If you’re a wedding photographer wondering if sales tax applies to you, you’ve landed at the right post. I’ll unpack the rules for prints, books, and delivering photos digitally. Let’s get started.
If you’ve been following me for any length of time, you probably know that my former career was that of a CPA. I may not labor on tax returns and financial statements on the daily, but I still draw on that experience every day running this photo business.
One of the most confusing and often forgotten aspects of running a photography business is sales tax and how it applies to wedding photography. First off, it’s different for each state, so this post may or may not be helpful depending on your state’s sales tax law. I’m writing from California, but the overall gist of this post should at least make you aware of something you’ve been missing entirely as a photographer.
It’s no secret that California has been hurting for more tax revenue, and with photography moving away from a physical delivery (prints, books, CD, flash drives, etc) and more and more toward digital delivery (Pic-Time, Pixieset, etc), there is less and less sales tax being harvested from photographers. This also means states are auditing creative-types more and more. I personally know two people who have been hit hard by fines and penalties for not paying sales tax. Trust me, it’s MUCH cheaper to pay the tax than wait for an audit.
Let’s unpack this and figure out what it means for you.
Define photograph for me…
A photograph per California includes “a digital image captured and stored on a transportable data storage medium such as a hard drive, CD, DVD, removable disk, or flash memory.” This means that even if you take a digital photo and deliver it to your client via flash drive, a potentially-taxable photo exists.
OK, so a digital photo is taxable. Do I just charge sales tax on the flash drive, or just the book, or… what do I charge tax on?
This is the part that sucks. California says that labor and service charges are taxable if they result in the creation of a product. That means if you charge $3,000 for wedding photography coverage, and you delivered the digital photos via flash drive, and maybe even a book, you have to charge sales tax on the entire $3,000, plus whatever you’re charging for the book.
Wow, that’s a lot of tax I have to charge clients. Are there any exceptions?
Yep, there are. Some photo-related sales aren’t taxable. These include any photos transferred electronically. This means transferred by either uploading to a service your clients can download from (Dropbox, SmugMug, etc.) or hosting on your site and allowing them to download directly to their computer. However, it’s super important to note, that if you deliver electronically, but then ALSO give your client a copy of their photos on a flash drive (even if it’s their own flash drive), you have to charge sales tax on the entire amount. It’s that physical drive/DVD/thing that tips the tax scale.
Well, OK bummer, I guess I have to pony up the sales tax. How do I pay?
Again, this is different for each state, but should be similar wherever you live. For California, you can go to the state’s Board of Equalization website and register there. You have to create an account for your business and then answer a series of questions. The state will tell you if you have to pay weekly, monthly, quarterly, or annually. We pay annually, which means we have to compute and pay by January 31st of the following year. For example, we pay 2015 taxes on January 31, 2016).
The Board of Equalization has created an entire booklet just for photographers and video professionals. I highly suggest breezing through it. There are different rules depending on what type of photography you do. Commercial photography has an additional set of issues to deal with.
Sales tax is a big bummer. Getting slogged down in years and years of back taxes, fines and penalties because you didn’t know, however, is far worse. If you weren’t paying sales tax before, hopefully this at least made you aware that you’re supposed to be paying it.
I can definitely help answer some questions, but your state’s tax board is usually the best place to go. The folks at California’s Board of Equalization are super helpful and will gladly help you with any questions. Here’s their number >>> 1-800-400-7115
Now go have a beer.