More goes on behind the lens than you think.

 

 If you’re a photographer, you may believe you’re providing a service to your customers and aren’t required to collect sales tax from them. You may be wrong. Here’s a snapshot of what is developing in the sales tax darkroom in Alabama.

Alabama sales tax must be collected on all gross proceeds from the retail sale of photographs, blueprints and similar items, without deduction for any part of the cost of production. This rule applies whether the photo is delivered to the customer in printed or digital form. If negatives belonging to the customer are only developed by you, the developing charge is not subject to sales tax if you charge the customer separately for this service. If photos are provided to you by the customer in order to tint or color them, the receipts for tinting or coloring are not subject to sales tax if you charge the customer separately for that service.

When you purchase supplies that become part of photographic prints or blueprints, you should purchase these sales-tax-free at wholesale. However, if you purchase materials and chemicals that are used or consumed during the development of photos or blueprints, you should purchase these at retail and pay sales tax on them. When you purchase mechanical equipment used to produce photographic negatives, prints or blueprints (including cameras), you should pay sales tax at a reduced rate known as the machine rate.

Professional photographers often charge package rates to customers to cover photography for a specific event. You may collect a deposit from your customer, followed by installment payments, or you may collect the entire fee up front. The package may cover your time, travel and other production costs and charges for prints, CDs, DVDs, or albums. What is subject to sales tax?

  • Prepaid fees, deposits or retainers that are not separately stated/charged on your invoice are subject to sales tax if you subsequently sell a disc, album, printed photo or digital photo to a customer who is located in Alabama
  • Prepaid fees, deposits or retainers that are separately stated/charged on your invoice – not subject to sales tax in Alabama
  • If the customer cancels the contract before the event takes place, any prepaid fees would not be subject to sales tax (if you collected sales tax, refund the tax to your customer and then claim a credit for the amount refunded on your subsequent sales tax return)
  • Service fees – subject to tax
  • Planning fees – subject to tax
  • Labor charges – subject to tax
  • Editing charges – subject to tax
  • Sitting fees – subject to tax
  • Discs, prints, digital photos, albums and other physical items – subject to tax if delivered to a customer in Alabama. Not taxable if delivered to a customer outside Alabama.

Use the customer’s address in your contract to determine whether the final product will be delivered to a customer in Alabama. If the contract address is outside Alabama, you are not required to collect Alabama sales tax from your customer. If you erroneously collect Alabama sales tax when the contract is set but later discover the photos will be delivered outside Alabama, you should refund the sales tax to your customer and then claim a credit for the amount refunded on your subsequent sales tax return.

                A recent Alabama court case (Jaclyn L. Robinson dba Robinson Studio & Design v. State of Alabama Department of Revenue Administrative Law Division) has highlighted many of these issues. The court encouraged the Alabama Department of Revenue to notify photographers in the state of these rules and to issue regulations explaining how photographers should charge and collect sales tax.