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A variety of
laws affect the way artists and designers work. Following are some
of the major factors our clients should be aware of as visual communication
projects are transacted.
Sales tax
Rooster Graphics International is
based in Philadelphia, PA U.S.A. Both the State of Pennssylvnia and the City of
Philadelphia have sales taxes amounting to 7% in total. A number of exemptions
exist, including special rules for the sale of reproduction rights and out-of-state
deliveries.
Generally, services, including the services of transferring reproduction rights,
are not subject to sales tax. Transfer of physical property to our clients (i.e., original
art, designer's mechanicals) are not subject to sales tax only if they are part part of a
project that will be billed to a client later by an intermediary design firm or agent.
Sales tax is applicable for end sales or retail costs only, not for intermediate
subcontracting. Also, mixing taxable with nontaxable items on the same invoice
subjects the entire invoice to sales tax.
Exemptions from
charging sales tax
- items for resale: When tangible property passes through
intermediate owners, taxes are deferred until it reaches the final purchaser. If an
agent or organization subcontracts Rooster Graphics for a project for
their client which they will bill themselves, we do not charge sales tax. A "resale
certificate" documenting that our work will be sold to a third part is required at
delivery time.
- sales to exempt organizations: Nonprofit and educatioal
institutions and most U.S.A. federal and state govenmental agencies have tax
exempt status. We require written proof of the tax-exempt status of our clients.
- grants of reproduction rights: At the end of our creative process, if
only specified restricted rights are transferred, but there is no transfer of ownership
of tangible personal property (e.g. an original art work, illustration, printed brochures,
or a web button), the transaction is not taxable.
- tax-exempt services: Our services that do not result in the
transfer of tangible personal property, such as our marketing, forecasting, project
management consultation services are not taxable. However, if actual reports,
forecasts, etc. delivered at the end of the consulting project, then the entire contract
including all consultations, design work, etc. is subject to the sales tax.
- out-of-sate sales: The sale of our work to out-of-state clients is not
subject to sales tax, subject to evidence of out-of-state delivery.
Hiring independent contractors
Our prospective clients should be aware of
any tax-liability consequences of hiring individual artists as independent contractors.
In the U.S.A., The Internal Revenue Service takes a dim view of independent
contractor relationships. As an established graphic and web design firm,
Rooster Graphics International allows you to satisfy your needs without
incurring the possible liabilities to a government viewing the design services provided
by an independent contractor as performed by an "employee" of your organization.
In the U.S., the IRS has issued a 20-factor control test for determining if an
independent freelance artist is actually "an employee" of the client firm. The IRS has
successfully argued in many cases that independent contractors such as illustrators
or mechanical artists are in fact employees. This results in Social Security tax,
benefits and insurance, and heavy penalty liabilities to client firms.
Cancellation and rejection fees
Our clients are subject to a cancellation fee if
a project is cancelled for reasons beyond the control of and unrelated to the performance
of Rooster Graphics International. Our cancellation fees are significantly lower
than the typical fees used by our competitors in the design industry.
- In the event of cancellation of an assignment by the client,
any milestone payments made prior to cancellation are retained by RGI.
- The client is also liable for a certain percentage of the payments due at the ends of the remaining project milestones.
This percentage depends on exactly when the client had to cancel the project and the relative complexity of the tasks in
each stage of the project. If the cancellation occurs before we deliver our design concepts, comps, or sketches
among which the client is to select their preferred general look for the assignment, we charge
a cancellation fee of approximately 15-20% of all remaining contracted payments for graphic or web design and consulting
assignments. This cancellation fee is 10-15% for any illustration and fine art or digital art assignments, and 5-10% for any
scripting assignments (JAVA, CGI, etc.).
- If the client needs to cancel the project after we deliver the concepts or comps or sketches for the assignment and prior
to the acceptance of one of the concepts by the client, the cancellation fee is 30-40% of all remaining contracted payments
for consulting and web design assignments, 25-30% for any fine art and graphic design assignments, 20-25%
for any illustration or scripting assignments, and 15-20% of any digital art assignments.
- If the cancellation occurs after the client's selection of a design but before our delivery of the preliminary work
or a beta or preliminary version of the assignment, the cancellation fee is 50-60% of all remaining contracted payments
for consulting and web design assignments, 40-50% for any fine art and graphic design assignments, 35-45%
for any illustration or scripting assignments, and 30% for any digital art assignments.
