Charging Taxes for Rental Items

[David Ryan]

I'm thinking about renting my RED to offset some of the cost.

Do I need to charge rental clients tax when I rent the camera out to them? I'm assuming no, as it isn't a sales item. (Rental houses in my area don't seem to charge tax)

But does that mean I'm going to owe a bunch to the Gov. at the end of the year since I didn't charge tax?

 

[Clint Johnson]

Your country, state/province, and even the municipality all effect what and how taxes are levied. Not only where you're business is located but everywhere you do business. The only ones who can tell you with even moderate accuracy are those doing the same work, in the same area... and the only ones who have any certainty of actually being right are your local tax lawyers and accountants.

 

[John DeBoer]

And in some states, if you did not pay tax when you purchased the item, you MUST charge tax when you rent it. (California is one)

 

[Matthew Rogers]

It all depends on your state. Here in TN I got two different stories from the TN department of revenue. The final story said that if I don't go with an item when it's rented then I charge sales tax, if I go with it and it reasonably under my control then I don't have to charge sales tax.

What sucks here is we are supposed to pay sales tax on gear PLUS charge sales tax on gear rental. Personally, I think that's kinda shady.

Check with your state. That's the best advice anyone can give you.

Matthew

 

[David Ryan]

I'm in California. I also did the tax exemption thing when buying most of my gear.

What are other rental houses in the area doing, seems like nobody is charging sales tax on items?

Who do I need to call in the State Gov to disucss this?

 

[Florian Stadler]

I have the policy to charge sales tax for clients in state and not charge sales tax out of state. I haven't had a meeting with my tax guy about it yet but that's how I understand the California tax law. I do believe Camera houses charge sales tax. I'm interested in the owner/operator paying no sales taxes scenario as it would benefit the client. Anybody that has already met with their tax guy care to chime in?

 

[John DeBoer]

I'm in California. I also did the tax exemption thing when buying most of my gear.

What are other rental houses in the area doing, seems like nobody is charging sales tax on items?

This is why rental houses in CAL pay tax when they buy gear. If you do not charge tax, they can/will consider all your rentals as tax included, which would be a big hit on your bottom line.

 

[John Logan]

meeting with a CA accountant who specializes in TV/Film in a couple days. Will report back with specifics.

 

[A. Clint Litton]

Anyone from NYC that can chime in on this?

Also, suppose you're invoicing people for rental + service (i.e. you)...does this affect what kind of taxes you're supposed to charge? Very confusing stuff to the uninitiated... any guidance is kindly appreciated.

Cheers,
Clint

 

[david_winters]

Talk to your accountant. We do not charge sales tax on production equipment rentals, as we paid sales tax at the time of purchase. However, we do charge tax on items such as tape stock, as they are considered a "resale." I generally avoid renting items from rental houses that change sales tax.

As I understand it, in CA, companies which are also the manufacturer of the rental item must charge sales tax to their customers, example J.L. Fisher. I know a lot of procos & producers were pissed off when Plus 8 was acquired by Panavision and had to start charging sales tax.

 

[Steve Gal]

Anyone from NYC that can chime in on this?

Also, suppose you're invoicing people for rental + service (i.e. you)...does this affect what kind of taxes you're supposed to charge? Very confusing stuff to the uninitiated... any guidance is kindly appreciated.

Cheers,
Clint

We charge tax unless the customer is exempt or non profit organization. We also purchase without paying tax. As far as I know, tax is the same for service and rentals. In NYC that is.

 

[David Mutchler]

good info

 

[conrad gaunt]

It all depends on your state. Here in TN I got two different stories from the TN department of revenue. The final story said that if I don't go with an item when it's rented then I charge sales tax, if I go with it and it reasonably under my control then I don't have to charge sales tax.

What sucks here is we are supposed to pay sales tax on gear PLUS charge sales tax on gear rental. Personally, I think that's kinda shady.

Check with your state. That's the best advice anyone can give you.

Matthew

Here in the UK most things have 17.5% VAT (value added tax, although global crisis has led UK gov. lowering to 15% for a while).

When I imported the R1, 17.5% import duty/VAT was added. ouch.

If my Red has a fault and I send it back to the states under warranty (assuming I fill in the right forms first), and it gets fixed, no VAT is paid during re-import.

If my Red has a fault and I send it back to the states under warranty (assuming I fill in lots of forms), and it gets replaced (for free, because it can't be fixed), the full 17.5% VAT is payable again upon re-import. ouch ouch

Now thats what I call shooting your own country in the foot, and mugging your own businesses.
UK business buys equipment (pays tax), returns equipment back to be replaced for free by foreign company (charged tax again).

Gangsters?

If you become VAT registered, you can claim all VAT back (for business expenses), but, you then have to charge VAT to clients.

Then you work all your life saving your money (motivated by your love for your family etc), paying taxes all the time as you go, then when you die, BAM!!, your legacy gets taxed again because, well we don't want too much money going to familys do we when that government we all love so much more could have it.

Gangsters?

No, w**kers!

When your sixteen in the UK, you can smoke, join the army, get married, pay taxes, BUT you can't vote, drive or drink.

Now you know why guns aren't allowed in the UK:red_bandana:

 

[Greg M]

Talk to your accountant. We do not charge sales tax on production equipment rentals, as we paid sales tax at the time of purchase.

What does that have to do with it??

In most states "rentals" are taxable. Charging tax for a rental has nothing to do with whether or not you paid tax when you purchased the equipment. In most states you will pay tax for both rentals and sales.

But this is really not a question for a forum, you should be asking your accountant this question. Do not base your business tax decisions on advise found in a forum or you will regret it later.

 

[Jeff Kilgroe]

As always, consult your local tax codes as well as the tax codes related to where your rental will be used. Many states, municipalities have taxes on services, rental items and even generalized "use taxes".

In Colorado, we're a "home rule" state, which means that all the local government entities can enforce their own tax codes. It can be a real pain sometimes where sales taxes can vary from one town to the next, some cities charge use tax, some do not... Some tax rentals, some do not.. Some charge tax on shipping and software upgrades, some do not..

In the USA, Generally speaking, you are only liable for charging tax to your customers for the area in which they take delivery of your goods or services. If you are delivering out of state, most states do not require that you charge out of state tax to out of state customers. Your customers will typically be liable on their end for any use taxes or additional taxes that may be imposed depending on where and how they use what thy rented from you.

 

[John DeBoer]

What does that have to do with it??

In most states "rentals" are taxable. Charging tax for a rental has nothing to do with whether or not you paid tax when you purchased the equipment. In most states you will pay tax for both rentals and sales.

BUT IN CALIFORNIA IT DOES!!!! If you buy a peice of gear, get a tax exemption, when you rent it, you MUST charge state tax.

I agree, talk to an accountant.......


John