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  Jim Parker March 13, 2013 at 8:43am

  That is very good advice, Jeanne. For people not familiar with the tax system, state sales tax issues and the like, hiring a good accountant is just good business sense. It takes a lot of work to follow the rules correctly, dot the t's and cross the i's. <lol>
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  jeanne cherry March 13, 2013 at 8:29am

  seriously dont want to get involved here, but...again....please consult an accountant..maybe 2 before you pay any crazy taxes...the privilege license you refer to is a Philly thing, not a PA thing...and you can pay a one time fee of (I believe) $300. Again, it refers to you 'working' there, and a good accountant can fight that...you are not 'working' there, you 'work' where your studio/office is, it is all a matter of perspective.  And as a side note, you are not ever personally income taxed on your gross. never...and if you pay any tax to another state based on an amount of income, you definitely deduct that from your home state income tax return. you are never taxed twice on the same money. Please talk to someone who is familiar..really familiar with your type of business. (I am a tax preparer in PA)
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  Bernard Zalon March 12, 2013 at 11:43pm

  I live in New York. I've been doing a show in Philadelphia (Rittenhouse Square) for about six years.  All of a sudden, the show director informed all of us that Pennsylvania requires us to pay $50 per year for a "Privilege License" for the "privilege" of doing business in, collecting sales tax in, and, yes, paying income tax in Pennsylvania.  And this is retroactive, both tax liability wise and "privilege" wise for as many years as you've been doing the show.  I know one artist who was contacted by the state and assessed over $800 gong back six years!
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  Lawrence Cimaglio December 14, 2012 at 10:43am

  No, Illinois and Michigan do not have reciprocal agreements.  My accountant got back to me and said flat out that Michigan is not entitled to income tax.  But, who is going to fight that battle.  I guess I choose not to. In this case, sellers (artists) beware!
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  Jim Parker December 13, 2012 at 6:13pm

  Do Illinois and Michigan have reciprocal agreements? Generally what is taxed as income in one state is not taxable as income in the other. I'd seek the advice of a tax accountant before year end to assure yourself that you have not fallen into the fourth circle of Hell.
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  Connie Mettler December 13, 2012 at 5:13pm

  Yes -- got it. We are a sole proprietorship -- and use the Schedule SE and take the figure of "income" from that over to the front page of the tax forms for the IRS. Have you spoken with an accountant about this? This interpretation from the State seems wrong.
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  Lawrence Cimaglio December 13, 2012 at 4:33pm

  You're right Connie. But sales are not income.  Sales are gross sales, not net profit. I pay sales tax in every state that I do shows in.  However, I pay income tax in my home state for all the NET profit my company makes.  Just like you do.  Imagine doing a show in Illinois.  And then, Illinois wants the sales tax plus income tax on the portion of gross sales that you made.  Illinois corporate tax is somewhere in the 9% range (net of profit).  In this case, what % is deductible from the Michigan tax in terms of operating expenses as we are in a foreign state.  Do you know exactly what your net profit is?  Are you lifo or fifo?  This is an infringement on interstate commerce at the lowest level.  Let's say you rent a car in Illinois and drive it to Michigan.  Lets say the rental company does not have permanent offices in Michigan.  Under this scenario, the rental company should be paying income tax on the rental of the car while in Michigan if longer than 1 day.  Have you ever heard of that happening?  This is what the artist scenario is about. We make our product in Illinois.  We pay sales tax on the place where it is transferred (sold).  But our deductible expenses from manufacturing are in Illinois.  If we paid income tax in Michigan bases on gross sales(yes, this supposedly is deductible on my Illinois income tax) why should Illinois fund Michigan.  It is not that I don't believe in paying income tax.  I do my state and fed personal as well as corporate.  But there is a grab going on in Michigan.
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  Connie Mettler December 13, 2012 at 3:42pm

  Honest, Lawrence, I didn't turn you in;) This sounds very strange to me. We live in Michigan and have a sales tax license here. We file regular income tax forms, and as we are Michigan residents, it is the regular income tax prepared for the State of Michigan. I'm thinking you must have misunderstood. Don't you file taxes in Michigan? Don't you usually owe some income tax? Your sales at the art fairs in the state would be reported as income.  We collect sales tax from sales in the State and quarterly make payments to the State.
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  Lawrence Cimaglio December 13, 2012 at 12:45pm

  Well, it was only last month when I stated that as an S Corp., I pay my income tax to my home state.  WOW!  Is someone listening?  I got a packet from Michigan that would scare the bajesus out of anyone.  First, I have not done any shows in Michigan although I would have liked to.  I was added on Michigan's sales tax role because I got onto the "Streamlined Sales Tax Registration" system.  If you basically sell anything in Michigan, you owe the State of Michigan income tax in addition to the sales tax.  They are full out going after anyone with a tax certificate that has or has not had sales and you must complete 4 pages of forms.  The tax is NOT a small amount either.  I gave the auditor that I spoke with a for-instance of a 2 day show grossing $4,000 with COG (cost of goods) of $1,500 and expenses of $800 would net only $1,700 on which I would normally pay my home state income taxes if I actually made a profit for the year. Whoa!  They want to tax on the gross sales. So, check it out before you apply to Michigan shows and give this some consideration. You can contact Allan Jacobs at 517-636-4142 in the Revenue Dept.  I actually spoke to an auditor named Katie.  I asked her to cancel my tax certificate as I will not do any Michigan shows under this nexus.
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  candiss cole-footitt November 21, 2012 at 4:20pm

  I ran into this first about ten years ago. I had filed sales tax returns in New York for over 20 years. They went back and realized that I didn't have a"foreign corporation doing business in a franchised location license". In New York State, or City,that license costs $300.00 a year. Ignorance is not an excuse. They fined me for not paying state income taxes for the past years, fined me for not having the "foreign corporation doing business in a franchised location license". fined me the interest on the money I should have paid them, and fined me for not paying the $50.00 fee for the option that some of my customers might have used public transport for my shows in New York City, and fined me the interest on the $50.00 over the years I should have paid it. They want not only the sales tax returns for any show you do in New York State or City, they want a copy of your Yearly Federal Returns and a State Income Tax Return for the money you made while doing business in their state. I have a very good tax accountant and he looked into hiring a NY State tax attorney. It was cost prohibitive. And as I said, ignorance is no excuse. I paid allot of money to get out of the mess with NYState. Now, I know what to do every year with them, and as long as the shows in NYState are worth it, I continue to purchase the license. California is another very tough state for this law. As others have said, research each state if you want to know the truth behind the tax laws for that state. Don't think that they won't come after you years later. All the states are "fishing" for easy money and unfortunately, the craft fairs are ripe for the picking. It is only going to get worse as the computer makes all of our files and records more accessible. It cost me so much to learn this lesson. I hope that this letter will prompt others to look before they show!