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DOR has recently published Directive 11-4 clarifying the circumstances under which charges of professional photographers to their Massachusetts customers are subject to sales tax or are exempt.

If you're heading toward a wedding, a few minutes of reading time here could save you and the bride- or groom-to-be a few bucks, or at least explain the possible sales tax implications for your wedding photography or videography (the same rules apply to both).

Generally, the sales tax applies to any sale at retail by any vendor of tangible personal property, so it is clear that a conventional wedding album or a DVD of wedding photos generates a sales tax.

But assembling photos in an album or DVD is no longer the sole method of delivering a photography product such as wedding pictures to a client, which makes a world of difference in sales tax. A wedding album or DVD is a product delivered to the purchaser in a tangible medium. You can put your hands on it, and so it is taxed as tangible personal property.

However, wedding photos delivered in a digital file via the Internet are not subject to Massachusetts sales tax because there is no transfer of tangible personal property as contemplated in MGL Chapter 64H Sec. 1.

So how does this work in practice? Let's say you contract with a photographer to pay $3,500 for photography services on your wedding day, and also contract to pay $500 for a DVD of the photos. The $4,000 total is subject to sales tax because the photographer produced a tangible product which you are contractually obligated to purchase.

Using the same example ($3,500 to pay for taking photos at the wedding), the photos are this time delivered from the photographer's File Transfer Protocol (FTP) site via the Internet. Since no tangible personal property has been produced, there is no tax owed for the photography. However, if a photo album or DVD is also produced as part of the package, the entire cost of photography and the photo album are taxable.

The production of tangible personal property, as opposed to an internet file that is intangible, is the key determinant as to whether sales tax is charged.

Are flash bulbs popping?

Let's switch the field of vision to portrait photography.

It has been clear, at least since an Appellate Tax Board case in 1992, that a portrait photographer's separately stated charges for "sitting fees" constitute a distinct service transaction, and, as such, are not subject to sales tax even in a case where a tangible product such as a DVD is created.If not separately stated, however, the sitting fee and tangible photographic product such as a DVD are both subject to tax.

Let's say the photographer charges $200 for a sitting fee and $300 for a DVD of photos taken. The invoice to the customer separately states the two charges. Sales tax is due only on the photos.

(Recall that the 1992 ATB decision addressed only portrait studio sitting fees, leaving aside other separately stated charges of photographers hired for an event such as a wedding. The ATB determined that for purposes of calculating sales tax a sitting fee in a portrait studio may be tax exempt, but the decision did not extend the notion of a sitting fee to apply to a photographer's out-of-studio work in shooting a wedding album.)

How about a portrait photographer whose $500 fee includes a sitting fee for up to an hour as well as the transfer of 40 digital images provided to the client via download from the photographer's FTP site? Since no tangible personal property has been created, there is no sales tax.

The same principle of tangible vs. intangible extends to other types of digital downloads including music and books. Buy a CD or a book and sales tax is charged; buy a music download or a book on Nook or Kindle and no sales tax is charged.

But a purchase of software downloaded electronically is specifically mentioned in 64H Section 1 and thus is taxable. The law reads that "A transfer of standardized computer software, including but not limited to electronic, telephonic, or similar transfer, shall also be considered a transfer of tangible personal property."


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