Sales and Use Tax for Photography and Video Production

This post is inspired by a question that came up on the Architectural ASMP user forum that many photographers both new and old face. 

Do I need to charge/collect sales tax for Photography and Video Services.

First off, sales tax differs from state to state. In my home state of Minnesota, we have a great fact sheet for sales/use tax. Your local Department of Revenue may have something similar. 
 
Today I'm only going to address the two of my most common use cases that come up as Exempt Sales:
Electronic delivery.
When the final photography is transferred electronically to the client, with no physical transfer of prints, negatives, discs, or other tangible items, the entire charge for the photography is exempt. The invoice must clearly state that the photography is transferred electronically. No exemption certificate is necessary.
 
Delivered outside Minnesota.
Photography sent or de- livered to a customer outside Minnesota is exempt. No exemption certificate is required; however, records must indicate that the items were shipped to a customer out- side Minnesota. Tax may be due in the state of destination depending on the other state’s tax laws.
Just to be clear, I sent the Sales and Use tax team a few clarifying situations:

In all instances, everything is transferred electronically via online storage.

  1. The client is an Architectural Firm to produce Architectural Photography
  2. The client is an Architectural Firm to produce Architectural Cinematography and Documentary.
  3. The client is a Magazine publication producing short form documentaries about architectural projects.
  4. My client is an advertising firm which is producing content for their client (an architectural firm)
The response from the MN Dept. of Revenue confirmed the following
If the photography is delivered electronically it is exempt from sales tax with no physical transfer of prints, negatives, discs, or other tangible items, the entire charge for the photography is exempt.  The invoice must clearly state that the photography is transferred electronically. No exemption certificate is necessary.  The service provider must pay sales or use tax on all inputs used to in the production of the photography that is delivered electronically to the customer.  If the photography is delivered in a tangible form, then it is taxable.
So that leaves one other popular scenario. When you have a client IN STATE, there are cases when delivering large volumes becomes untenable for delivery over FTP or website. Such may result in the question of how a Thumb-drive or other external hard drive may be considered "electronic transfer". I called the MN department of Revenue Sales and Tax Use line last year at 651-296-6181 or 800-657-3777. The woman I spoke with said that the only way I could deliver it on either type of medium, is if I physically go to my client's location, sit down at the computer, and transfer/copy, the electronic files my self, then take the media device back with me. 
 
The great thing, is that this is saving my clients in MN considerable amounts that then can be invested in more production value or future projects. 
 
PLEASE NOTE: This is the case as of the date of this blog post but may have changed by the time you read this.