Do Real Estate Photographers Need to Collect Sales Tax On Shoots?

June 29th, 2016

WADeptofRevenuStephanie in Washington state asks:

I have launched my business and finally gotten my first paying job, then I went to make my first invoice and can’t figure out if I have to charge my customers WA State Sales Tax? I have been reading the state website about taxes and still haven’t figured it out. Any advice?

Stephanie, I can see why you are confused. The Washington department of revenue site is very confusing. It gives two different answers to your question on the same page. Since I moved out of WA before they came up with this rule on digital products I checked with two real estate photographers currently in the Seattle area and they said below is the key paragraph. According to the Photography Tax Guide tab #5 on the Washington Department of Revenue site:

Royalties and Digital Photographs
The granting of specific intangible rights to use a photo is not a sale of digital goods subject to retail sales tax, even when the photo is transferred to the buyer electronically. The method of delivery – whether tangible (i.e., print or CD) or electronic – does not determine the taxability of the transaction.

So no, as long as you license your clients to USE the photographs you shoot it is not considered a sale in the traditional sense so you don’t have to collect sales tax. On the other hand, you sell all the rights to your client (ownership is transferred to the client), then you do need to collect sales tax. Another big motivation to license your photos only for the duration of the listing! This is my interpretation of the WA DOR website and input from some practicing Washington real estate photographers. But don’t take my word for it, get a formally written ruling from the Washington Dept of Revenue.

Update 7/6 2016: I just hear back from Stephanie and she says that the WA DOR agrees with our analysis above (as long as you license your clients to USE the photographs you shoot it is not considered a sale in the traditional sense so you don’t have to collect Washington sales tax).

States in the US vary quite a lot in this area. Here is a summary of US state policy in this area.

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19 Responses to “Do Real Estate Photographers Need to Collect Sales Tax On Shoots?”

  • That is my understanding too, in WA State. No ownership w/ digital delivery= no sales tax. OTOH, I just sold ownership photos of 50 homes to a Texas company that’s building spec in WA… I didn’t collect sales tax.

  • This is a confusing issue for sure.

    I am a former Tax CPA….so have some knowledge in the area and you are right, it all depends on where you are and what you are selling. For example, if you put the photos on a CD for the agent, you could be liable for sales tax whereas if you only make them available as a download, you would not be liable. Or if you provide printed brochures, you could be liable for tax. It seems that the more “tangible” things are, the more states tax it, but that is a generality. Through our platform we provide downloads up to 3300 pixels, but you could use dropbox or the like.

    Also if you provide a subscription there could be tax. And some states tax the service. Connecticut for example charges a 1% computer tax that we have charged for years. So, check your state, call them on an anonymous basis and document what they said. When in doubt engage a CPA.

    And remember, if the state deems you liable for the tax, and you did not collect it from your customers, then you have to pay and likely can’t go back against your customers. So it is good to get this business issue down from the start (and note it can change over time).

  • I believe that in some jurisdictions there is no tax on labor. In essence, everything a photographer does is labor. On a simple project, such as a portrait or real estate image, the labor is $X and the prints/digital files are say, $5 each. Not sure how this theory would work for someone of renown selling a major art piece.

  • In Texas, it’s a taxable transaction. I hate that many others in the area fails to collect sales taxes. My shoots are $150 so that’s like $12 more just on taxes. On video shoots, it’s around $20-$30 in taxes. Others who don’t report sales taxes are breaking the law but are unlikely to be audited or arrested for tax evasion.

    http://comptroller.texas.gov/taxinfo/taxpubs/tx94_176.pdf

  • Not in Tennessee unless I deliver a physical product.

  • Indeed, it seems all states have their own rules. In California, it is my understanding that if you do not supply hard copy in the form of CDs, DVDs, prints, and you provide access to the images by sending them over the internet or downloading them to the client’s computer via thumb drive that you retain, then you do not charge sales tax on the shoot nor on the results of the shoot.

    However, if you do hand over hard copy after the shoot, then you have to charge sales tax of the shoot and on the individual pieces of hard copy if you charge for the hard copy.

    What still is not clear to me after a number of conversations with the State Board of Equalization (CA’s sales tax collection agency) is if some time after the shoot if a client wants hard copy of the images, do you then have to charge for the entire shoot or just the individual hard copies. If so, what is the elapsed time between billing and being paid for the non-taxable shoot and the then taxable hard copy? I don’t know. Not that it has arisen but I can see it happening.

  • In Minnesota, neither photography nor artwork is taxed if it is created digitally and delivered electronically. But, when you send an invoice the digital creation and delivery must be stated on the invoice itself, otherwise tax is due. A photographer probably won’t be audited, but your client might be subject to routine audits and they will examine all their invoices. One of my clients was audited and because the invoice didn’t indicate the digital exception, they were liable for the tax. Fortunately, this client of 20 years didn’t ask me to pay, but needless to say I include a line on every invoice that says “Digitally created and delivered electronically”.

  • In Quebec it is a Goods and Services tax, so it is definitely taxable – unless you are making less than 30000$ gross per year.

    However, businesses that collect taxes (including realtors) can also deduct the taxes spent. So, if the realtor makes 80000$ (and collects 12000$ of tax) but spends 40000$ (and spends 6000$ on tax) he only has to pay out 6000$ to the government. So charging the TPS/TVQ here makes sense just to make you look more professional, as they get it back at tax time.

