California Photographers Sales Tax
Sales tax for photography in California is explained in Publication 68 This 33 page document that just deals with sales tax on photography in California is a lot to take in, so here is what you need to know:
Sell prints or deliver images on something physical
If you sell physical prints or deliver digital images to clients on physical media like cds or thumb drives (even loading the images onto a cd or drive your client owns), pretty much everything will be subject to sales tax. This includes the prints, sitting fees, cam-era rental you pass on to the client, travel expenses you pass on to the client, fees for models, and more. (Publication 68 pg 4 “Charges for overhead and project-related expenses”).
Don’t sell prints and don’t deliver images on physical media
If you do not sell prints, and only deliver images through purely electronic media, pretty much nothing is subject to sales tax. Your sitting fees, travel expenses, retouching, etc. are not subject to sales tax. California says that you need to keep copies of support for why you do not need to pay sales tax due to not providing images on physical media. For example, if you e-mail files to clients, make sure you save a copy of that e-mail. If you use software to provide images to clients, make sure you keep a copy of all the deliveries of images done electronically in case you are ever audited. If you switch the software you use to deliver images, make sure you download a backup of all the support before you cancel your old software. Be very careful to have complete records of this because an audit could otherwise cost you many thousands of dollars.
We recommend that if you do not sell prints that you consider only providing images through electronic media so that sales tax does not apply.
Shipping that is shown separately on an invoice is not taxable if you don’t mark up the shipping. Any amount you charge in addition to your actual shipping costs or any handling charge is subject to sales tax if the overall sale is subject to sales tax. Make sure the shipping is clearly labeled separately on the invoice and isn’t marked up to avoid sales tax on it for taxable sales.
For sales and use tax purposes, “commercial use” includes promotion, publicity, marketing, publishing, advertising, corporate com-munications, packaging, news reporting, product development, merchandising, commercial display, and so forth. Clients who pur-chase photographs for commercial use include businesses (including professional photographers), nonprofit organizations, and government agencies. Commercial use does not include wedding photographs, school photographs, portraits, or fine art prints. (Publication 68, page 14) Note that different rules apply if you sell images that are going to be printed on something that’s resold like a calendar. Those rules are covered under Technology Transfer Agreements (Publication 68, page 10).
If you sell photographs for commercial use, know that your “preliminary art” will likely be taxed differently from your “finished art.” See the Publication 68 for specific examples of the very nuanced differences between these two things. The difference is criti-cal because “preliminary art” is likely not taxable while “finished art” probably is. The way your bill is broken out is also important, so make sure you understand the Billing Methods section starting on page 17 of Publication 68 if you sell commercial work.
Special rules apply if you:
• Sell to a California resident who lives out of state
• Sell stock photography
• Develop prints yourself
• Use CDs, flash drives, or other physical media to deliver images that clients have to return to you
• Technology Transfer Agreements
• Sell reproduction rights to your photograph for commercial purposes intended for use on products that will be sold
• Work for the Motion Picture Industry