and sorry if I missed it, but you also want documentation of which both  you and the store owner have a copy that is signed or initialed by both of all the inventory you're leaving with the store.  Anything that's for sale should include prices on the record.  If the store owner discounts the price on his/her own inititaive, it should come out of the owner's pocket not yours.  Anytime something is sold, both lists get amended and signed/initialed.  Any display materials (e.g., easels, business cards, printed catalogue, etc) that you provide the store also go on the list.  Anytime you remove/replace inventory the lists get amended and signed/initialed.  Sometimes the store/gallery will have a system for keeping these records.  Sometimes it can be as simple as notebooks both of you update.  Sometimes the owner will give a written receipt of what's been provided by the artist.