  • I live in the state of Washington and was also very confused, especially because I called the Dept. of Revenue and they insisted that sales tax was due. When I tried to recite the RCW that I thought exempted us from charging tax, she told me I could file for a binding decision from the department. I did file and received a binding decision that sales tax was not due when the photographs were used for business purposes. You do, however, need to get your clients to complete the Digital Products and Remote Access Software Exemption Certificate and keep it on file. You can download the form here:

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwj6h8Gc-8_NAhUU8GMKHeqWD0QQFggoMAA&url=http%3A%2F%2Fwww.sos.wa.gov%2Fquicklinks%2FExemptCert%2F&usg=AFQjCNHDdWCmFrLuEmif40Ru3j6ZkbqXiw&sig2=9-HmTT59nbPW4kEGAyFEIA&bvm=bv.126130881,bs.2,d.cGc

  • In my state, Massachusetts, the total invoice is taxable regardless of the delivery medium (DVD, online, paper). If I deliver out of state, then no sales tax is due (to Massachusetts), but the out of state client is responsible for paying his state’s sales/use tax. But that’s his problem, not mine.

    Remember – All states are different as this is a state tax.

  • Bottom line it….. put down the camera and take the time to learn how to set up and run a business. The time you spend doing that will pay off for the rest of your career. I have known a lot of “photographers” that did great work, but failed in business because they did not take the time or investment in learning business 101. Spend a couple of dollars to have a accountant set up you books and console you on if and when taxes are to be collected.

    Don’t fret about what the others do, find out what YOU need to do and DO IT. Play by the rules in your area and you won’t be worried about an audit. Play games with taxes and sooner or later you will feel the pain of penalties…

  • @Jerry – Great advice!

  • This reminds me of some of the food taxes. Here in California if I walk into subway and grab a sandwich it’s not taxed. If I happen to want it hot and they put it in the toaster, it is taxed. Ok, haha.

    Honestly, h and r block and be done with this stuff. It’ll cost you like 200 bucks a year and they handle any problems you have if something comes up after you file. Total no brainer for me I won’t touch those forms ever again.

  • In Michigan, the process of creating photographs is taxed. So, we tax the whole total regardless of what is delivered. It really varies from state to state. Even here in Michigan, some CPA’s don’t know about the photography tax law. So, best to talk with a CPA who is familiar with working with photographers.

  • I’m not sure I would trust an accountant to sort through the WA state regulations any better than I have – after all, we’ve heard of plenty of times where an accountant messed up and ultimately the taxpayer is liable for the difference. I need to be convinced I am taking the correct action. We have had our own small retail toy business since 1995 and have manged not to get audited yet, I’d like to continue that record!

    I also applied for a ruling from the DOR, and am waiting to hear back. FWIW, the advice line did tell me there was no tax if the photos were only licensed, but then said not to use their advice as a ruling, and that I should apply for a formal ruling. I asked Larry his opinion since I knew he had worked in WA and thought he might have some insight into this confusing issue.

  • Lot of interpretations that can go wrong here. Scary indeed! I run my business out of WA as well. I have collected taxes for my services since I was told by DOR that I should, so I never questioned it. Maybe I should! In regards to the ownership with digital delivery I have always viewed it that the agent has a limited ownership tied to the listing and specific usage. I did not want to loose control of my images (RE Agents personal advertising) so I put into my PayPal invoice the simple statement.

    “Photos can only be used for the purpose of MLS marketing for the above said property listed in “description”. Any other usage has to be communicated and agreed upon in written format with 360 Wicked Photography.”

  • @Mike – Your situation is exactly the reason I did a post on this subject. Given the ease of misinterpretation of the WA DOR website I would suggest that you contact the WA department of revenue, use the paragraph in the post above titled “Royalties and Digital Photographs” to describe your terms of service and ask the DOR for a formal ruling. As Stephanie says above in her comment, the DOR verbally told her the same interpretation as I describe in the post.

    My understanding is that there are other real estate photographers that have gotten a formal ruling that match what this post describes and what Stephanie was told verbally.

    I wouldn’t be surprised if half of the real estate photographers in Washington were collecting sales tax and don’t need to.

  • It’s confusing here is NJ as well. The state offers a pdf of the tax guidelines specifically for photographers. It’s so simple and complicated at the same time. The simple part is… if it’s tangible, it’s taxable. If it’s digital, it’s not taxable. Sounds pretty simple, right? Prints and CD’s are taxable, digital delivery is not. As you keep reading this helpful document, it states that any editing is taxable as well as travel costs. Editing is taxable? they don’t define what editing is but as we all know, just about everything we do digitally is going to be edited in one way or another. And travel costs are factored into my fee already… especially if I have to go beyond a 15 mile radius of my town… extra travel charges apply.

    I reached out to the state tax office and asked them for clarification. They stated that if I was going to charge a flat fee which included the post-processing and travel costs, then the whole thing is taxable. But if I itemized the invoice (ie. $100 for the shoot, $50 for editing, $20 for travel, etc) then I could just tax specific parts of the invoice, thus passing some tax savings to my clients. I felt that the convoluted method of itemizing the invoice would only confuse my clients more. Plus it would make it appear that I was nickel and dime-ing them for every little thing. It’s much easier to say $170 plus tax, then the other way just to save them $5.

  • @Mike Nilsson, Your customer has no ownership. Just like renting a hotel room doesn’t mean that you own it for the night, it’s being rented to you. If you call it “limited ownership”, your transaction will likely be classed as a sale and fully taxable by any tax office employee (or blood-traitor, if you prefer).

    I heartily agree that getting a ruling formally and in writing is important if the state policies seem vague. Verbal advice over the phone is only as good as the paper it’s written on. The same goes for IRS help lines; when you read their disclaimers, it states that you are still liable for penalties and interest if the IRS employee helping you gives incorrect answers. Run in circles, scream and shout.

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