nelsonian

Sorry if this sounds like a dumb question. In NZ musicians who are registered for GST (Good and services tax) have to add 12.5% onto their gig price to cover GST.

DD and SIL who are about to move to the US and have all the required work permits, are planning on getting gigs while they are there. Do they have to add anything on to their price to cover taxes, they will be based in Ohio initially.

Thanks for your help

dmlove

I don't know for sure, but in the U.S. sales tax rules are determined by the state, so every state is different. Here in California, services (as opposed to "goods") are not subject to sales tax (the "equivalent" of your goods & services tax).

lakeside77

From my experience (which may or may not be 100% correct), you would treat it as self employment income and not do anything to account for "sales tax". If doing it correctly, then you would claim this as self empl income on your federal income tax forms as well as state income tax forms (if applicable), and you would then pay your self employment tax on it - somewhere around 15%, I believe.

But like I said, I may be wrong on that.

dmlove

Lakeside, you're not wrong, but it wasn't the question (although it's still good information). The question was about sales tax, not income tax. I assume in NZ they add to the "gig price" and pay goods & services tax, and they still pay income tax on the remainder (I'm assuming there IS an income tax in NZ).

nelsonian

Yes in NZ you still pay income tax on the net profit, as well as GST. But you claim back the GST you have paid on any expenses relating to your business so at the end of the tw month period when you file the GST return you just pay GST on the difference, or even get a refund if you have purchased more than you earned.

It would seem that sales tax only applies to goods and not services which is great news.

ellenem

<<It would seem that sales tax only applies to goods and not services which is great news.>>

No sales tax seems like good news, yes . . . but if self-employed you will responsible to pay your entire Social Security tax which employees usually split with their employers. . .

Depending on where you live, as a self-employed person you may have to pay federal income tax, Social Security tax, state income tax, local city income tax (for example, New York City has such), unincorporated business tax (again, varies by location).

nelsonian

Yes I have been reading up on all the different taxes, quite a daunting process really. I am an accountant here in NZ, but think DD and SIL will have to get some professional advice once they are there.

AAFrequentFlyer

The income tax depends on how they get paid. If they do big gigs and get paid by check, then income tax will have to be filed. Federal for sure, state and local, depending on the location.

If they just play in smaller, bar type venues where they get paid with cash, then it's pretty much a wash. The bars pay cash because some of their money is not declared either. Both sides benefit from it. I'm not saying it's right, but it's a fact. When I managed a small bar many years ago we had local bands on weekends. We paid them cash, nobody declared anything and life went on.

Obviously, there are no benefits outside of the actual pay. No Social Security, no insurance, nothing. The entertainers either secured it on their own or just went without benefits at all if they just pocketed the money.

here_today_gone2Maui

Sale tax is a state thing and varies accordingly. DH is a musician and in California, as mentioned before, there is no sales tax for services. In other states he was usually booked via a booking agent who took care of such stuff. But, when he works here in Hawai'i he is responsible for paying the 4% excise tax. It is not required by law that he charge the excise, only that he pay it. I am self-employed in HI and for most customers I add the excise tax to the bill. But for some I just pay it out pocket (although in reality I have built it in to the cost). All the state cares is that I pay them, not whether I pass it on.

Your daughter's best bet would be to check with the Ohio state department of taxation. I would wager that any venues that hire her would also know the state law well enough to help her out.

nelsonian

Thanks for all the replies, will pass the info onto DD and SIL.

basingstoke2

I can't think of a state where a sales tax is applied to musician's gigs. I used to moonlight with a group and we played a number of clubs. Basicallly we were considered independent contractors and sales tax did not apply. Now income and other taxes, those were something else. DD is a musician and has had jobs but there too, sales tax never came up.

dmlove

It is not required by law that he charge the excise, only that he pay it.

That's true for sales tax, too. The seller is required to report it and pay it -- whether they collect it from their customers or pay it themselves is up to them.

travelinwifey

When we hired a band this past Feb. there were no taxes involved, a website you can look into is www.gigmasters.com that lists entertainers all over the us. For both the comedian we hired and the band it was a flat rate with no sales tax. And then it's up to the individual (the band) to pay their private income taxes.

here_today_gone2Maui

<<<I can't think of a state where a sales tax is applied to musician's gigs.>>>


Hawai'i would be one, that I know for a fact. Some states (and even municipaltiies) have taxes on services, others do not. In Hawai'i the musician is required to pay excise tax, as is everyone for anything, services or goods, every transaction has anywhere from .05 – 4% applied to it. Other states will vary according to the state, and local, laws.

Also, remember that income tax, which is Federal, is separate and different from state sales or excise tax.

Seriously, so not take tax advice form a travel forum. Tell DD to contact the Ohio Department of Taxation, or whatever it is called in Ohiio.

dmlove

Also, remember that income tax, which is Federal, is separate and different from state sales or excise tax.

There is federal income tax and most STATES also have an income tax (some do not, like Oregon, Florida and Texas). As someone else mentioned, some CITIES also have an income tax (New York City for example).

nytraveler

You need to check the tax authorities in the areas in which you'll be playing.

As others have mentioned there is no federal sales tax (equivalent to VAT) at all. But most states have sales tax and many cities do as well. If it covers services as well as goods varies by state and by municipality. Also - if you're going to collect sales tax you have to be registered with the appropriate government and have a tax ID number.

(The US has a truly federal system of government - it is a federation of 50 separate states with 50 different sets of laws - for most everything.)

smetz

nelsonian, the IRS has very good resources on their website, as do most of the state taxing authorities. They make paying your taxes easy! If money is an issue, it may not be necessary to get professional guidance when you get here. Most taxing agencies, IRS included, also have customer service phone lines available that you can call with questions.

Anyway, some states are trying to expand the base of items to which they can apply the sales tax, and in some cases they are trying to include services. In most cases, I'd be pretty surprised if they tried to apply a sales tax to musicians' fees.

Most of your issues are going to be in regard to income taxes at the federal and state level, and employment taxes (social security and medicare) for federal purposes.

nytraveler

And don;t forget that many cities - such as NYC - have city income taxes - which can be substantial. And this applies to all money you make in NYC - if you live there or not.

nelsonian

I have checked out the Ohio tax website and found the list of services where sales tax is charged. Music is not one of them, so that's onle less thing to worry about.

That's interesting about New York having to pay city tax even if you only earn money there and not live there.

Ohio seems to have a city tax as well as the State tax. All very interesting. In NZ you just file one tax return, having to file 3 seems a bit of an overkill!!!!

lakeside77

response to dmlove - I did answer the original question in my reply.

<<treat it as self employment income and not do anything to account for "sales tax". >>

I provided the extra details about income tax because that is what they would have to deal with, not sales tax. I do music for weddings, teach piano, etc and that's how it's always worked for me based on where I've lived.