Since we’re located in Los Angeles we get a fair amount of requests to purchase equipment using California’s Teleproduction sales tax exemption (Section 6378). If you’re not familiar with this exemption, it basically gives you a 5.5% discount on the sales tax we would otherwise be forced to collect on your behalf. All you need to do to take advantage of this discount? Simply fill out a form that states:
- You’re using the equipment in California, AND
- It’s being used solely for tele-production/ post-production purposes
Production versus Post-Production
There’s one problem with this: It doesn’t cover cameras. No, really. It doesn’t. It seems most people don’t understand that this exemption is primarily intended for post-production and specifically excludes production equipment such as cameras. Below is an excerpt from Regulation 1532 which elaborates on the teleproduction exemption. Here you can see the state’s definition of “teleproduction or other postproduction services”:
(4) “Teleproduction or other postproduction services” means services for film, video, or digital multimedia formats (audio or visual) that include editing, film and video transfers, transcoding, dubbing, subtitling, credits, close captioning, audio production, special effects (visual or sound), graphics, or animation. For the purposes of this regulation, “teleproduction or other postproduction services” includes postproduction services and does not include production services or activities. “Teleproduction or other postproduction services” include the duplicating of film for postproduction purposes. However, the duplication of film to make release prints does not qualify as a “teleproduction or other postproduction service.”
Note the sentence in bold (emphasis ours). Despite this, we’ve actually had customers get angry with us because another local vendor allowed them to use the tax exemption for camera gear, sometimes going so far as listing different vendors that have extended the credit to them as if to insinuate that if everyone else isn’t adhering to the law it’s ok for us to ignore it as well. Here’s the problem.
Responsibility to Collect
In California sales tax is a tax you owe however it is the merchant’s responsibility to collect and file this tax on your behalf. You might be wondering why. Well, let’s just say most people do a poor job of self-reporting sales tax they owe. All those internet purchases you make from other states and don’t pay tax on? Technically you still owe sales tax on those purchases. You’re supposed to track and self-report this however hardly anyone does. In-state they can force merchants to act as the pass-through since we’re already so heavily regulated. It’s easy to shoulder us with the burden since we’re already collecting money from you.
Some customers will still argue that they shouldn’t pay tax and that if they’re wrong it’s their responsibility to pay. Unfortunately that’s not the case. It is our responsibility to collect and if we’re wrong the state will come after us looking for the missing money. It’s important to understand that we don’t keep a penny of your sales tax. In fact, it costs us money to collect it in the form of credit card merchant fees. Furthermore, it costs us business because people will buy from companies out of state so they don’t have to pay it. We don’t want to charge you sales tax any more than you want to pay it. It’s a pain for us to collect, it’s a pain for us to file, it costs us money, and in many cases it’s a charge our local customers were not anticipating.
Bypassing California Sales Tax
Let’s say you’re starting with a $1000 camera. We have to add 9% state tax onto that making your total $1090. Chances are you found us from eBay or Amazon. We pay these companies hefty fees to sell on their platforms. When you buy from us directly you save on average 5% off your item price. That means your $1000 item is now $950 and being taxed at $950. With tax you’re up to $1035. If you’re in Los Angeles and can pay cash it only gets better. We pass on our credit card processing fees to you in the form of a 2.5% discount. Combine that with your 5% discount earned from buying from us directly and your $1000 item is now $925. With tax it’s $1008.25. So simply buying from us directly and paying cash nets you a $7.5% discount, effectively wiping out almost all of your sales tax. Your warranty stays the same. Nothing else changes.
At the end of the day it’s important to understand what the tele-production exemption does/ does not cover regardless of whether you’re buying from us or not. If the state determines that the items purchased do not qualify for the discount it’s likely they’ll chase down both the buyer and the seller and when they do that they like to tack on fees. Make sure you’re on the up and up.