What a Six-Figure Tax Audit Taught Us About Clean Books
36:36
What a Six-Figure Tax Audit Taught Us About Clean Books
Jun 30, 2026
I'm going to share a number that made my friend Heather feel physically sick.
$160,000.
That's what one auditor at the Pennsylvania Department of Revenue initially claimed she owed after a routine sales tax audit. Not a typo. Not a worst-case hypothetical. A real assessment, delivered on the Friday before Christmas at 5pm.
Heather runs a photography coaching business. Her books are clean. She follows the code. And she still got hit with a number that could have bought a house.
In this week's episode we walked through her entire ten-month audit saga, from the first phone call to the final payment. If you run any kind of photography business, this is the conversation that gets you to fix the things you've been avoiding. Here's what we covered, and what you can do about it today.
Can a Photographer Really Get Audited for Sales Tax?
Yes. Any business that sells taxable goods or services can be selected for a state sales tax audit, and photographers are an easy target because the rules around session fees and digital files vary by state and change often.
I've been through one myself here in North Carolina a few years back. Mine took about a year from start to finish. Heather's has stretched close to ten months and counting. Neither of us did anything wrong. We just run businesses, and businesses get audited.
The hard part isn't always the money. It's the low-level hum in the background of your brain that never fully shuts off. You swat it away, it disappears for a few minutes, then it's back. That mental drain is the real tax.
Are Session Fees and Digital Files Taxable?
In many states, yes. Digital files are now taxable in the majority of states, and session fees can become taxable the moment a client buys anything, including a digital download.
Here's where it gets sneaky. In North Carolina, my session fee isn't taxable on its own. But the second a client buys something, including digital files, that session fee becomes taxable. So essentially, every sale is taxable.
When I went back to double-check during Heather's ordeal, I realized almost everything I sell, including my online programs, was now taxable. So to my North Carolina people, I'm sorry you're seeing sales tax on your purchases now. I'd rather charge it correctly than get surprised with a bill later.
The lesson: don't assume you know your state's rules just because you've been in business for years. What's taxable changes. Check it annually.
What Records Should Every Photographer Keep?
Keep a complete record of every sale and every purchase, including client names, addresses, session fees, and exactly what was bought. Save every receipt in one place so you can produce documentation fast if you're ever audited.
This is the takeaway I want you to actually act on. Both of us learned the same thing: even clean books were missing pieces.
Here's the simple version of what to do:
Record every photography sale with the client's name, address, session fee, and itemized products
Collect a client address for every transaction, even small digital sales (yes, this is why we now ask)
Forward every business receipt into one dedicated folder in your email
Keep any tax attorney letters or liability determinations with your records
It doesn't have to be fancy. I have a receipts folder in my Gmail, and every receipt gets forwarded straight in. If I ever get audited again, pulling it all together will be a project, but I'll have it.
How Did Profit First Save the Day?
By setting aside tax money in a separate savings account she never touches, Heather had the full $17,000 ready to pay without scrambling or going into debt.
This is the quiet hero of the whole story. Heather uses Profit First and oversaves for taxes in an account she treats as untouchable. Her naturally conservative, risk-averse nature meant the money was simply there when she needed it.
A six-figure assessment is terrifying. A $17,000 bill you've already saved for is a Tuesday. The difference between those two experiences is a savings habit you build before you ever need it.
The Mindset Shift That Made It Bearable
There's a line from Conscious Luck by Gay Hendricks that Heather kept coming back to: with enough distance, everything can be viewed as lucky.
At one point she was walking her property with her husband and realized the worst the state could do was take money. Money you can make again. And there was a strange gift buried in the whole mess. She now understands the tax code, QuickBooks, and her own reporting better than ever. Getting this handled now, before her revenue climbs higher, is actually the lucky timing.
She's even taking an owner's draw from the over-saved tax account to book a family vacation next spring. Redeeming the situation, one beach at a time.
Key Takeaways
Sales tax rules change, so recheck what's taxable in your state every year
Digital files and session fees are taxable in many states, often tied together
Keep complete records of every sale and purchase, including client addresses
Save tax money in a separate account before you ever need it
Sometimes taking the deal beats fighting for principle
With enough distance, even a brutal audit can look lucky
If you've been avoiding getting your records and systems in order, let this be your nudge. The best time to build these habits was years ago. The second best time is right now, before anyone comes knocking.
Listen to the full episode for the whole wild story:
I'm Nicole and I help portrait photographers to stop competing on price, sell without feeling pushy, and consistently increase sales to $2,000+ per session - which is the fastest path to a 6-figure business. My goal is to help you build a thriving business you love while earning the income you deserve.
