Wedding photography: a sales tax snapshot – Wacky Tax Wednesday
- Jun 21, 2017 | Gail Cole
My husband and I said our marriage vows on a deserted stretch of rain-washed coast after a two-day hike. There were no facilities to rent, no caterers to organize, and no photographers to catch us in the act (although my father did threaten to drop one in by helicopter). So, I don’t have a whole lot of firsthand knowledge of weddings. But I do know they usually involve purchasing lots of goods and services, often together, and that when goods and services are sold together, sales tax gets complicated.
In fact, weddings are an ideal venue for bundled transactions — those that involve the sale of both tangible personal property and services. You purchase dresses that need to be altered, and flowers that need to be arranged and delivered. You may rent a venue, or tables and chairs, and employ a caterer to prepare and serve food. Perhaps most important, for posterity’s sake, you engage a photographer to capture each magical and humorous moment.
Photographers have a big job. In addition to obtaining and presenting flawless evidence of the big event, they must know how to properly apply sales tax to the goods and services they sell. This isn’t always obvious.
For example, in Washington, photographers must generally collect and remit sales tax on all charges associated with an event like a wedding, including reimbursed travel expenses and other miscellaneous expenses. However, the taxability of photography services is far more complex than that suggests. If a Washington-based photographer sends photos to a customer who resides out of state, Washington sales tax does not apply to the service or the photos, even if the photos were taken in Washington. And if a customer pays for sitting fees but does not subsequently purchase photographs, tax may or may not apply: photographers should request a ruling from the Washington Department of Revenue. If you want more information than this snapshot provides, read all 13 pages of the department’s Photography Tax Guide.
You get the picture: sales tax is complicated.
What’s really being sold, the service or the photo?
In Alabama, the confusing nature of the taxability of photography services has triggered lawsuits, Department of Revenue regulations, and recently, a new law.
While tangible personal property is presumed taxable in Alabama, services are presumed nontaxable: Sales and use tax only applies to services specifically described as taxable in state statutes. But that didn’t stop the Department of Revenue from holding the Omni Studio liable for tax on “transactions such as: headshots, flat-rate photography sessions, digital studio photography, portraits, weddings and reception events.” The department based its 2013 assessment on a departmental regulation (810-6-1-.119) that defines as taxable the gross proceeds “accruing from retail sales of photographs,” and “consultation fees, sitting fees, and all other fees when such fees are charged in conjunction with the sale of photographs.”
Omni fought the assessment, arguing its transfer of photographs to clients “is merely incidental to the provision of nontaxable services and, therefore, does not constitute a taxable sale of personal property.” The trial court sided with the studio, and when the Department of Revenue appealed to the Alabama Court of Civil Appeals, that court also ruled in favor of Omni.
In fact, the court noted that the taxability of goods can be altered based on their connection to nontaxable services: “It has been established that some transfers of tangible personal property are considered merely incidental to the nontaxable sale of services and, therefore, are not themselves taxable.” To support this claim, it listed several court rulings. Regrettably, for the Department of Revenue, it only quoted its own rulings and regulations in its argument.
Nontaxable status of services codified
That landmark case was determined in April 2016. Since then, the Alabama legislature has worked to clarify the state’s sales tax policies regarding photography services. It recently enacted HB 290, which codifies the sales and use tax exemption for photography and portrait artist services, “including sitting fees and consultation fees, even when provided as part of a transaction ultimately involving the sale of one or more photographs, so long as the exempt services are separately stated to the customer on a bill of sale, invoice, or like memorialization of the transaction.”
To help keep this messy topic out of the courts moving forward, HB 290 prohibits state and local tax authorities from seeking payment for sales tax not collected “for transactions occurring before October 1, 2017.” It also disallows taxpayers or other entities from seeking a refund of past sales tax paid on such transactions.
Let others focus on sales tax for you
Having eloped, I don’t have much in the way of wedding photographs. But had we hired one to trek out to the coast with us, we’d have wanted that photographer focused on snapping the best pics possible — not preoccupied with sales tax.
If you want to focus on your business instead of sales tax, consider reaching out to the tax experts at Avalara Professional Services. Learn more.