Alyson Miller is a CPA who provides specialized accounting and tax services solely to music and entertainment clients.

Taxes are usually the last thing on the agenda of the touring musician but as tax season approaches it’s a good time for you to get organized. There are a number of tax deductions that are unique to musicians and therefore handled incorrectly on the tax return or forgotten all together. Before we discuss what can potentially lower your taxes, let’s talk about income.

It’s a common misconception that if you don’t receive a 1099-MISC for something then you don’t have to report it.  Income or compensation that you receive for anything - shows, session work, teaching, bartending or whatever it may be - must be reported, including cash, regardless of whether or not you get a 1099.   If you’re in a band with several members, beware that club owners and promoters hate issuing individual 1099’s to each band member, so often times the band “leader” will receive the 1099 and report the entire amount on their Schedule C.  The “leader” then has to issue 1099’s to each member of the band or any other person paid (sound, lighting, guest musicians) so that it can be taken as a deduction on the Schedule C.  Don’t stick yourself with all of the income and forget the deduction.   

Here’s a list of the most important items that can potentially lower your taxes. 

Travel

Travel expenses are allowable deductions on you tax return.  So, if you have a show in a location that is far enough away from home such that it is impossible or inconvenient to return home, you can deduct it.  Deductible items include hotels, airfare, phone calls home, rehearsal hall rental, and anything else related to the performance.  If stops are made along that way to other cities (for example to visit friends) then that portion of the trip and the related expenses are not deductible.  Always keep receipts for every expense along with tour schedules and any other documentation that you may have.

Meals  

Meals associated with overnight travel are also deductible at 50% of the expense.  Other meal expenses incurred that are associated with the “business” of being a musician, say meeting a potential band mate for lunch to discuss the possibility of becoming a member of the band or meeting with your accountant, could also be 50% deductible.  The discussion must primarily be about business. If keeping receipts is not something you’re very good at, consider using the IRS allowable deduction that varies by city.  The IRS requires the who, what, where and why for these expenses.  One suggestion is to keep business cards as part of your documentation.

Equipment

The purchase of equipment (generally anything with a cost of $500 or more) is depreciated over 5 years.  What this means is that you can take one-fifth of the cost of the item each year for 5 years unless you dispose of the item.  The IRS also allows you to take the full cost of the equipment in 1 year if you choose.  This is called the Section 179 Deduction.  The cost of cables, strings, and other small items less than $500 can be taken as a deduction in the year that it is purchased.

Vehicle Expenses

 There two ways to calculate the deduction for your vehicle.  The IRS allows you to use which ever one gives you the biggest deduction.  One method is to keep a log of your travel in a calendar, notebook, or some type of log book and use the standard mileage deduction (48.5 cents per mile in 2007).  Record the mileage to and from shows, trips to purchase supplies or any other business related activity.  The other method is to keep actual receipts for gas, repairs and maintenance, insurance, property taxes, and depreciation of the vehicle as the deduction.  Generally vehicles such as buses yield a bigger deduction when the actual expenses are used.

Home Office or Studio

If you have a room in your home that is exclusively used for your business whether it be for paying band expenses, rehearsing, or it’s set up as a studio, you might be able to take it as a deduction.  Exclusive use is the key.  It cannot be used for any other purpose but for your business.  The corner of your living room with a desk does not qualify.  If you can justify a space used exclusively for your business, you can take a percentage of the square footage for the business portion.  The percentage is then applied to your rent, mortgage interest, utilities, etc.   

Other

There are other deductions that when taken in moderation are allowed such as CDs, concert tickets, and music publications.  Ordinarily, taxpayers cannot take these as deductions but as a musician you must keep up with the industry.  Most of the time these are classified on the tax return as research.  Wardrobe can also be deducted if it is exclusively used on stage. 

This not meant to be a comprehensive list of deductions.  The tax code changes all the time. Check the IRS tax code (www.irs.gov) or with a tax professional before you do anything.  

One last important thing………

If you use an accountant or tax professional, it’s best to use someone who has other clients in the music industry.  Unfortunately, there aren’t many of us around so interview your accountant and make sure they are at least interested in what you are talking about and willing to understand your “business” of being a musician. When choosing an accountant, one size does not fit all. It’s like choosing a doctor. If you had a pain in your head you wouldn’t go to a podiatrist.

 

Garry Velletri is Senior Vice President of Bug Music. He has been with Bug since 1985 and is based in New York.

Music Publishing Terminology

The ownership and management of exploited music copyrights by licensing and registering certain

rong>rights and the collection of the resulting royalties and fees including mechanical royalties, performance royalties and synch fees.

