Does Illinois sales tax apply to a photographer's digital photo files and an optional custom-made photo album sold along with them?

Plain-English summary

A professional photographer wrote to the Illinois Department of Revenue asking about the sales tax treatment of their business. The photographer's pricing has two parts: a session fee (covering the photography service itself, with no tangible product included) and package fees, which include digital image files and give the client the option to add a custom-made photo album. Notably, the package fee stays the same whether or not the client adds the album -- the photographer described the digital files as the "primary product" being sold. The photographer asked whether they were required to keep collecting and remitting Illinois sales tax on these packages.

The Department issued a General Information Letter (GIL) rather than a Private Letter Ruling (PLR), meaning it laid out the governing framework without resolving exactly how it applies to this photographer's specific package structure. The framework breaks into two pieces:

Digital files delivered electronically. Under 86 Ill. Adm. Code 130.2105(a)(3), information or data that is electronically transferred or downloaded is not considered a transfer of tangible personal property in Illinois. So the electronic delivery of digital photographs (without any accompanying canned software) generally would not be subject to Retailers' Occupation Tax or Use Tax.

Photoprocessing rules don't apply to digital photography. The Department noted that Illinois has a special rule for "products of photoprocessing" (86 Ill. Adm. Code 130.2000) -- traditional film development, printing, tinting, and enlarging -- under which photographers owe Retailers' Occupation Tax on the photoprocessing portion of their charge (50% of the unseparated price generally, or 10% for a professional photographer, if the photoprocessing charge isn't separately stated). But the Department was explicit that the sale of digital photography is not a sale of "products of photoprocessing," so those specific photoprocessing tax-base rules don't apply here at all.

A physical photo album is different. Because an album is tangible personal property, if the photographer sells one along with (or incident to) their photography service, that transfer triggers Service Occupation Tax (or Use Tax) liability under 86 Ill. Adm. Code 140.101-140.109. A "serviceman" (here, the photographer) has to choose one of four ways to calculate the tax base on that album: (1) tax on the separately-stated selling price of the album; (2) tax on 50% of the entire bill, if the album price isn't separately stated; (3) Service Occupation Tax on the album's cost price, if the photographer is registered as a "de minimis" serviceman; or (4) Use Tax on the album's cost price paid to their supplier (or self-assessed if the supplier doesn't collect it), if the photographer qualifies as de minimis and isn't otherwise required to register. A serviceman qualifies as de minimis if the cost price of tangible personal property they transfer is less than 35% of their annual gross receipts from service transactions (86 Ill. Adm. Code 140.101(f)).

The Department didn't say which of the four methods this particular photographer must use -- that depends on facts (like whether they separately state the album price, and whether they qualify as de minimis) that a GIL doesn't resolve.

What this means for you

Photographers and photo studios

If you sell digital image files electronically with no physical product, that portion of your charge generally isn't subject to Illinois Retailers' Occupation or Use Tax under 86 Ill. Adm. Code 130.2105(a)(3) -- and importantly, the traditional film-photoprocessing tax rules (86 Ill. Adm. Code 130.2000) don't apply to digital photography at all, so you don't need to apply the 50%/10% photoprocessing formulas to a digital-only sale. But once you add a physical item like a custom album, that item is taxable tangible personal property, and you (as the "serviceman") need to pick one of the four Service Occupation Tax/Use Tax calculation methods described above -- typically by separately stating the album's price on the invoice (method 1) if you want the simplest, most transparent approach.

Accountants and tax professionals

This GIL is a useful two-part framework for any digital-plus-physical-product bundle, not just photography: (1) purely electronic delivery of information/data isn't a taxable transfer of tangible personal property (130.2105(a)(3)); (2) once a physical item enters the transaction, look to the Service Occupation Tax's four tax-base methods (140.101 et seq.) rather than any product-specific processing rule, unless that specific rule (like 130.2000's photoprocessing rule) is confirmed to apply to the exact product involved. Because this is a GIL and not a PLR, it isn't binding on the Department for any other taxpayer, including one with an outwardly similar digital-photography business -- a client who needs a binding answer on their specific pricing structure should request their own PLR under 2 Ill. Adm. Code 1200.110.

