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Several years ago, we experienced a Maryland Sales Tax audit. Recently, more and more of our clients are being exposed to the same “pleasure”. The result of our audit and our customer’s audits have been very similar, with each of us paying tens of thousands of dollars to the Maryland Comptroller’s office.
It almost seems that the Comptroller’s office is going after the services industries and are finding ways of making services taxable. The auditor will come into your office, nice as pie. They are courteous while they help you tie the noose around your businesses throat, and they politely smile as the pull the lever, releasing the trap door that leaves you swinging in the wind.
Our experience of the methods they use to go after the creative services industry is as follows: Scanning and photography services - Scanning and photography is a service and therefore not taxable, right? Not necessarily. If you give your client the files on a CD or flash drive, and do not charge them separately for the CD, they will consider that a finished good and therefore will require you pay sales tax on it. Even though the CD is under a dollar, they will require that sales tax be paid for all the information stored on the CD (i.e. all of the scans, pics, etc.)
Electronic designs may be taxable as well. If you design a logo, and give the logo to a client on a CD, MD sales tax may be applicable to your design as well, since it is on something tangible that you hand to a customer.
Ordering equipment out of state is also supposed to have Maryland Sales Tax paid. For example, if you order office equipment from a catalogue from out of date or administrative supplies from out of state, the vendor does not charge you Maryland Sales Tax. Even though the vendor is not required to collect MD Sales Tax because they are out of state, you are still required to pay the sales tax. You must make a special payment directly to the comptroller’s office.
Reassigning equipment is another creative way to collect money from businesses. We had purchased computers for doing print production. Since we purchased the equipment for production/ manufacturing purposes, we do not have to pay Maryland sales tax on the equipment. When the equipment gets old and is completely depreciated, we replaced it with newer equipment and delegated the older equipment to perform tasks like invoicing or job tracking. As soon as the equipment is moved to a non-manufacturing duty, we were required to pay the Maryland sales tax of the equipment at the cost of when the product was new. The only way production/ manufacturing equipment is completely non-taxable is if it is only used for manufacturing (i.e. your design station doesn’t do invoicing or any other administrative functions), and it is only used for production/manufacturing for the life of the equipment.
We are not accountants and tax lawyers. Everything we have stated has been just reporting what the Maryland Comptrollers agent told us during our audit and what our customers have relayed from their audit. It may be a good idea to speak with your accountant or attorney on ways to minimize your risk in the event of an audit.
Imagination Center officially christened its new facility with a Chamber of Commerce Ribbon Cutting and hosted the October Business Card Exchange. The event was co-hosted with our friends at Digital Bard Video and The Alternative Board of Central Maryland.
Nearly 200 people in the business community helped us celebrate the ribbon cutting and event. In addition to Imagination providing the facility, Digital Bard celebrated the even by making Halloween videos for anyone interested. Through the use of their green screen and their video magic, they had Frederick’s business leader’s act out scenarios and put everything in place to make an awesome Halloween greeting! To see how they made their movie magic, CLICK HERE.
The Alternative Board of Central Maryland joined in the festivities by offering speed coaching where Debbie Zients would sit with business leaders to discuss where their businesses were going and how they were getting there. Debbie at The Alternative Board has been instrumental in helping us develop and stick to a business plan that has afforded us tremendous success in the years we have worked with her. More information regarding The Alternative Board may be found at http://www.tab-centralmd.com
Mark and I would like to thank all who attended and all who wished us well for this event!
In August, Imagination Center hosted a modular seminar explaining the benefits of modular displays for larger venues. One of the companies in attendance was Avemco. Terry Kasmarzyk approached us several days later with some general guidelines of a system to replace their existing custom display. They were looking for a solution that had a large area to tout their message as well as substantial storage space for holding their literature and show giveaways. They were looking for something easier to set-up, lighter, and something that would be less expensive to ship, assemble, and store.
The solution was the Delta Matrix System. The Delta Matrix solution reduced the storage and shipping size from two crates to one, and reduced the weight to roughly half compared to their existing system. We will write a follow-up piece after their first show with the Delta Matrix system in the spring.