Things You’ll Need to Know About Charging Sales Tax for Your Photos

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This post originally appeared on the B&E Photographs journal on July 23, 2014, and is being syndicated at The Phoblographer with Brandon and Erin Wehman’s permission. All photos taken by B&E Photographs. Used with permission.

It’s no secret, especially to their followers, that photographer, co-founder of B&E Photographs, and adventurer Brandon Wehman offers a lot of great photography insights (and travel destination tips) on his site, B&E Photographs. In fact, back in May The Phoblographer syndicated one of his blog posts, Backpacking with a DSLR, which offers tips on how best to carry, secure, and make your DSLR accessible while on a backpacking trip.

This time around, Brandon, who incidentally was a certified public accountant before becoming a full-time photographer, shares his knowledge on something that a lot of professional photographers might not know about or understand well but is, in fact, of great importance when you’re making money as a photographer – the dreaded SALES TAX.

Read Brandon’s piece after the jump for a better understanding of how a sales tax works in a photography business.

 

Sales Tax for Photographers

Alright all you fellow photographers, this one’s for you. Let’s talk about sales tax and how it applies to photographers.

If you’ve been following us for any length of time, you probably know that last year Erin and I were fortunate enough to shed our former careers and make this passion our full-time job. What you may not know, though, is 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 B&E.

Sales tax and how it applies to photography is one of the most confusing and oft forgotten aspects of running a photography business. 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 largely away from a sales-based model (prints, books, etc.) and more and more toward digital delivery (Dropbox, DVDs, flash drives, etc.), there is less and less sales tax being harvested from this corner of the creative world. 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.

Also, heads up, I’m coming at this from a digital wedding photography angle. Film folk delivering prints using the traditional business model should know to pay sales tax already.

 

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 (i.e. pay 2014 taxes on January 31, 2015).

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, for example, commercial photography has an additional set of issues to deal with.

Hopefully, if you weren’t paying sales tax before, this at least made you aware that you’re supposed to be paying it. Sales tax is a big bummer, but it’s even worse if you get slogged down in years and years of back taxes, fines and penalties.

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.

 

Brandon Wehman is a wedding and portrait photographer based in Monterey, California. He co-owns and runs B&E Photographs with his wife, Erin.