I'm looking to talk to a PA lawyer about starting up my photography business... I believe I know all the licenses I need to apply for but, when it comes to taxes, I'm scared! I want to make sure I can afford it, though I know business start up slow! I know in PA they have a tax of 6% on tangible items/services. Which I'm guessing I charge my clients but, what other taxes should I know about so I can charge accordingly. Thanks
You should probably consider hiring or at least paying for a consultation with an attorney or CPA. There is a lot to do in terms of getting a business set up and in photography, you do want to make sure to have a business structure in place for liability reasons. You would be surprised how many people ask about suing photographers because they weren't happy with their wedding/marketing/product photos.
That said, PA is a tough state on the sales tax side. They do conduct audits because it is a revenue raiser for the state. You will need to sign up for a sales and use tax account. Sales tax is collected on sales of tangible items but not most services (there are exceptions). Use tax is payable for any supplies or equipment purchased from outside of PA where PA sales tax was not collected or where the non-PA sales tax was below 6%. This is important because a lot of photography equipment from outlets like Adorama, B&H, etc. is not charged PA sales tax, but would require that use tax be paid (and these are generally more expensive items so the use tax on a $10,000 camera is $600).
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Attorney Grey is correct. You do need to set up a corporate structure. Generally speaking, that would be an LLC or a S Corp. However, setting that up is not a shield to liability if you do not follow accepted business practices such as regularly creating minutes, maintaining separation between personal and office funds and others. Failure to do so could allow a plaintiff attorney to pierce your corporate shield.
You also will need to make estimated payments of your federal taxes and file and pay them at least quarterly.
If you have employees you need to pay the 941 trust fund taxes. You may want to consider your employees as independent contractors, but there are rules as to who really is an independent contractor and who is not. An erroneous designation is a common and sometimes costly mistake for a start up.
Also you need to learn what expenses are deductible and which are not. It is not true that all business expenses are deductible. Proper planning can reduce your tax liability.
This is general advice and does not establish a lawyer client relationship.
You will want to set up a meeting with an attorney and probably a CPA. As prior comments indicate you will want a limited liability structure (Corporation or LLC) because photographers do get sued (ie., losing the wedding pictures or other one time events). Therefore you will need to file Federal and PA income tax returns for the entity as well as you individually. As you point out there are sales and use tax issues in PA, and if you hire anyone you will have Federal, PA and local payroll taxes. Finally, many municipalities in PA have Mercantile or Business Privilege Taxes if you are located in or do business in their jurisdiction.
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