What's taxable when it comes to photography?

There was an link on Sales Tax News and Links today that brought up this topic.  I actually wrote about this originally on July 16, 2009.  Amazingly, the article needed little updating.  But I have changed a few things and applied a little wordsmithing.  So for you professional or semi-professional photographers out there, enjoy.

Photography services

Most states don't broadly tax services - but some do. And photography is also considered the delivery of product (the prints), and that product is usually taxable as the sale of tangible personal property. However, these rules vary enormously from state to state.  So you need to research what YOUR state does.

For example, I'm in Illinois, and photography services aren't taxable. Even the delivery of the prints, if they're part of the photographer's service, like doing a wedding or a portrait session, are still not taxable.

However, in Wisconsin (a popular vacation destination for people from Illinois in case you've never seen Stripes), most photographic services, including shooting those portraits and weddings, are taxable. I bet that just bummed out a bunch of photographers I know in Wisconsin.

Film or print processing

Getting prints from the drug store is taxable in most states. It's the delivery of tangible personal property. And if you order prints online and they're delivered to you, you'll owe use tax if they don't charge tax.

Sale of prints

Just like the sale of any other tangible personal property, sales of photographic prints (eg. at an art show) are taxable.

Delivery of images online

In a few states, the delivery of pictures electronically is taxable. But while many states tax downloaded video, music and books, most states just haven't gotten around to photographs yet.  But that will change over time. And the auditor might try to bluff you, just for grins.

And if you deliver the photographs on a flash drive or a DVD, then you've transferred tangible personal property, and the sale is no longer simply a transfer over the internet but a true sale of TPP.

Special tax breaks

There are a few states that have special exemptions for the sale of art - and this usually includes fine art photography.  Don't get excited though.  Only a few states do this.

Here's the cool part

If you're selling your taxable prints, then the paper and ink that you purchase is usually exempt as purchases for resale (or ingredients if you're thinking manufacturing).  Heck, the inkjet printer might even be exempt as manufacturing equipment.

Please remember that, as you saw with Illinois and Wisconsin, the rules vary widely from state to state.  You gotta look it up for your state.  Because it's going to be different there.

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The Sales Tax Guy http://salestaxguy.blogspot.com

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Printing and Publications

I had a rant all set about the "Amazon tax", but I decided you needed some actual content, as opposed to me editorializing, so here you go.  I might do it in a day or so, after the steam stops coming out of my ears.

There are several issues to consider when it comes to printing and publications.

First of all, printed products are usually taxable.  They're tangible personal property and therefore, by default, taxable.  But there are plenty of exemptions, which we'll talk about.

Take newspapers for instance.  You know, those things that get ink all over your hands.  We used to read them when we were riding in the stagecoach.  Now we have iPads.

Anyway, in some states, there's a sales tax on newspapers. Consumers usually don't see this because the tax is absorbed into the price when sold from a machine or street vendors. In other states, there is simply no tax on newspapers. And I'll bet that, in those states, there are editors who are complaining about all of the big corporate exemptions.  But are they complaining about the exemption they get for newspapers? Didn't think so.

Dang. And I wasn't going to editorialize.

Magazines are different. They are often taxable when sold over the counter, but there are some states where they are exempt. And if they are taxable when sold over the counter, they're usually not taxable when sold by subscription.  The subscription one is tricky.  There are states that DO tax subscriptions.  And they have a field day with doctors' offices. 

Newsletters and other periodicals, when sold by non-profits, are often not taxable, with some restrictions.

Then, there is the definition of what precisely IS a newspaper, magazine or newsletter. For example, newspapers often specifically have to be printed on newsprint and come out at least weekly. And magazines often must be published at least quarterly, have advertising, and soft covers.  And then there's the question of taxability if the publication is delivered digitally. 

Finally, there's the printing of advertising, catalogs, brochures, and similar custom printed documents.

There are a couple of states that make this easy.  In those states, custom printing is considered a service and is not taxable.  Done!

However, most states will say that custom printing is taxable.

One general exception for custom printing is product that is shipped out of the state.   While there are usually specific laws that state this, it's rooted in this golden rule.

There are a couple of states that say that custom printing, if shipped via common carrier (like the Postal Service) to the individual customers and prospects, even within the state, is not taxable. This presents a bookkeeping challenge. If you have 100,000 brochures printed, how many will be mailed to your customers, and how many will be kept for handing out at tradeshows, etc?  And the method of delivery is important.  In one state, the law requires that the delivery must be by US Mail.  Not Fed Ex.  The US Mail.  Gotta be careful to read the entire rule.

To summarize the big points:

Stock printing: generally taxable
Newspapers: often taxable
Magazines: usually taxable
Publications by non-profits: often not taxable
Subscriptions: often not taxable
Custom printing: usually taxable
Printing shipped out of state: generally not taxable
Custom printing shipped within state to individual customers: sometimes not taxable

Remember, every state will be completely different.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

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Watch your software

We were at the bird store making our monthly investment in seed for the feeders (I really hate squirrels). While standing at the counter signing the loan paperwork, I asked Shari, the owner of the store, to add a magazine to the bill.

I noticed that she charged me sales tax not only on the seed, but also on the magazine.

Now I really don't care about the sales tax on the magazine, particularly after having to pawn the car to buy more bird feed. But, since I am in the business, and Shari is a friend of ours, I decided that I had to give her a hard time.

"Why did you charge me tax?"

"Why not?" she said, suspiciously.

"You're not supposed to charge sales tax on magazines, they're exempt."

"But the cash register software charges it automatically. Nobody has ever complained before."

"Your software is wrong. And nobody else has complained because none of your other customers are such monumentally brilliant sales tax experts."

She was all set to refund me the tax, but I told her not to worry about it. I just like to turn the rest of my life into a never-ending sales tax seminar. I really am a boring guy.

Last weekend, we stopped in again for our next purchase. Shari said, "Jim, I called the software company. They fixed it! They said they made a mistake." She was thrilled that she could tell me that I was right. I mean, we are putting her five kids through college. Did I mention I hate squirrels?

What are the morals of the story?

1. I'll bet you didn't know that magazines are exempt in Illinois. Illinois is one of the few states that has that exemption. Most states exempt magazines sold by subscription only. But in Illinois, over-the-counter magazines are not taxable. Remember that every state is completely different.

2. Don't count on your software vendor to get it right. If that company had just looked it up, they would have easily found that Illinois has the exemption. But some programmer didn't bother to look it up because everybody taxes magazines. You are responsible for getting your sales tax right. The vendor is supposed to help, but you gotta check. Luckily for the Shari, she had been over-charging taxes. If she had been under-charging taxes, do you think the software company would have stepped up and taken care of any liability she had?

I just looked out the window. Dang feeder is empty again.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions.

Here's information on our upcoming seminars and webinars.
http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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