Clients who buy photography packages

This letter doesn't change what a client pays; it only addresses what the photographer owes the state and how. If your package price doesn't change whether or not you add an album, ask your photographer how they've decided to handle the tax on the album piece -- some methods (like the 50%-of-bill method) apply tax to the whole package rather than isolating the album's cost.

Common questions

Q: Is a digital photo file itself subject to Illinois sales tax?
A: Generally no. Under 86 Ill. Adm. Code 130.2105(a)(3), electronically transferred or downloaded information/data is not treated as a transfer of tangible personal property, so a purely digital delivery is generally not subject to Retailers' Occupation Tax or Use Tax.

Q: Do Illinois's special photoprocessing tax rules (the 50%/10% formulas) apply to digital photography?
A: No. The Department states directly that the sale of digital photography is not a sale of "products of photoprocessing," so the 86 Ill. Adm. Code 130.2000 photoprocessing rules -- which were written for film developing, printing, and enlarging -- don't apply to digital images.

Q: What if the photographer also sells a physical custom photo album?
A: The album is tangible personal property. Selling it along with (or incident to) the photography service triggers Service Occupation Tax (or Use Tax) liability on the photographer under 86 Ill. Adm. Code 140.101-140.109, using one of four permitted tax-base calculation methods.

Q: Which of the four Service Occupation Tax methods must this photographer use?
A: The GIL doesn't say -- that depends on facts like whether the album price is separately stated and whether the photographer qualifies as a "de minimis" serviceman (cost price of transferred tangible personal property under 35% of annual gross service receipts). A GIL states the framework; it doesn't resolve a taxpayer's specific facts the way a binding PLR would.

Q: Can this photographer (or another photographer with similar facts) rely on this GIL as legal protection?
A: No. A GIL is not a statement of Department policy and is not binding on the Department, even for the person who requested it. Anyone wanting a binding answer on their own specific pricing structure needs to request a Private Letter Ruling.

Citations and references

Statutes:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act imposition)
• 35 ILCS 105/3 (Use Tax Act imposition)

Regulations:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax regulations)
• 86 Ill. Adm. Code 150.101 (Use Tax regulations)
• 86 Ill. Adm. Code 130.2105(a)(3) (electronic transfer of information/data is not a transfer of tangible personal property)
• 86 Ill. Adm. Code 130.2000 (photoprocessing and photographers; not applicable to digital photography)
• 86 Ill. Adm. Code 140.101 through 140.109 (Service Occupation Tax)
• 86 Ill. Adm. Code 140.101(f) (de minimis serviceman threshold)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0018-GIL.pdf

Original ruling text

ST 24-0018 4/5/2024

MISCELLANEOUS

This letter discusses digital photography. See 86 Ill. Adm. Code 130.2000 and
86 Ill. Adm. Code 140.101. (This is a GIL.)
April 5, 2024
NAME
ADDRESS
Dear NAME:
This letter is in response to your letter dated December 5, 2022, 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:
To Whom it May Concern,
I hope this letter finds you well. I am writing to request a General
Information Letter regarding the sales tax obligations for my business,
COMPANY, which provides photography services to clients. We are
located in CITY, IL.
My pricing structure consists of two main components: the session fee and
package fees. The session fee covers the cost of services rendered and
does not include any tangible products. The package fees, on the other
hand, include digital files of my clients’ images. Additionally, within these
packages, clients have the option to include a custom-made album.
However, it is important to note that the package fees remain constant
regardless of whether the album is included or not, as the primary product
offered is the digital files.
Given this pricing structure, I am seeking clarification on whether my
business is required to continue collecting and remitting sales tax.
Specifically, I would like to know how the sale of digital files and optional