 

Huh?

The world of music publishing is littered with obscure, misleading, and archaic terms; some of which have more than one meaning depending on the context. No wonder it all sounds confusing if not downright intimidating. Understanding the meaning of these terms and phrases will provide a useful base for understanding music publishing in general.

Copyright

Is it copyright or “copywrite”? Yes you wrote a song; but a copyright is never, ever referred to as a copywrite. There are two general rights covered in a music copyright: the authorship of a song and the ownership of a song. According to Copyright Law, you are the natural owner of every song you write until you assign the ownership to someone else. Every song is made up of two equal parts; not the lyrics and the melody but the writer share and the publisher share.

The writer share is semi-sacred. It represents the authorship of the song. While a copyright can change hands many times; the writer share remains the property of the author.

The other fifty percent, the publisher share, is the equitable share. It is what you can sell or buy. In this context it is known as the “copyright”. When a publisher acquires a copyright, it is acquiring the publisher share.

Control

The Publisher controls the writers share. The publisher licenses mechanical , print and synch rights on behalf of itself and the writer. These royalties and fees are collected by the publisher (the owner of the copyright) for both the publisher share and the writer share. It is the publisher’s responsibility to pay the writer. Performance royalties are the only royalty type where the writer can collect his writer royalties directly from the performing rights organization. Control means the publisher has the right to negotiate and execute all licenses.

Royalties

Ongoing earnings of licensed songs from each sale or broadcast.

Exploitation

In music publishing, exploitation is a good term. You want your songs to be exploited. Landing a song in a film or television show is an exploitation; somebody recording your song is an exploitation; releasing a record is an exploitation. When one of those songs from your record becomes part of a greatest hits package down the line - that's an exploitation. An exploited song that is licensed and registered opens revenue streams.

Royalties don’t just magically show up in your mailbox; It is the result of the publisher executing licenses and filing the proper registrations.

Registration

You or your music publisher registers your songs with a performing rights organization (ASCAP, BMI or SESAC) to get the song details in their database so the correct percentages of performance royalties can be attributed and paid to the correct party.

Your music publisher registers your songs with a ‘local’ publisher in a foreign territory so they can, in turn, register the songs with their local mechanical and performing rights societies (society being a fancy term for foreign mechanical and performing rights organizations) so the correct percentages of foreign mechanical royalties and the publishers side of performance royalties are attributed and paid to the correct party.

Licensing

The music publisher doesn’t sell songs to another artist to record or to be used on a TV show or film- they license it. There are four primary rights to license:

Mechanical rights — Back in the early twentieth century, there were two methods of distributing music: sheet music and player piano rolls. To differentiate between the two, early copyright law defined the royalties generated by the sale of these player-piano rolls a “mechanical” royalty for which you needed a mechanical license; after all, piano rolls were a mechanical contraption. The definition of Mechanicals through time went on to include Edison rolls, 78 rpm vinyl records,45 rpm records, 33 1/3 rpm long play records, cassettes, 8track tapes, cds and now digital downloads. It’s like calling your iPod a Victrola but the term stuck. A good way to think of it is mechanical royalties are for the sale of music.

Performing rights — Think broadcast. There are three performing rights organizations in the United States: BMI, ASCAP and SESAC. They are not music publishers or administrators. These “PRO”s have blanket licenses with radio stations, television stations, clubs, restaurants, stores, digital streaming services like Napster and so on. You should belong to one if you have any exploited songs. For the price of these blanket licenses (which vary depending on the size of the broadcaster) the broadcaster can play all the BMI, ASCAP or SESAC songs ‘til their heart’s content for a measured period of time. These ‘plays’ are tracked and the pool of blanket license money is divvied up proportionate to the number of plays and the value of plays. In other words, for example, a play on a major radio station is worth more than a play on a college radio station. Another example: a featured play on a television program is worth more than a background play on the same program. Performance royalties are generated from the broadcast of music.

Synch rights — short for synchronization this is the licensed right for a film or other audiovisual medium to use your song, to synchronize your music to recorded visuals, in an audio-visual product. It can be a commercial, a videogame, a film, a TV show or a website. A synch license usually produces a negotiated fee for certain rights depending on the usage. Yes, we are talking about rights within rights. For example, say it’s your lucky day and Mitsubishi wants to use your song in their new car commercial. With your approval your music publisher negotiates a synch fee with the music supervisor for the Mitsubishi spot which will allow them to use your song for, say, one year for national television plays for one flat fee. If they still want to use it after the one year or if they want to run it internationally or stream it on their website or put it on a promotional DVD for give-away, all of these uses are rights within the basic right and should most likely carry additional fees. (Since the Mitsubishi spot is broadcast it also produces a performance royalty)

Print rights — Sheet music, song folios: it’s pretty self-explanatory — but be careful-the term ‘publish’ has a few different meanings depending on how it’s used. Once a song is released or exploited in some way it is considered ‘published.' Once a song is filed with the Library of Congress for copyright it is considered published, it does not necessarily mean the song‘s notation and lyrics are published in print form. However, if the song’s written notation and lyrics are published in print or digital form for purchase, it will earn print royalties from the print license your publisher negotiated.

