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Taxes and Artwork: Part 2
IMR, Dec. 23, 1996
Officials at Independent Business Group, a distributorship in Hayward, Calif., are hoping they've found a way to avoid a repeat of the tax nightmare that cost them $27,000 earlier this year.
The Sept. 16 IMR reported the distributorship's troubles with the IRS, which claimed Independent owed more taxes because all art and graphic design charges should have been classified as assets instead of costs of goods. The distributorship had been lumping art and design charges into printing items on invoices.
Now, Independent Business Group has a new notice on the back of its invoices that officials hope will prevent future problems. The backer reads, "Notice to Customer: This invoice may include a charge for producing artwork and/or graphics. Any such artwork and/or graphics is your property which is available to you for pick-up and use at any time. Should you not presently wish to obtain possession of your artwork and/or graphics, IBG will store it on our premises without charge to you. We will not make use of it without your consent. During the period that IBG retains possession of your artwork and/or graphics, IBG does so as a gratuitous depository."
Gail O'Roke, CFC, president of the distributorship, says it took about two months to draft and finalize the notice. "There's certainly no guarantee it'll work," she says. "The IRS won't tell you. But according to our lawyer this should work." O'Roke says the firm's lawyer originally proposed a notice that was three times as long as the one above, and he wanted to include the cost for the artwork for each particular job. Officials at the distributorship balked at that, but worked with the lawyer to come up with a more feasible notice. However, O'Roke says the lawyer insisted on using the legal phrase "gratuitous depository," which means Independent is keeping the artwork for the customer free of charge.
After two weeks of using the new invoices, O'Roke says no customers have commented on it. But she says the company has received several calls from other concerned distributors since the IMR article was published. "I hope this helps somebody else out," she says.