Life on tour can be thrilling for musicians, but behind the scenes, there’s an aspect that often goes unnoticed – taxes. From considering multi-state tax implications to ensuring accurate record-keeping, there are a number of tax considerations for musicians on tour.
At Fusion, our CPAs have worked closely with high-net-worth entertainers to help them save money and ensure multistate tax compliance. In this article, we share some of the key pointers that our CPAs believe can help to make musicians’ lives easier when it comes to multi-state taxes and more.
Multi-state tax implications
Touring isn’t just about playing music; it’s a business venture. What many artists may not realize is that every gig, merchandise sale, and even streaming revenue can impact tax obligations. But, that’s not all. As musicians cross state borders, they also have to bear in mind the diverse interstate tax landscape. From income tax rates to sales tax on merchandise, each state has its own tax regulations. Taking these nuances into account is crucial to accurate and compliant tax filing.
Our CPAs note that interstate tax apportionment requirements are by far one of the most challenging tax issues for musicians. This is because touring often involves visiting a number of states which may all have different tax requirements. It is important to consult with your tax practitioner to find ways to avoid double taxation and minimize tax liability.
Track of residency rules and requirements
Many of the high net-worth musicians that we work with at Fusion, own property in multiple states and travel between them for when touring or for leisure purposes. This is something to take note of as most US states have a threshold for the number of days you are allowed to stay within their state without paying taxes.
If you frequent another state a number of times per year, it is important that you remain within the threshold. Conducting business in another state as a resident of a state different from your home state residence can impact your tax liability in each state. To avoid tax penalties in this regard you can track the number of days you’ve spent in a particular state using residency management software to ensure accurate tax submissions and maximize tax benefits.
Accounting software and expert support
Navigating tax in the entertainment industry can be challenging with many factors to consider for compliance and tax reprieve. Add to this multi-state taxes and it may become an immense stumbling block for your creative drive as an artist. Our CPAs recommend implementing accounting software like NetSuite, with built-in multi-state tax ability to help streamline your financial processes. It not only makes life easier but also ensures tax accuracy and compliance.
Accounting software support
Implementing accounting software can help you in the following ways:
- Automated tax compliance: Accounting software can automate the calculation of taxes owed in each state based on income generated. This helps you comply with multi-state tax requirements, reduces the risk of errors and ensures accurate tax filing.
- Real-time financial visibility: Multi-state touring involves managing finances across different locations. Real-time visibility is crucial for understanding the financial impact of performances in different states meeting tax obligations.
- Efficient expense tracking: Accounting software streamlines the process of tracking expenses related to performance and travel. This level of precision ensures that you can claim all eligible deductions, reducing their taxable income and potentially lowering their tax liability.
Partnering with an expert CPA for support
Working with an expert CPA in this regard is also greatly beneficial for musicians. Tax practitioners do more than just balance your books – they ensure that your funds are being managed adequately. Your CPA also works to ensure that your financial management software is on par with your needs, and implemented correctly.
Heading to a new state on tour? Your CPA can help you draw inferences by studying your financial data. This can help you decide which states would be the most worthwhile to include as part of your tour destinations. They can also help you ensure compliance as you navigate revenue from royalties and more.
At Fusion CPA, we analyze your data with the help of business intelligence software to develop a business strategy for your creative products. Our CPAs have years of experience working with entertainers to ensure they meet their tax obligations but also to set their taxes up in a way that allows them to optimize tax breaks. Contact us for assistance with managing your wealth portfolio as a musician.
This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. We base articles on current or proposed tax rules at the time of writing and do not update older posts for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.