Functions of a Music Publisher

So now that you are armed with a basic understanding of these terms, you will see that a Music Publisher performs the following:

Administration

Secures copyrights, controls copyrights, executes a variety of licenses, causes songs to be registered with a variety of organizations and societies world-wide, collects royalties, disburses royalties, and more.

Creative Services

The Creative exploitation of copyrights or causing songs to be exploited by pitching songs to other artists and securing placements in Film, TV and commercials; networking and promoting its writers (further explanation invites a whole blog topic in itself)

Publishers are often able to provide critical funding in the form of advances against your future royalties and by covering the costs of recording demos of your songs.

If you’re a musician working to build a career in the music business hopefully you have already covered the basics like getting your own website, setting up a MySpace page and signing up for distribution through a company like CD Baby or TuneCore.

There are numerous solutions now available for marketing music at a minimal cost but keep in mind that none of them can offer a magic bullet for success in the music business. Below are a few categories and companies worth considering when you sit down to develop your music marketing plan.

Radio

Online radio is growing quickly in popularity among music fans as many of the providers have greatly improved their music recommendation technology and added social networking options to help their members discover new music. Here are two popular online radio providers that accept submissions directly from artists, have a large base of listeners and feature links that allow fans to buy the music they are enjoying.

Pandora – Accepts artist submissions only via mail but it’s definitely worth the effort. They only add songs into rotation that meet their quality standards. Their address is: Music Genome Project Submissions, 360 22^nd St. Suite 440 Oakland, CA, 94612. Cost: $2.50 (for postage)

Last.FM – Artists can directly upload their music to the site, create an artist page, join genre based groups, add friends and build their own station. Cost: $0

Licensing

Licensing music for television, films, video games or advertising has emerged as one of the best ways for independent artists to actually get paid for their work plus gain exposure from a wide audience. If you control the rights to your music, a non-exclusive agreement can be signed that typically pays 50% of the licensing fees collected. Two of the leading licensing companies that accept submissions directly from artists are:

Rumblefish – Rumblefish features an online music licensing store that makes it easy for buyers to search and purchase licenses directly from their catalog of available music. They also allow artists to keep 100% of their PRO royalties Cost: $0

PumpAudio – PumpAudio was recently acquired by Getty Images and is now able to offer Getty’s existing customers access to their music licensing catalog. Cost: $0

Gigs

Playing live shows is one of the most important things an artist can do to build a fan base and create momentum for their career. Of course it’s very difficult to get booked if you are not widely known, regardless of your talent level. A couple of online tools that can help artists improve their chances of getting booked are:

Sonicbids – Sonicbids allows artists to create an electronic press kit (EPK) that can be submitted via email instead of mailing costly and environmentally unfriendly traditional press kits. They also feature a list of promoters and gig openings where artists can submit their EPK for consideration. Cost: $49.95 annually.

Eventful – Eventful is a leading provider of local community events calendars where artists can upload their tour dates. Their unique approach allows fans to create demand for a specific artist to play in their town. Artists can use demand information to help them plan a successful tour. Cost: $0

Mobile

Many music fans now spend more time on their mobile device than their PC: It only makes sense to develop a mobile strategy for promoting your music. Mobile marketing solutions can include text messaging, ringtones, ringbacks, full track downloads, wallpaper and mobile fan clubs. Two solution providers that make it easy for artists to start marketing their music through mobile devices are:

Broadtexter – Broadtexter lets independent artists easily create mobile fan clubs plus text fans with artist news and regionally based tour date alerts. Costs: $0

MyxerTones - MyxerTones allows artists to create mobile phone ringtones and wallpapers that can be bought directly from a mobile device or the artist’s website. Artists can set their own prices and keep 60% of the revenue collected for their content. Costs: $0

Awareness

Building a strong fan base is the key component to a successful career but simply finding a way to get noticed by fans can be quite challenging. There are a lot of great options for promoting your music on the web and here are two you should definitely consider:

