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Helping California Cartoonists Against Unfair Taxation

© Laura Kraus

The state of California tries to unfairly tax cartoonists. Right now a bill which would solve this problem is moving through the California legislature. Please visit the National Cartoonists Society Web site to learn more. A portion of the information contained there is reprinted below.

California's tax regulations are so crazy and complex that almost every California artist violates them. Taxes may or may not be due depending on how the artist delivers his artwork, how the client uses the art, who scans the art, if the artwork qualifies as "incidental" or for a host of other arbitrary reasons. It's no help calling the tax board (BOE) for advice since their staff doesn't understand the regulations either and they frequently give out wrong information. When the audit axe falls it's up to the artist to prove that he doesn't owe tax on each job by keeping records on hand which meet the BOE's requirements.

California's Sales and Use tax is collected on tangible property--things you can touch. Under the law, the BOE is supposed to tax the true object of a transaction. For example, when a writer gives his client a floppy disk, the BOE considers the true object of the transaction to be the information on the disk; information is not tangible property so the writer owes no tax. When an artist gives his client a floppy disk, the BOE says that the true object of the transaction is disk itself; the disk is tangible/taxable so the artist owes tax on the full amount of the sale. No other state takes this position.

The mistake most of us make is thinking that we haven't sold anything tangible when we keep our original artwork and sell reproduction rights--in this case the BOE says we're in the business of "leasing" artwork and we owe Use Tax on all of our future royalties resulting from any "lease."

When publicity follows an issue the BOE is happy to add another exemption to the tax regulations. Cartoonist Paul Mavrides recently mounted a noisy publicity campaign against taxes on royalties from his comic books. Now rights to artwork will be tax exempt if the artist also writes the script which accompanies the art. While we welcome any incremental change which benefits artists, we are disappointed that this change is so narrowly drawn. The BOE seems to be auditing more artists now than ever before. Most of them just pay the tax because that's almost always cheaper than fighting. We appreciate the efforts of children's book illustrator, Heather Preston who is suing the tax board over this issue.