Hey everybody. Welcome to the very first hair of the dog podcast. I'm Nicole Begley and today we're going to be talking about procrastination and what it means and I can't wait to dive in with you.
Speaker 2:
Welcome to the hair of the dog podcast. If you're a pet photographer, ready to make more money and start living a life by your design, you've come to the right place. And now your host, pet photographer, travel addicts, chocolate martini connoisseur, Nicole Begley.
Speaker 1:
Hello everybody and welcome to our very first hair of the dog podcast. I'm Nicole Begley, your host, and I'm so excited that you are here with me. I'm absolutely honored if you are a pet photographer and you're looking to grow your business or improve your craft, this is the place to be a, I've been a pet photographer since 2010 I actually started doing family photography and pet photography because I really thought when I started, well, there's no way you can do just pets. That's crazy. Well, turns out you can and it turns out there's quite a few of us and it is a pretty fantastic niche that is rapidly growing in the pet photography community. Or excuse me, the photography community I should say. And um, yeah, it's so much fun. I absolutely love what I do and even more so, I love helping other pet photographers grow their business and learn more about the industry and start to live a life by their design, by building a business that supports the dreams that they want to do both professionally and personally. So that's really why I'm here and why I love to do what I do. So thank you again for being part of this very first podcast. I've got to tell you, I'm more than a little bit nervous, you know, this isn't one of these things I've been thinking about doing for a while now and there's always been a reason why I shouldn't, you know, or many reasons if I really listened to what my head was telling myself, you might be familiar with this, especially if you're an artist and a photographer. We all tend to get pretty hard on ourself. When we start to want to do something new or we want to put ourselves out there, you might have this little voice inside your brain that's talking about, Hey, you know, um, you're, you're not very good at, at your art or you're not ready for clients. If you have a client and you produce this type of work, they're going to be angry with you. Or what are people going to think about charging this much money for pet photography? Who even photographs pets. I've had all of those in my head before and then for this podcast, you know, of course there's the whole laundry list of I don't know what to do. I don't know what I'm going to say. Who the heck is even going to listen? Oh, and by the way, I don't like the sound of my voice, but I guess who really does so you are probably well of the just litany of voices in our head that just goes down and down a doubt and talks you into being safe. It's really just a survival mechanism from back in the day when if we left our house, you know, we might get attacked by a saber tooth tiger. So of course your reptilian brain, that part of your brain wants you to stay safe. So it's telling you all these things that sound good on paper to make you play small and stay safe. And I just want to encourage you, if you're an artist, you want to get your work out there, you want to have your work seen. If you have the goal of building a business, you need to take action and start actually asking people for a business. You need to tell people that this is something that you do. So you need to get past that fear. Now, as humans, we are such a judgment making machines, right? Everything happens and we assign a meaning to it and we judge it as you walk around her in the day. I want you to, to really pay attention and all the judging you're doing. You know you're walking through target and maybe you see something and you say to yourself, well gosh, who would have that? That's silly. Or, Oh, I really like that, or I can't live without that. You're making a judgment on every single thing that you see. Every person that you see, every commercial that you hear, literally everything. You're making judgements all day long. So of course people are going to be making those judgments about you as well. And that's really where our fear comes in. That is really why we are so scared of putting ourselves out there is because we fear being judged. We fear what other people are going to think about us. But guess what? It really doesn't matter. The only thing that matters is what you think about yourself. And the only thing that matters is your intention and what you are putting out into the world. And if it is with good intentions, I guarantee you it will come back around for you. So please do not be fearful of that judgment. We just need to get out there in the community. You need to be comfortable sharing your vision, sharing your voice, sharing your art, and I hope you'll join me in just feeling the fear, doing it anyway, and just kicking that fear right there in the face. One other thing I want you to pay attention to as you go through your week is that where are you procrastinating? This can be pretty eyeopening because sometimes I'm working on something. I always have a list. I have a giant list next to me at all times with all the projects I wanted to do and all the things that I'm working on a, I tend to be a little bit of an over, not overachiever, but over. Um, gosh, what's the word I'd be looking for? I guess just overexcitement it all the possibility over possibility anyway, I always have this list of things that I'm working on and oftentimes there's one or two things that I know I need to be doing that I know are the most important, the 5% activities on this giant list that is going to move my goals forward and for whatever reason I just keep procrastinating on it. I just don't do it, and then you start to wonder why, why am I not doing this? And usually that procrastination has to do with an underlying fear of something. So whether it's the fear of, Oh gosh, I don't know how to do it, so I'm just not going to do it and I'm going to do all these other things that are fun and really self-reinforcing because I already know how to do them. Or maybe it's something that you're fearful of because it, it feels uncomfortable. You're