Tax Law (Questions About Taxes)/sales tax on live artists nationally
Thanks for reviewing this unique question. I am head of a division that provides artists to live events. Most of the artists are actual employees of our company. Our company is based in OH, but operates in all 50 states and Toronto. Our locations in 24 states have hundreds of employees that are assigned to specific events in there area. These employees are paid through our company. Most of the artists are based out of the established locations but perform in surrounding counties and cities for corporate, promotional and private events. We do collect sales tax in some of the locations which is remitted to the appropriate states/county, and city we are established in. We do want to be proactive in paying appropriately but answers have been vague and mysterious. We sent about 400 artists out to events nationwide in nearly as many cities. Most of the events are single events and not reoccurring. Do we need to collect sales tax and remit to the cities we perform in or where we are established? Lastly, we also us 1099 artists on some events. What sales tax and considerations should be considered when sending these individuals? Any advise or direction would be fantastic.
Sales tax is normally administrated by the local Business License Department. Sales tax rates vary by State, but they also vary by locality. A city may tack on a specific rate, while the surrounding county, my use a different rate.
Your collection of sales tax should coincide with the rules of the locality. The Business license department of the city or county would be the best place to check.
Some ordinances my have provisions that certain events such as yours are not subject to sales tax.
Once you establish whether that specific local will require you to collect the tax. . . get it in writing. . . then follow those rules.
Also Whatever you collect you MUST submit. If you are ever caught even accidently, keeping collected sales tax, the gates of hell will immediately open up, and the foulest of beasts will pursue you with wreckless abandon.
Are your 1099 independent contractors really independent? if so, then you can continue to pay them as 1099s. But the 1099 is problem maker for those that inaccurately apply it.
The 1099 allows for you the "Contractor" to not withhold or contribute to any employment taxes, since you are not the employer. If you were the employer, then you would be expected to withhold, pay FICA, unemployment, workers comp. etc.
Some people err, and choose not to see the whole picture and simply see that they could not pay any of the employment taxes, and claim to offer a higher (Gross) wage. Many departments of the Government are less than happy with those people and dedicate themselves to correcting those errors. Don't make that error.
Other than that, You probably do have some portion of your talent, that work for more than one company, have control over how they perform their job, and can hire and fire those that they work with. They are most likely independent. They then take on the task of paying their own self employment taxes and withholding.
The normal source of leads for Government agencies to look for questionable 1099 practices, are the tax returns of the independent contractor. When someone is issued a 1099, but they don't count it on their tax return, the investigation starts.
If it leads to an in person interview, the IRS agent will do a quick assessment of the likelihood of collection. In the event that successful collection is unlikely, they may attempt to flip the burden. If they can get that broke artist to admit that they were acting as an employee, in one of over 20 different capacities, then they can claim the artist is a common-law employee, assure the broke artist that they won't have to pay the tax, and that your company was responsible for all the back taxes, penalties and interest.
The technical term for that is BAD. So, only 1099 those that you can absolutely confirm are truly independent.
the Business Designers.