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BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 933
Experience:  Owner of a CPA firm
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I am an animator based in TN and I am providing an

Customer Question

Hello,
I am an animator based in TN and I am providing an animation for a company based in Hawaii whom will broadcast the animation in Hawaii. What taxes do I charge them. Is media considered a product or service? Do I charge sales tax to out of state customers as a TN based business? Are there any federal taxes I need to charge for?
Submitted: 1 year ago.
Category: Tax
Expert:  BK-CPA replied 1 year ago.
Hello and thank you for your question. Tennessee generally taxes the retail sale, lease, licensing, or use of specified digital products, including animations, but exempts "sales for resale..., including any further broadcast," so I think you're ok in this case (see below). The State updated its sourcing rules recently with the updates taking effect July 1, 2015. If the sale is sourced outside Tennessee, then you would not have to collect the sales tax even if a retail sale (in this case it appears the sale will be sourced outside of TN, so again you'd be ok; see below). There is no federal sales or excise tax on something like this, just income taxes. For taxability:Tenn. Code Ann. 67-6-233. (2014) Taxation of the retail sale, lease, licensing or use of specified digital products transferred to or accessed by subscribers or consumers. (a) The retail sale, lease, licensing or use of specified digital products transferred to or accessed by subscribers or consumers in this state shall be subject to the tax levied by this chapter on the sales price or purchase price of the specified digital products at a rate equal to the rate of tax levied on the sale of tangible personal property at retail by § 67-6-202....(f) Retail sales subject to tax under this section shall not include any sale, lease, licensing or use of a specified digital product, if the sale, lease, license or use of the equivalent in a tangible form would be exempt as a sale for resale, sublease or subrent, including any further broadcast, distribution, license or retransmission of the digital product by a provider of video programming services, who shall not be deemed a subscriber or consumer for purposes of this section. For purposes of this section, "video programming services" means programming provided by or generally considered comparable to programming provided by a television broadcast station and shall include cable television services sold by a provider authorized pursuant to title 7, chapter 59, wireless cable television services (multipoint distribution service/multichannel multipoint distribution service) and video services provided through wireline facilities located at least in part in the public rights-of-way without regard to delivery technology, including Internet protocol technology. For sourcing:Tenn. Code Ann. 67-6-902. Sourcing -- Retail sales -- Lease or rental of tangible personal property -- Lease or sale of non-transportation equipment vehicles -- Retail sales of transportation equipment. [Effective on July 1, 2015.](a) The retail sale, excluding lease or rental, of a product shall be sourced as follows: (1) When the product is received by the purchaser at a business location of the seller, the sale is sourced to that business location; (2) When the product is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser, or the purchaser's donee, designated as such by the purchaser, occurs, including the location indicated by instructions for delivery to the purchaser, or donee, known to the seller; (3) When subdivisions (a)(1) and (2) do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller's business when use of this address does not constitute bad faith; (4) When subdivisions (a)(1), (2), and (3) do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser's payment instrument, if no other address is available, when use of this address does not constitute bad faith; and (5) When none of the previous rules of subdivisions (a)(1), (a)(2), (a)(3) or (a)(4) apply, including the circumstance in which the seller is without sufficient information to apply the previous rules, then the location shall be determined by the address from which tangible personal property was shipped, from which the digital product or the computer software delivered electronically was first available for transmission by the seller, or from which the service was provided, disregarding for these purposes any location that merely provided the digital transfer of the product sold....(e) (1) For the purposes of subsection (a), "receive" and "receipt" mean: (A) Taking possession of tangible personal property; (B) Making first use of services; or (C) Taking possession or making first use of digital products, whichever comes first. (2) "Receive" and "receipt" do not include possession by a shipping company on behalf of the purchaser.
Customer: replied 1 year ago.

Thank you!

Customer: replied 1 year ago.

Have you been payed now? Sorry, this is my first time using this website and I don't really get how it works.

Expert:  BK-CPA replied 1 year ago.
That is very considerate of you. The experts that answer questions here are only paid if their particular answer is accepted. I have not received anything for helping you at this point. Thank you.
Customer: replied 1 year ago.

sorry. How do I accept it?

Expert:  BK-CPA replied 1 year ago.

There should be a "submit feedback" button on the screen. The following is from JustAnswers help section:

http://ww2.justanswer.com/help/topics/142

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Thanks again!