- If the cancellation occurs after we deliver the preliminary version of the assignment, the cancellation
fees are 100% of all remaining contracted payments for consulting and web design, graphic design and illustration assignments,
and 75% of any fine art, digital art and scripting assignments.
- Regardless of when the project is cancelled, all "necessary expenses" such as
model fees, materials, overnight shipping fee, independent contractor fees already
incurred by us or that we are liable to pay will be paid in full before the client's
liability according to the above timing criteria is calculated based on the remainder of
the contracted amount over the aforementined "necessary expenses".
- In the event of cancellation, Rooster Graphics International retains all rights to
the completed artwork, design or technology.
Rejection/Termination provisions
In the unlikely event that preliminary or finished work is found by the client not
to be reasonably satisfactory, the client may agree to pay a rejection fee to terminate
the assignment. Logically, the client may reject a submission and terminate the assignment
only while the submission is being reviewed regarding its acceptability. Since our clients are
offered numerous opportunities to understandand our artistic styles and technological
capabilities during the initial discussions, the contract negotiations, and as we work on
the different stages of the assignment, the termination fee charged gets larger and
larger the later during the project the client terminates the project.
- In the event of termination of an assignment by the client,
any milestone payments made prior to termination are retained by RGI.
- If termination occurs while the client is reviewing our proposed concepts, comps or
sketches, the client will be liable for a rejection fee of 10% of the unpaid portions of the
assignment fees for graphic or web design and consulting assignments, and 20% of any
illustration, fine art, digital art, or scripting assignments (JAVA, CGI, etc.) .
- If termination occurs during the review of the preliminary or Beta versions of the
work, the rejection fee is 50% for consulting projects, 35% for any fine art and
graphic design work, 20% for any web design, illustration or scripting work, and 15%
for any digital art work.
- If rejection occurs after the delivery of the final version while the final version is being reviewed,
the cancellation fees are 100% for consulting and web design, graphic design and illustration work, and 75%
of any fine art and digital art and scripting work.
- Regardless of when the project is rejected, all "necessary expenses" such as
model fees, materials, overnight shipping fee, independent contractor fees already
incurred by us or that we are liable to pay for will be paid in full before the client's
liability according to the above timing criteria is calculated based on the remainder of
the contracted amount over the aforementined "necessary expenses".
- In the event of rejection, the client forfeits any rights to the services and
products provided by Rooster Graphics International. However, our clients
retain all rights already purchased by us on their behalf from any third parties such as
independent artists, consultants, or freelancers.
NOTE: The cancellation and rejection fees noted are significantly
below industry standards and medians noted in the Graphic Artists Guild Handbook.
The above specififications are guidelines subject to negotiation as well as to the
circumstances of each project. For instance, if a client's project involves an
unusually complex preliminary design and planning, or a very short deadline, or
competes with other clients for the resources of Rooster Graphics
International, the cancellation and rejection fees may be set higher.
For a review of how these cancellation and rejection concepts are incorporated into the
legal fineprint of formal agreements, please consult our Contracts section.
Speculative ventures
Speculative ventures in the visual
communiacation industry are as risky as those in the financial markets. A project for
designing an award-winning advertisement or researching the uncharted boundaries
of internet communations are such risky projects.
Occasionally, speculative relationships arise because a client simultaneously requests many design firms to submit detailed ideas and concepts prior to commissioning a designer, without any
committment on their part to good faith negotiations. At Rooster Graphics, our policy is to develop and submit ideas or concepts only for a fee which is deductible from our
design fees if and when an agreement is negotiated and signed.
Unless otherwise agreed upon, clients that contract speculative projects bear
all the risk of the project and are subject to the standard Cancellation and Rejection
policies of Rooster Graphics International.
For instance, a consulting project for developing an industry-specific sales
forecasting software which the client then plans to market commercially is a risky
business venture. Rooster Graphics International will not be responsible
for the market response to or the commercial success of its consulting applications.
Similarly, our clients who contract us specifically for producing quality art to be
submitted to contests or competitions, or for story boards to be presented to
publishers or filmmakers, etc. must accept that Rooster Graphics
International is not responsible for the ultimate success of such projects.
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