How should a wedding photographer/videographer in Illinois charge sales tax on custom photo albums and video packages sold to clients?

Plain-English summary

A Chicago-based photography/videography professional wrote to the Illinois Department of Revenue asking how to charge sales tax on custom-branded products — like a custom photo album or a similar deliverable — sold alongside services such as event photo coverage and videography. The Department responded with a General Information Letter (GIL) rather than a binding Private Letter Ruling, because a GIL simply points taxpayers to the relevant regulations rather than resolving a specific factual dispute.

The Department explained that photographers and similar servicemen are subject to Retailers' Occupation Tax (ROT) on the actual photo-processing component of their charges (the part covered by 86 Ill. Adm. Code 130.2000), but that videography and similar services are not considered sales of photo-processing products — those are subject to Service Occupation Tax (SOT) instead, under 86 Ill. Adm. Code 140.101.

Under the Service Occupation Tax, a "serviceman" who transfers tangible personal property (like a printed album or a video on a USB drive) incident to a sale of service can calculate the tax base using one of four methods:

1. The separately stated selling price of the item transferred;
2. 50% of the entire bill to the customer (if the price isn't separately stated);
3. Service Occupation Tax on the item's cost price, if the business is a registered "de minimis" serviceman; or
4. Use Tax on the item's cost price, if the business is a de minimis serviceman not otherwise required to register.

A business qualifies as "de minimis" if the annual aggregate cost price of tangible personal property it transfers incident to services is less than 35% of its annual gross receipts from those service transactions (75% for pharmacists and graphic arts producers). This determination is made annually across the whole business — not transaction by transaction.

What this means for you

Wedding and event photographers/videographers

If you sell a mix of photography (with real photo processing/printing) and videography, split those revenue streams: the ROT applies to the photo-processing/printing component of a photographer's charge, while the video product and other non-photo-processing items you transfer to clients are subject to Service Occupation Tax as a serviceman, not ROT. How you bundle "packages" (e.g., "8 hours of coverage plus a custom album for $X" vs. an album billed separately) affects how you document and calculate your tax base, so decide up front whether you'll separately state your product prices or use the 50%-of-bill method.

Small and part-time creative-services businesses

If the tangible items you hand over to clients (albums, prints, USB drives, thumb drives, etc.) make up less than 35% of your annual gross receipts from services (75% for pharmacists and graphic arts production businesses), you may qualify to pay tax as a "de minimis" serviceman — either Service Occupation Tax on your cost price (if registered) or Use Tax on your cost price (if not otherwise required to register). This lets you avoid collecting sales tax directly from customers, since the tax liability falls on you instead.

Accountants and tax professionals advising service businesses

This GIL is a useful reference for any serviceman scenario involving tangible personal property transferred incident to services: it walks through all four permissible tax-base methods (separately stated price, 50% of bill, cost price for registered de minimis servicemen, and Use Tax on cost price for unregistered de minimis servicemen), and clarifies that de minimis status is determined on an annual aggregate basis under 86 Ill. Adm. Code 140.109, not per transaction.

Common questions

Q: Is a wedding videographer subject to Retailers' Occupation Tax like a photo processor?
A: No. Under 86 Ill. Adm. Code 130.2000(b)(3), the sale of video production/services is not considered a sale of photo-processing products, so it is not subject to Retailers' Occupation Tax. Instead, videographers who transfer tangible personal property (like a finished video on a drive) incident to their services are subject to Service Occupation Tax under 86 Ill. Adm. Code 140.101.

Q: How does a photographer calculate tax if they sell a custom album along with hourly coverage as one package?
A: They can either separately state the selling price of the album (tax is based on that stated price), or, if they don't separately state it, use 50% of the entire package price as the tax base. In neither case may the tax base be less than the item's cost price.

Q: What does it mean to be a "de minimis" serviceman, and why does it matter?
A: A serviceman qualifies as de minimis if their annual aggregate cost price of tangible personal property transferred incident to services is less than 35% of their annual gross receipts from service transactions (75% for pharmacists and graphic arts production). De minimis servicemen may instead pay tax based on their cost price — either Service Occupation Tax (if registered) or Use Tax (if not required to register) — rather than collecting tax on the full retail price from customers.

