Diana,

You'll probably get a lot of different opinions about whether and when design work is taxable, even from the State Comptroller.

But this is basically how it works:
Anything that you make that you sell to the end user (whether that be a consumer or a business) is taxable. On the other hand, anything you make and sell to someone who will resell it is not taxable, and you have to get a resell certificate from them for your records.

So how does this impact your business? Well, if you design a brochure, a logo, a website or anything else for one of your own clients, then you must charge sales tax for it. But if you design the same piece for an ad agency you're subcontracting for, you don't charge tax, because THEY will charge tax when they resell it to their end client.

Another wrinkle: if you're designing part of a product to be resold by your client (such as a tshirt design or product packaging), you don't charge sales tax on that, because the client (or retailer) will charge tax on the item when it's sold at the store.

Also, the end seller (whether that's you or the agency you're contracting for) is required to charge tax on ALL elements of the product, including photography, printing, copywriting, programming, materials, web hosting, or any other outside expenses. So, if your client pays for the printing himself, then the printer has to charge tax. But if you pay for the printing, then bill it to the client, then YOU charge the tax (and make sure the printer DOESN'T charge you tax!)

Clear as mud?

Dana:

Rush is right. This is how I understand it. I paid a consultant to call the State Comptroller and get my QuickBooks set up correctly.

The only thing I would add is if the company is a non-profit, exempt from such tax, such a municipality, church etc. then you do not have to charge them tax. But you must have them sign a tax-exempt status form and provide you with their number.

The tax started in the early 80's. The State of Texas decided that our "art" was a tangible product that changed hands, such as a painting and decided it should be taxed.

It isn't too big of a deal, just tack it on to the invoice collect it, set it aside (don't consider it yours, ever.) and send it in to the State once a quarter.