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The New Hollywood Workshop #16: Replicating: Taxes and other costs

By Eliot Hochberg (eliot@high-mountain.com), July 9, 2003

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One aspect of replication that you may not consider immediately is sales tax. Depending on how you structure your projects, you may find that your replicator will charge sales tax to you or your client. This tax is applicable to any physical item sold in the state it was created, so if you use an out of state replicator, they may not charge you sales tax. However, depending on the laws in your state, you may be responsible for collecting sales tax from your client.

The easiest way to deal with this issue is to have your client pay the replicator directly. Another way is to get a resale license. In this way, you will not be charged sales tax, but you will then need to charge your client sales tax. The third way to handle this is to pay the sales tax to the replicator, and then pass the expense on to the client. The last way is equivalent to having them pay directly, but makes it easier for the client to keep track of the project’s costs and payments. Be warned, however, that if you choose the third method, you cannot mark up the price of the DVDs without factoring in additional tax – it’s usually better to add a service fee instead. Check with a state tax advisor or attorney to be sure of your obligations.

Another cost to keep in mind is the cost of shipping. Be sure to factor in shipping for sample disks, proofs, and the final product. It’s usually easy to get an estimate for what these will cost from the replicator for their portion, but it is wise to estimate 10% over the overall cost of replication for shipping. You can always reduce that cost later if necessary. Also, be sure to keep in mind that you will need test DVD-Rs and ink and paper. On a typical project, expect to use 10–15 discs for testing and sampling to your client. If your system supports DVD-RW, that’s a great way to save money there.

One thing you may not expect is a cost/discount for over/under. Typically, replicators only guarantee to get within 10% of the target disc amount. On a 500 disc run, that would mean that they would consider a successful project one that results in 450 discs. Usually, you aren’t charged for the discs you don’t receive. If you absolutely must have 500 discs, then be sure to ask for 556 discs or more. If, on the other hand, your clients budget is the most important issue, realize that often you will be obliged to pay for overage (where the production “yield,” for want of a better word, is better than expected). So on a 500 disc project, if 550 discs are made, you would have to pay for the additional fifty discs. You can reduce the cost of the added discs by asking that they not be assembled. These overages and underages usually apply to the covers as well. In most instances, you are more likely to get an overage than an underage, so be especially prepared for that.

Be sure to have enough DLT tapes, if necessary, to keep your project going. These are reusable, so three or four on hand should suffice, depending on your workload. More often than not, DVD-Rs will be okay for most projects, but if your project requires Macrovision or CSS encryption, you will need DLT tapes. Macrovision may accept DVD-Rs. Check with Macrovision and/or your replicator to be sure.

You my also want to consider adding in a “goof” buffer. This is a few hundred dollars extra, just in case you make a mistake, you can afford to give the client a complicated fix “free.” Obviously, you don’t want to overdo that, but another 10% extra can help you to cover any problems. If the client agrees to the amount, you can improve their experience by being able to happily fix things while not losing too much money in the process.

A final hidden cost could be needing PC software to obtain functions that DVD Studio Pro does not provide. I have made the choice to avoid that where possible, but if you absolutely must have a particular function, such as allowing chapters but not fast-forwarding, then be sure to budget for software and access to a PC to make the necessary adjustments.

The New Hollywood Workshop is dedicated to using Macintosh computers and software to do what the big boys do. Want an example? Check out Duality, a short made completely with Macintosh products.

Eliot Hochberg is a Web developer with over seven years’ experience. Apple’s new professional tools are just the ticket for a sole proprietor like Eliot to go to the next level. Right now, he’s seeking DVD duplication services that support DVD Studio Pro. If your company does, let us know. We’ll list you in future articles.

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