OurStage – OurStage features a monthly competition where fans use a voting system to determine the best song and video by genre then select an overall winner. There are several monthly prizes, including a $5000 grand prize. Fans of your specific genre will get exposed to your music and even have the option of purchasing it. Cost: $0

Artist Data Systems – ADS can automatically synchronize an artist’s information, news and tour dates across several social networks and music related sites. This allows an artist to expand the number of places where fans can discover their music without the hassle of individually managing the same information on multiple sites. Cost: $0

 

John Doe is the founder of the seminal Los Angeles punk group X, a solo artist and actor. John answers questions from our community members in the WWJDD? blog. Photo by Autumn de Wilde

Question from Kathy in South Carolina

Hi JD,

I am a songwriter in an emerging band and we are about to complete and release our debut cd. What is your take on sharing songwriter royalties with others in the band? Also, how does one decide which performing rights organization to join these days? Do you have any practical tips and insights on choosing between ASCAP, BMI, SESAC, etc? I have read that you can contact each of them and decide based on options and relationships you develop, but I have not approached a particular one yet.

Thanks for your guidance!

Kathy Osborne

From the band South85

www.south85.com

www.myspace.com/south85band

WWJDD?

Hey Kathy,

You share the songwriting credit any way you see fit. Either work done, like melody, chords or lyrics contributed or situation inspired, being there & essential to the process. It doesn't have to be 50/50. Always do what your intuition tells you is right. You will probably do the right thing & won't have regrets. You could say all your songs were written by Jesus or your mommy if you wanted but then they would collect the royalties.

I used to be w/BMI, mostly run by broadcasters i.e. radio & the like. They were competent but sort of hands off, didn't really hear from them personally. I switched to ASCAP because it's run by songwriters & composers. Also someone I've known for a long time works @ ASCAP & I get a bit more attention that way. That only applies to an established writer but anyone can have a champion in any company. By which I mean if you meet someone at either society who really gets what you write then work w/ them. It appears that ASCAP collects a bit more money than BMI but I'm sure someone else might say the opposite. Both are non-profit & do a good job. I don't know any writers who use SESAC so I can't really comment on them but they definitely are the lesser of the three.

best of luck,
Jd

If you have questions for John Doe about music, the music business or life feel free to email them to wwjdd@knowthemusicbiz.com.

For more information on John Doe check out theejohndoe.com or YepRoc.com

If you set up your MySpace page to help launch your music career but fame and fortune haven’t automatically followed here are some additional ideas to consider:

1. Be really, really, really good

Work extraordinarily hard at perfecting your craft. Write some great songs. Quality matters more than ever, make sure your songs are exceptional and the recording sounds good as well. You will often have only one chance to get heard. Don’t put any of your work out for public consumption unless you are sure it’s ready. If you are not really, really good, different or unique you will never be able to get noticed among the thousands of bands competing for attention today.

2. Support local music in your community

Supporting local music in your community is the right thing to do if you truly love music; it is also a great way to build important relationships. Regularly attending (and actually paying!) at local shows will get you noticed by the bands and venue staff and can provide a good opportunity to meet others in the local music community. When you are one of only a handful of people to attend a local show it will be noticed and much appreciated. Building relationships and helping other local artists can be a critical component to your success. You need local support to launch your career before having a chance to grow regionally or nationally. You never know who might be willing to help you out, facilitate an important introduction or need an opening act at some point in the future.

3. Play live shows as often as possible

Regularly playing live shows is probably the most important thing an artist can do to help their career. Performing live is the best way to build a local fan base and having an active fan base willing to pay for your shows is the best way to attract the attention of venues, booking agents, managers, distributors and record labels. Of course, the challenge is to get booked (even in an opening slot that doesn’t pay) when you are just getting started. Venues expect artists to bring paying fans to their shows, they book bands with an established following not “great” acts no one has heard of before. When you finally get booked do everything possible to bring a crowd with you. Getting gigs is very important but also very difficult, see item # 2 for some helpful hints.

4. Get a website

MySpace is an important part of every artist’s online marketing strategy these days but it should not be your primary web presence. MySpace should be one of the many places that helps drive fans to YOUR website. Like it or not an important part of being an artist today is building a brand. As a brand you need to have your own domain name that you control and can keep forever. Having your own website also allows much more flexibility and choice in selecting tools for reaching fans and selling music. Today there are several website solutions available for artists that are extremely easy to use and don’t require any HTML or programming skills. One website solution specifically tailored for artists is Hostbaby. Their websites include an email tool, blog with RSS feed, concert calendar, streaming audio, the ability sell music through your existing channels and costs only $20.00 per month. Let us know your experience with other artist website solutions and recommendations.