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albums within my photography packages aligns with the current sales tax
regulations in Illinois.
Your guidance on this matter would be greatly appreciated as it will ensure
that my business remains compliant with all applicable tax laws. If there
are any additional details or documentation needed to assist in providing a
response to my inquiry, please do not hesitate to contact me.
Thank you for your attention to this matter, and I look forward to your
prompt response.
DEPARTMENT’S RESPONSE:
Retailers’ Occupation Tax and Use Tax
The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property to purchasers for use or
consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is
imposed on the privilege of using, in this State, any kind of tangible personal property
that is purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm.
Code 150.101. These taxes comprise what is commonly known as “sales” tax in Illinois.
Retailers’ Occupation and Use Taxes do not apply to sales of service that do not
involve the transfer of tangible personal property to customers. However, if tangible
personal property is transferred incident to sales of service, this will result in either
Service Occupation Tax liability or Use Tax liability for the serviceman depending upon
the serviceman’s activities. For your general information, see 86 Ill. Adm. Code
140.101 through 140.109 regarding sales of service and Service Occupation Tax.
Information or data that is electronically transferred or downloaded is not
considered the transfer of tangible personal property in this State. See 86 Ill. Adm.
Code 130.2105(a)(3). Accordingly, the electronic transfer of digital photographs or
retouched photographs that does not include canned software as part of the transfer
generally would not be subject to tax.
Section 2-15 of the Retailers’ Occupation Tax Act contains specific rules for
photoprocessing and photographers. Generally, photographers are subject to Retailers’
Occupation Tax on the photoprocessing component of their total service charge when
they sell products of photoprocessing. See 86 Ill. Adm. Code 130.2000. In transactions
in which products of photoprocessing are sold in conjunction with other services, if a
charge for the photoprocessing component is not separately stated, tax is imposed on
50% of the entire selling price, unless the sale is made by a professional photographer,
in which case tax is imposed on 10% of the entire selling price. For purposes of the tax,
“photoprocessing” includes, but is not limited to, developing films, positives and

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negatives, transparencies, tinting, coloring, and making and enlarging prints. See 86 Ill.
Adm. Code 130.2000(b)(3).
The sale of digital photography is not a sale of products of photoprocessing. As
a result, the foregoing rules regarding photoprocessing do not apply in the situation of a
professional photographer taking digital photographs. Please refer to the below
discussion of the Service Occupation Tax for the tax treatment of this type of service.
Service Occupation Tax
Under the Service Occupation Tax Act, businesses providing services (i.e.,
servicemen) are taxed on tangible personal property transferred as an incident to sales
of service. See 86 Ill. Adm. Code 140.101. The transfer of tangible personal property
to service customers may result in either Service Occupation Tax liability or Use Tax
liability for servicemen, depending upon which tax base they choose to calculate their
liability.
Servicemen may calculate their tax base in one of four ways: (1) separatelystated selling price of tangible personal property transferred incident to service; (2) 50%
of the serviceman’s entire bill; (3) Service Occupation Tax on the serviceman's cost
price if the serviceman is a registered de minimis serviceman; or (4) Use Tax on the
serviceman’s cost price if the serviceman is de minimis and is not otherwise required to
be registered under Section 2a of the Retailers’ Occupation Tax Act.
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 sales of service. They are required to collect the corresponding
Service Use Tax from their customers.
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 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 is
authorized to pay Service Occupation Tax (which includes local taxes) based upon the

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cost price of tangible personal property transferred incident to sales of service.
Servicemen that incur Service Occupation Tax collect the Service Use Tax from their
customers. They remit tax to the Department by filing returns and do not pay tax to their
suppliers. They provide suppliers with Certificates of Resale for the tangible personal
property transferred to service customers.
The final method of determining tax liability may be used by de minimis
servicemen that are 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 the annual aggregate cost price of tangible personal property transferred as an
incident of sales of service is less than 35% of the servicemen’s annual gross receipts
from service transactions (75% in the case of pharmacists and persons engaged in
graphic arts production). Such de minimis servicemen handle their tax liability by
paying Use Tax to their suppliers. If their suppliers are not registered to collect and
remit tax, the servicemen must register, self-assess, and remit Use Tax to the
Department. The servicemen are considered to be the end-users of the tangible
personal property transferred incident to service. Consequently, they are not authorized
to collect a “tax” from the service customers. See 86 Ill. Adm. Code 140.108.
For example, if a custom photograph album (“album”) 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 album. 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 album’s
cost price of the tangible personal property to the serviceman’s supplier or may selfassess 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.
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.
Very truly yours,
Kimberly Rossini
Associate Counsel

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