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I'm a photographer starting a business. I will sell

Customer Question
Hi, I'm a photographer...

Hi, I'm a photographer starting a business. I will sell photography services that result in digital photo files for advertising. In Kentucky, those kinds of digital files are taxable and in Ohio they are not. Kentucky is destination based and Ohio is origin based. So if I register my business in Kentucky and have a client in Ohio, do I charge sales tax over the digital files? And if yes, does it go to Kentucky or Ohio?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

I'm wondering what is best regarding taxes: to register my business in Kentucky or in Ohio. I do not own a studio or any kind of location, I photograph in public places.

Submitted: 2 months ago.Category: Finance
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Answered in 6 minutes by:
3/27/2018
Financial Professional: bkb1956, Finance Enthusiast replied 2 months ago
bkb1956
bkb1956, Finance Enthusiast
Category: Finance
Satisfied Customers: 6,189
Experience: IRS Enrolled Agent, 20+ years of experience in tax preparation with associated finance experience.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Because Kentucky is destination based as to sales tax, you would charge and collect sales tax for Kentucky from Kentucky customers. You would not charge and collect sales tax from customers located outside of Kentucky.

Because Ohio is origin based, you would charge and collect sales tax based on where your business is located in Ohio.

Where do you live? That determines where you should register your business since you have nexus (physical presence) in that state.

You would only charge sales tax in another state if you have nexus in that other state.

Make sense?

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 2 months ago
I'm confused by this part of your answer: "Because Ohio is origin based, you would charge and collect sales tax based on where your business is located in Ohio."I live in Kentucky. I don't have a physical location or an employee or any kind of ties in Ohio. So if I book a client who lives in Ohio, then I should not charge any sales tax from them?
Financial Professional: bkb1956, Finance Enthusiast replied 2 months ago

I initially answered based on the fact that you did not advise where you are located.

If you live in Kentucky, you operate your business in Kentucky and the sales tax rules for Kentucky would apply.

If you live in Kentucky and form a business in Ohio, then you will have Kentucky and Ohio sales tax issues.

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Customer reply replied 2 months ago
As I understand the tax rule for Kentucky is that you collect tax for the destination state, so in this case (of an Ohio client) I would collect taxes for Ohio? Or do I not collect it for Ohio since Ohio is origin based? And also, Ohio wouldn't consider the digital files taxable, does that matter? Sorry, this subject is just just confusing to me..
Financial Professional: bkb1956, Finance Enthusiast replied 2 months ago

That's not what destination state means.

Kentucky is destination based as far as customers LOCATED IN KENTUCKY, not outside of Kentucky. Many states have different sales tax percentages for difference cities/areas located in the same state.

If you had a customer in Ohio, you would not charge Kentucky sales tax nor would you charge Ohio sales tax. Additionally, Ohio does not charge sales tax for digital files.

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