Q: Can a business decide de minimis status on a job-by-job basis?
A: No. Per 86 Ill. Adm. Code 140.109, the de minimis determination is made using the serviceman's annual aggregate cost price of tangible personal property transferred incident to sales of service — not on a transaction-by-transaction basis.

Q: Does this letter resolve my specific tax situation the way a formal ruling would?
A: No. This is a GIL, which only points taxpayers to relevant regulations and general principles; it is not a statement of Department policy and is not binding on the Department. Taxpayers with a specific, complete fact pattern who want a binding answer must request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110.

Citations and references

Statutes and rules:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act, imposition of tax)
• 86 Ill. Adm. Code 130.2000 (ROT treatment of photographers/photo-processing; 130.2000(b)(3) excludes video production)
• 86 Ill. Adm. Code 140.101 (Service Occupation Tax generally; 140.101(f) de minimis threshold)
• 86 Ill. Adm. Code 140.106 (Certificates of Resale; Service Use Tax collection)
• 86 Ill. Adm. Code 140.108 (registered de minimis servicemen paying tax on cost price)
• 86 Ill. Adm. Code 140.109 (annual aggregate de minimis determination)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter, non-binding nature)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2021.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2021/st21-0029-gil.pdf

Original ruling text

ST-21-0029 08/16/2021 MISCELLANEOUS
This letter discusses digital photography. See 86 Ill. Adm. Code 130.2000 and
86 Ill. Adm. Code 140.101. (This is a GIL.)
August 16, 2021
Dear NAME:
This letter is in response to your letter dated January 10, 2019, in which you
requested information. The Department issues two types of letter rulings. Private Letter
Rulings (“PLRs”) are issued by the Department in response to specific taxpayer
inquiries concerning the application of a tax statute or rule to a particular fact situation.
A PLR is binding on the Department, but only as to the taxpayer who is the subject of
the request for ruling and only to the extent the facts recited in the PLR are correct and
complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General
Information Letter (“GIL”) is to direct taxpayers to Department regulations or other
sources of information regarding the topic about which they have inquired. A GIL is not
a statement of Department policy and is not binding on the Department. See 2 Ill. Adm.
Code 1200.120. You may access our website at www.tax.illinois.gov to review
regulations, letter rulings and other types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:
I’m NAME, a PROFFESION based in Chicago, IL. I have been doing
research on how to charge our clients for their custom PRODUCT1 and
custom PRODUCT2 and it seems to be a gray area.
The document I found is included in this letter (Title 86 Part 130 Section
130.2000) and hasn’t seen updates since 2000. I would like to request that this
document be updated so that it will apply to modern 2019 PRODUCT3. The
processing that is referenced in this document applies to PRODUCT4 and is not
applicable to the age of PRODUCT3 with PROCESS1 and PROCESS2.
The products that we sell, as mentioned, are PRODUCT2 and PRODUCT1.
These are all custom items and are different for each couple that we work with. I
am unsure as to how I should be collecting sales tax.
Ideally, I could create a package for our couples and say that “Package X”
includes 8 hours of PROCESS1 coverage, PROCESS2, and a 10x10 custom
PRODUCT1 for $$$$. Or, if best, I can keep products separate and do “Package
X” includes 8 hours of PROCESS1 and PROCESS2 for $$$$, and the custom
PRODUCT1 is available a la carte and is on a separate invoice for $$$$.
I would of course like to submit the correct amount of sales tax and would
appreciate any direction and further explanation.