going to get outside of your box, you're going to, you know, put something out there that there might be people that don't agree with you. Whatever the reason, the fact of the matter is that we are usually avoiding something because we are fearful of it or we don't know what's going on. We don't know how to take action on it, so therefore we'd just ignore it. I have found when I have actually sat down and made a commitment in the morning to say, my gosh, this has been sitting on my list for forever. Let's just sit down and get it done. When I do that, it might only take me 20 minutes. It's usually not some big crazy thing that was so scary or was so hard. Usually once you actually take action, you discover that it really wasn't a big deal at all and you wonder why it is the waited so long and you spent all of this time in this kind of stressed environment that's like putting it off. But it's been this like, you know, elephant in the room just sitting there. You knew it was on the list and you've been giving it this mental stress about it. So you've just, but you could have just done it. You could've just done it in a few minutes. So if you find yourself procrastinating on things that have been sitting on your list for a while and you just aren't sure why you're not doing it, ask yourself, get really quiet and just ask yourself, is it because I don't know how to do it? And if that's the case, then what? What can I do? What one step can I do towards this thing that I'm procrastinating on? And then often when you start to take that step, you're going to get more clarity because action does lead to clarity. So just take that first step. You don't need to see the entire staircase. Just take the first step. Number two, if you're procrastinating, you're like, okay, why am I procrastinating? Maybe I'm fearful of something. Is there something you're avoiding? Because if you do it, something could happen or it means something. What meaning are you placing on this? And then you just have to do it. You just have to say, this is being silly. This is my, you know, reptilian brain trying to keep me safe. Thank you. Silly monkey brain. I'm going to go ahead and do this anyway and then just go ahead and get it done and you will be amazed at what starts to happen in your life when you start to take that uncomfortable action because truly everything that you want in your life and in your business is often on the other side of a little bit of fear and that fear is healthy and that fear is natural because we haven't been there before. You're going to a new spot so you've never experienced this before. So it is just your brain keeping you safe so you don't get eaten by that saber tooth tiger, which you're going to be fine. Spoiler alert, you're going to be fine. So just to go ahead and take that action. So that is my pledge for you guys and I hope that you will join me in making a similar pledge that you are going to be committed to moving forward and committed to take an action. Is there one thing, just one thing, do you have on your to do list right now that you've been putting off that you could take action after this episode? Can you go ahead and just take the first step? If you do take that action, I would love to hear about it. So please let me know. Uh, I would just, I would love to help cheer you on. You can join us in our big, we have a big hair of the dog free community on Facebook. It's over 10,000 pet photographers. We would love to see you there. You can go to www.hairofthedogacademy.com/f B group and um, it'll take you right there. So we'd love to see you in that group anyway, post in that group. Let me know what action you are going to be taking or that you did take even better after this episode. Now, if you've enjoyed this episode, thank you for hanging out with me. It has been short and sweet. Let me tell you a little bit about what you can expect going forward from the hair of the dog podcast. We're going to have a variety of different um, types of episodes and the length is really going to depend on what we're talking about. If it's something quick and actionable, like this one, it might only be 10 minutes long, but if there's something more involved, it might be a 20 or 30 minute episode or even longer. If it's really, really involved. I don't want to cut the content short or likewise. I don't want to add fluff just to make these podcasts a certain length or cut out the really good stuff to fit within a certain length. So the beauty of the podcast, it can be whatever length we want. So some will be short and sweet. So some will be just me sharing whatever I feel compelled to share with you guys from actionable tips and tricks in your business to more things like this procrastination and fear and other things that might be getting in the way of your success. I'm also going to be interviewing industry leaders. We'll be bringing, um, lots of people to talk to there. So let me know if you have anyone that you would love to hear from. And last, but certainly not least, we are going to be sharing the stories of some of the students in the hair at the dog Academy who are up to incredible things. They're making great strides forward in their business and just really killing it. So I would love to chat with them to talk about what's working for them, what breakthroughs they've had to help you guys get some more. Again, actionable tips and things that you can do and implement in your business, in your life right away. Just start to see improvement and to start to get closer to that life by design that you want to create. So thanks again for joining me on this very first episode. If you would be so kind as to leave a review, I would really appreciate it cause that will help more people find the show and help me be able to impact more lives and I would be eternally grateful. And in the meantime, we will see you next time.
Speaker 2:
Thanks for listening to this episode of hair of the dog podcast. If you enjoyed this show, please take a minute to leave a review and while you're there, don't forget to subscribe so you don't miss our upcoming episodes. One last thing, if you are ready to dive into more resources, head over to our [email protected]. Thanks for being a part of this pet photography community.
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