I sent this to Cecil’s email, but I need an answer ASAP, and I’m not sure I can get one in time. If anyone knows for sure what the answer to my question is, I’d appreciate it!
Here’s the skivvy:
I am getting married next June in Rohnert Park, California. We are currently arranging with a venue to book not only their site and catering services for the ceremony & reception, but their in-house DJ as well (to play music at our wedding and be Master of Ceremonies). I was just about to sign the wedding contract with the venue when I stopped and noticed that they charged sales tax on the DJ’s rate. **Can they or a private DJ even charge sales tax for their services? ** I was under the assumption that a DJ is considered ‘labor’ and therefore, no sales tax can be charged. My best friend, however, says that at her wedding two years ago (held in Oakland, CA), the DJ charged sales tax. I’m now confused as to what is the truth here.
I’m in need of an answer quickly, as the final contract needs to be signed before October 31st! I don’t want to sign it & commit myself to the financial amount if there is an error in the contract.
Anyone can charge you sales tax. He can charge you the Mongolian national sales tax if he wants. The law, and the revenue folks in government, and generally concerned with whether or not businesses pay the sales tax they’re supposed to to GOVERNMENT.
Charging or not charging sales tax is wholly voluntary. A retailer would be free to not charge California sales tax on retail items - but the State of California would still expect them to pay the sales tax to the State.
Now, there may be laws about misleading the customer about what, precisely, they’re paying for.
Well, it’s from 2002, but…
My answer would be no (and I am not a tax attorney or IRS agent, but I do DJ services and have a 5 piece band). California does not tax professional services, they only tax “tangible items.”
Unless some one comes along and tells you otherwise, tell that DJ service they’re full of it and remove the tax or you’ll go elsewhere.
This sounds completely illogical to me. How can a retailer or service provider determine “Yeah, okay, I’m gonna charge this guy sales tax” for something that is defined as tax-exempt? If it’s a tax-exempted service, the state isn’t going to be looking for that sales tax revenue, and so the DJ service would be richer by whatever amount he charged for the tax.
I’m not saying it is tax-exempt or isn’t. I have no idea. I just can’t fathom that charging sales tax on a tax-exempt service is a voluntary decision by the service provider.
Ask the DJ to show receipts for his payment of sales taxes collected to the State of California. In the absence of willingness to so do, don’t agree to a contract with said individual.
Roughly, sales tax is considered to be a clause on a contract saying, “I’m charging you this money on the understanding that I’m donating it to the government on your behalf.” Whether or not it is a tax due is not strictly a requirement for this, I guess. And whether the government is expecting it or not is also not quite the point. If he charges it to you and does not remit it to the government, then he has defrauded you. (The california government, like most governments, will I imagine have no problem with anybody paying them more than is required by the tax codes.)
Paying any tax beyond the amount required by tax code law is always voluntary, never prohibited, basically. However, nobody ever really wants to give more money to the government than they have to, except maybe when it will save them greater time and effort filing their taxes.
Now, if the sales tax is not required under law, then for the DJ to charge it to you under his invoice is a completely unreasonable request, and if you can’t get it thrown out of the contract you should walk. Remember, he’s not the one really paying the tax… he just collects it on behalf of the government. How would you react in general to some guy walking up to you on the street and asking for money that he’ll give to the government for you, that you don’t have to pay? Regardless of whether or not he’ll go through with it, that doesn’t exactly make sense on your end.
This has been a WAG post. I’m not an accountant or tax laywer.
In searching for an answer to this question, I came across this page, which seems to indicate that they were correct in adding sales tax to the DJ services. The reason is that you’re not buying only the DJ services but are renting the hall and buying catering services and the DJ is only a small part of it.
I think another example is if you purchase a suit and have the retailer do the alterations. In that case, they’d be right to charge sales tax on the labor but not if you went to a tailor only for the alterations.
Actually, interpreting the ‘true objects test’ from that page, I came out the other way… the DJ has nothing directly to do with delivering food or getting you into the hall, which are the only semi-‘tangible properties’ involved. (Well, the food is definitely tangible… the rental on the hall is in a grey area.) And the ‘object of the sale’ is definitely not a tangible objects… it’s an event, a nice wedding experience.
And I don’t really understand what the other items on the invoice have to do with it when they’re all clearly seperated and defined, as the OP suggested. The DJ rate was a seperate item on the contract, and it had sales tax attached to it… (checks the linked page again.) Right:
That seems to back up my gut reaction, that if the services and goods each have their own price, that there should be sales tax on the goods and not on the services. The DJ’s services themselves are not to deliver goods. Therefore no sales tax owed on them. Is how I read it.
I too would disagree with your analysis. Let’s say you take your car in for service, and the total bill is $200. $100 in parts, and $100 in labor. Tax is only charged on the $100 in parts, there is no tax on labor. It does not matter if they are on the same bill or not, there is no tax on labor
IANAL or tax pro, but it seems to me that in the situation presented in the OP, the main purpose or “true object” is the wedding hall rental and the meal. Obviously, the meal is taxable. It’s not clear to me, based on a reading of this State of California webpage (warning: PDF), whether the hall rental is taxable (bolding adding). It may depend on whether the hall rental is broken out on the invoice. Either way, it seems to me that the DJ services are incidental and therefore taxable.
The referenced portions of the California Revenue and Tax code, section 6006 and 6015, can be found here
I was going to write that they had no right to charge you sales tax. However, in typical murky California written law fashion, section 6016 of the Code describes "tangible personal property as:
(Emphasis mine)
Seems to me like they are trying to tell you that the sounds the DJ will cause to be heard are “tangible personal property” being provided to you in the course of the service. It could be that the state has indeed determined this to be true in some court case, but I’d check with a lawyer.
The photo studio I work at charges taxes on photo sessions. I suppose they get the proofs, which are a tangible object and arguably the point of the whole thing. They also charge tax on shipping and handling, which they claim is taxed by some new CA law.
I think the key thing to remember is that, when it comes to weddings, EVERYTHING is negotiable. Of course, you’ll have better luck in off-season stuff – we got great deals by getting married in January, you won’t have as much luck in June – but tell the venue you want them to cover the sales tax for the DJ. It can’t amount to much, and they’d rather do that than lose a booking.
Hmm… yet another complication to the question. I would say that there’s a difference between buying music, in the sense of a computer data file and license that you can play at will, and buying music at a one-time event, though I’m not entirely sure how to describe the difference other than that.
I gather from some of the responses that it’s not crystal clear whether or not the state considers this item to be taxable. I would venture that this service provider, or one they have heard about, got hit with a tax bill (and possible penalty and interest) in a similar situation where they had thought the item in question was not taxable, only to find out it was. Having been thus burned, they’ve learned to err on the side of caution and charge tax for anything that they think might be considered taxable.
Presumably they remit the tax to the state, which almost certainly isn’t going to go to the trouble to analyze all the particulars of the situation and figure out for them whether it actually was taxable. If there is a definitive answer, it’s probably only available from an attorney or CPA who specializes in this, or from the state tax bureau (but if said bureau operates like the IRS, a wrong answer might be given but the burden of responsibility would still be on the taxpayer). Unless the service provider’s tax adviser (not yours) assures them that it’s not taxable, I doubt they’d be willing to take the risk of getting stuck for it.
I sent this to Cecil’s email, but I need an answer ASAP, and I’m not sure I can get one in time. If anyone knows for sure what the answer to my question is, I’d appreciate it!