NAME
Page 2
August 16, 2021
I called in on 1/10/19 and talked to NAME, ID ####, and he suggested that I
reach you, the Legal Office Team.
DEPARTMENT’S RESPONSE:
OCCUPATION1, OCCUPATION2, and other servicemen, are subject to
Retailers' Occupation Tax on the PROCESS3 component of their total service charge
when they sell products of PROCESS3.[35 ILCS 120/2] However, under the
Department’s regulation, the sale of PROCESS2 is not considered a sale of products of
PROCESS3. 86 Ill. Adm. Code 130.2000(b)(3). Sales of PROCESS2 are subject to
Service Occupation Tax. See 86 Ill. Adm. Code 140.101.
Under the Service Occupation Tax, servicemen are taxed on tangible personal
property that they transfer incident to sales of service. Servicemen may calculate their
tax base in one of four ways: (1) separately stated selling price; (2) 50% of the entire
bill; (3) Service Occupation Tax on the cost price if they are registered de minimis
servicemen; or, (4) Use Tax on the cost price if the servicemen are de minimis and are
not otherwise required to be registered under Section 2a of the Retailers' Occupation
Tax Act.
It should be noted that for methods (3) and (4), a de minimis determine is made
using a serviceman’s annual aggregate cost price of tangible personal property
transferred incident to the sales of service. Servicemen do not have the option of
determining whether they are de minimis using a transaction-by-transaction basis. See
86 Ill. Adm. Code 140.109.
Using the first method, servicemen may separately state the selling price of each
item transferred as a result of sales of service. The tax is based on the separately
stated selling price of
the tangible personal property transferred. If servicemen do not wish to separately state
the selling price of the tangible personal property transferred, those servicemen must
use the second method where they will use 50% of the entire bill to their service
customers as the tax base. Both of the above methods provide that in no event may the
tax base be less than the cost price of the tangible personal property transferred. Under
these methods, servicemen may provide their suppliers with Certificates of Resale when
purchasing the tangible personal property to be transferred as a part of the sales of
service. Upon selling their product, they are required to collect the corresponding
Service Use Tax from their customers. See 86 Ill. Adm. Code 140.106.
The third way servicemen may account for their tax liability only applies to de
minimis
servicemen who have either chosen to be registered or are required to be registered
because they
incur Retailers’ Occupation Tax liability with respect to a portion of their business.
Servicemen may qualify as de minimis if they determine that their annual aggregate

NAME
Page 3
August 16, 2021
cost price of tangible personal property transferred incident to sales of service is less
than 35% of their annual gross receipts from service transactions (75% in the case of
pharmacists and persons engaged in graphic arts production). See 86 Ill. Adm. Code
140.101(f). This class of registered de minimis servicemen are authorized to pay
Service Occupation Tax (which includes local taxes) based upon the cost price of
tangible personal property transferred incident to sales of a service. Servicemen that
incur Service Occupation Tax collect the Service Use Tax from their customers. They
remit the tax to the Department by filing returns and do not pay tax to suppliers. They
provide suppliers with Certificates of Resale for the property transferred to service
customers. See 86 Ill. Adm. Code 140.108. Please note that the tax base for this
method is the cost price of the tangible personal property actually transferred to the
customer. It does not include the cost of supplies that the serviceman may need to
produce the item unless the supplies are part of the item transferred to the customer.
The final method of determining tax liability may be used by de minimis
servicemen not
otherwise required to be registered under Section 2a of the Retailers' Occupation Tax
Act. Servicemen may qualify as de minimis if they determine that their annual aggregate
cost price of
tangible personal property transferred incident to sales of service is less than 35% of
their annual
gross receipts from service transactions (75% in the case of pharmacists and persons
engaged in
graphic arts production). Such de minimis servicemen may pay Use Tax to their
suppliers or may self-assess and remit Use Tax to the Department when making
purchases from unregistered out-of-State suppliers. Those servicemen are not
authorized to collect “tax” from their service customers because they, not their
customers, incur the tax liability. Those servicemen are also not liable for Service
Occupation Tax.
For example, if a PRODUCT2 custom PRODUCT1 (“PRODUCT1”) is sold as a
separate item, and the serviceman calculates the tax using the first method, the tax is
based on the separately stated selling price of the PRODUCT1. If the serviceman
calculates the tax using the second method, the tax is based on 50% of the total selling
price of the entire bill. If the serviceman is eligible and chooses to calculate the tax
using the third method, the tax is based upon the cost price of the of tangible personal
property transferred incident to the sales of service. Finally, if the serviceman is eligible
and chooses to calculate the tax using the fourth method, the serviceman may pay Use
Tax based on the PRODUCTS1 cost price of the tangible personal property to his
supplier or may self-assess and remit Use Tax to the Department when making
purchases of tangible personal property from unregistered out-of-State suppliers.
Servicemen who are eligible to pay Use Tax rather than Service Occupation Tax under
the fourth method of calculating tax are not authorized to collect “tax” from their service
customers because they, not their customers, incur the tax liability.

NAME
Page 4
August 16, 2021
I hope this information is helpful. If you require additional information, please
visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer
Information Division at (217) 782-3336.

TG:rkn

Very truly yours,
Thomas Grudichak
Associate Counsel