Simply put, your clients want photos. They
want an album, a gallery wrap or a drive of
images. Without the photography service,
these items wouldn’t exist because there
would be no photos.
Without diving into any one state’s laws,
this brief explanation gives you the gist
of why photography services and tangible products may be subject to sales tax.
Armed with this information, you can contact your state and local tax agencies to get
the information you need to ensure you
are collecting sales tax properly. Also, remember that the treatment of sales tax for
portrait sessions may be different than for
Sales Tax on
In the old days, clients would expect to get
something tangible from their photographer. Technology, however, has changed
the landscape. In the past year alone, digital
storage services like PASS and Dropbox became more widely used by photographers
to deliver images to clients. Another huge
misconception is that digital images are not
subject to sales tax. This is not true.
Depending on state law, digital images that are electronically delivered to and
downloaded by your client from the Internet may be subject to sales tax.
Alabama, Maine, South Dakota, Texas,
Utah, Washington and a few other states
require that sales tax be charged for digital images. Additionally, if you find your
state does not apply sales tax to digital images today, be aware that increasingly more
states are passing legislation to tax these
types of digital products. This means that
your state law may change in the future.
Sales tax laws can and do change.
A use tax applies to taxable goods and
services for use in your state, where you
haven’t been charged a sales tax. Use tax is
reported and paid to your tax agency along
with your sales tax, via your tax return.
The simplest example of use tax is when
a photographer located outside of New
York—let’s say in Massachusetts—pur-
chases a camera strap from Adorama,
camera strap is shipped to the Massachu-
setts photographer and Adorama collects
no sales tax. This is because Adorama
isn’t obligated to collect sales tax from
Massachusetts’ residents. Because the
photographer hasn’t paid sales tax on this
purchase, he must now self-assess the
sales tax due, because he’s planning to
use this item in Massachusetts, and remit
the amount of sales tax due to the Massa-
chusetts Department of Revenue on their
sales and use tax return.
Consider yourself very lucky if you are a
photographer who does business in a state
that only has one tax rate. With only one
rate, calculating the rate of sales tax applied
to a transaction becomes much easier. For
example, the sales tax rate in Massachusetts
is 6. 25 percent statewide. That means that
at any location, the tax rate is 6. 25 percent.
In some states, however, the tax rate varies
from one location to the next. This is because some states have cities and counties
with rates that differ.
To make things even more difficult, in
some states sales tax is calculated at the
“ship-to,” while in other states it is calculat-
ed at the “ship-from.” Say what? This means
that when shipping items to clients, if you
are located in a state that calculates sales
tax at the ship-to location—your client’s
address—you will have to know the sales
tax rate that is applicable for that address.
Many state tax websites have tax rate
locators or charts, and they are the most
reliable sources for tax rates. There are also
other websites such as TaxRates.com and
GeoTAX.com that provide location-based
sales and use tax rates.
There are several types of tax exemptions.
One is a goods or service-based exemption, such as an exemption in some states
for the purchase of prescription medicine.
This exemption exists due to the nature of
the product. Another type of exemption is
entity-based, which may be an entity like a
church. And the third type is an exemption
Entity-based exemptions are the most
common type for photographers. Some
entities, due to their status, are excused
from paying sales tax on certain qualifying
transactions. A church or a nonprofit organization that expects to be exempt from
sales tax may hire you. Subsequently they
should let you know that they are exempt
from sales tax.