Did you know that of the 50 states, 47 have faced or are facing deficits in their
budgets for this and/or next year? Read this email carefully, for it can save your firm tens of thousands of dollars.
In the 25+ years of the history of MAPPS, it has been our experience that when states face budget challenges, they usually implement aggressive tax collection activities to make up the deficit. That often means they go after mapping firms. Let me explain.
Most (but not all) states have a
sales tax. Many of those with a sales tax assess that tax on sales of products, but not services.
When states face deficits, the state tax collection agency often increases its audit, collection and administration efforts, in order to realize more revenue (without the legislature voting on tax increases). Recognizing that in many states products are taxable and services are not, the states attempt to classify many activities as goods rather than services.
That is where photogrammetry and mapping come in. Many MAPPS members have received tax notices from the state, or are subject to tax audits, wherein the state claims that mapping and photogrammetry are not services, but instead are subject to sales tax.
Some MAPPS member firms have had bills for as much as $40,000 in back sales taxes. We have had sessions on this issue at MAPPS meetings in the past. Given the current budget climate in the states, I wanted to take this opportunity to remind you that MAPPS is here to help you when you are confronted with a proposed tax on your firm's activities, particularly when the state tries to claim that you are providing a product, not a service.
First, make sure you are aware of the
tax law in your home state and all other states in which you are doing business. Consult your accountant and tax counsel.
Second, be certain to conduct a review and audit of all your firm's practices and procedures. Do not use words like "product" , "photographs", "prints", "industry" or the like on your invoices, brochures, business cards, web site and other communications media. If you are using such terms, you will find it virtually impossible to claim that you are exempt from sales tax as a service provider.
If you receive a tax notice or are audited and told you have not assessed and collected a sales tax on your firm's activities, ask for a detailed, written notice.
Contact MAPPS.
We can work with you to point out the difference between mapping as a professional service and the sale of consumer maps as a product. We can also demonstrate how aerial photography is not an end product, but rather a step in a professional service.
MAPPS has a presentation on this issue.
We also have a
memorandum that you can submit to your state tax agency, that can be used by your accountant or tax counsel, or MAPPS can independently submit on your behalf. It demonstrates how and why mapping is a professional service and provides precedent in other states that have concluded that mapping is exempt as a service.
The important thing is, don't fold. Don't be intimidated. Don't pay the tax without a fight; you'll be setting a bad precedent for your firm and your profession. MAPPS has a very good track record of winning these fights with and for our members.
You should not have to pay any more than your fair share of taxes. And you should not have to pay taxes where your state legislature has enacted an exemption.
