Is a stock-photo business's sale of its own photographs subject to New York sales tax, and does it matter whether the images are delivered on paper/disk or purely electronically?

Plain-English summary

A sole proprietor starting a stock-photo business asked whether selling copies of his photographs -- while retaining ownership of the images themselves -- is subject to New York sales tax. He sells copies in tangible formats (paper, disk) and also delivers images purely electronically, and sometimes earns royalties when a customer reproduces an image in a poster, brochure, newspaper, or other printed product.

The Department applied three separate rules. First, selling a photo on paper, slide, negative, CD, video, or any other tangible medium is a sale of tangible personal property and is fully taxable, the same as any physical goods. Second, delivering the same photographic image solely electronically -- with no tangible format ever transferred -- is not a sale of tangible personal property and is not taxable. Third, a payment that is really a royalty for the right to reproduce the photograph (rather than a sale or license to use the physical item) is not taxable, provided the photographer actually owns the reproduction rights and the customer's only use of any temporarily-possessed original is to make the reproduction -- retouching, exhibiting, or otherwise using the original beyond mere copying converts the payment into a taxable license to use.

What this means for you

Photographers, stock-photo agencies, and licensing businesses

Format and rights matter more than price. Selling a physical copy (print, disk, CD) is taxable regardless of how the deal is described; delivering the same image purely by electronic file is not. A true royalty for reproduction rights stays untaxed only if you actually hold those rights and the customer doesn't retouch, permanently keep, or otherwise use the original beyond copying it.

Publishers, advertisers, and other buyers of images

If you're paying a photographer or agency for the right to reproduce an image in a book, ad, or product, ask whether the charge is structured as a royalty (nontaxable, if the seller owns the rights) versus a straight sale or license to use the physical photograph (taxable). Retouching or otherwise altering an original photo you temporarily possess can convert a nontaxable royalty arrangement into a taxable license.

Accountants and tax professionals

The controlling regulation is 20 NYCRR 526.7(f), with its three worked examples distinguishing a nontaxable reproduction-right royalty from a taxable license to use. The seller must actually possess the right to grant reproduction rights in the original for the royalty characterization to hold -- a mere collector or distributor of someone else's photographs doesn't qualify (see Example 3 in the regulation).

Common questions

Q: Is selling a printed photo or a photo on CD/disk taxable in New York?
A: Yes -- any sale of a photograph in a tangible format (paper, slide, negative, CD, video, etc.) is a taxable sale of tangible personal property.

Q: Is delivering a photo purely electronically (no physical copy) taxable?
A: No. A purely electronic delivery, with no tangible medium ever transferred to the customer, is not subject to sales tax.

Q: Are royalty payments for the right to reproduce a photo in a book or ad taxable?
A: No, if the payment is genuinely in the nature of a royalty under the laws relating to artistic and literary property and the photographer actually owns the reproduction rights. Temporary possession of the original solely to make the reproduction doesn't change that.

Q: What if the customer retouches, exhibits, or keeps the original photo?
A: Then the transaction is a taxable license to use rather than a nontaxable royalty -- any use beyond mere reproduction, or any transfer of permanent possession, makes the charge taxable.

Citations and references

Statutes and guidance:

• Tax Law § 1101(b)(4)-(6) (retail sale; sale/selling/purchase; tangible personal property)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• 20 NYCRR 526.7(a), (c), (e)-(f) (sale, rental/license, and reproduction-rights definitions)
• 20 NYCRR 526.8(a) (tangible personal property, including photographs)
• TSB-A-99(48)S (The Stock Market Photo Agency, Inc., Nov. 12, 1999)
• TSB-A-01(15)S (Universal Music Group, Apr. 18, 2001)
• TSB-A-92(60)S (Alan/Anthony, Inc., July 30, 1992)
• TSB-A-91(79)S (Sherman Grinberg Film Libraries, Inc., Dec. 26, 1991)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2005.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a05_34s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-05(34)S
Sales Tax
September 27, 2005

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S040707A

On July 7, 2004, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Martin R. Timm, P.O. Box 246, Glenwood, NY, 14069.
The issue raised by Petitioner, Martin R. Timm, is whether the sale of photographs from
its library collection of stock photographs is subject to sales and use tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner owns a library of stock photographs and is starting a stock photo business.
Petitioner will sell the photographic images owned by Petitioner to its customers. While
retaining all ownership rights in the photograph itself, Petitioner will sell copies of the
photograph in tangible format (paper, disk, etc.) and intangible format (i.e., delivered
electronically). Petitioner may also receive royalties from use of the photographic image in and
on printed products (posters, brochures, etc.) or in the print media (newspapers, periodicals, etc.).
Applicable law and regulations
Section 1101(b) of the Tax Law provides, in part:
When used in this article for purposes of the taxes imposed by subdivisions (a),
(b), (c) and (d) of section eleven hundred five and by section eleven hundred ten, the
following terms shall mean:
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(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such. . . .
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(5) Sale, selling or purchase. Any transfer of title or possession or both, exchange
or barter, rental, lease or license to use or consume (including, with respect to computer
software, merely the right to reproduce), conditional or otherwise, in any manner or by
any means whatsoever for a consideration, or any agreement therefor, including the
rendering of any service, taxable under this article, for a consideration or any agreement
therefor.

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Sales Tax
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(6) Tangible personal property. Corporeal personal property of any nature. . . .
Section 1105(a) of the Tax Law imposes a tax on the receipts from every retail sale of
tangible personal property unless otherwise exempted or excluded from tax.
Section 526.7 of the Sales and Use Tax Regulations provides, in part:
Sale, selling or purchase. [Tax Law, § 1101(b)(5)]
(a) Definition. (1) The words sale, selling or purchase mean any
transaction in which there is a transfer of title or possession, or both, of tangible
personal property for a consideration.
(2) Among the transactions included in the words sale, selling or purchase
are exchanges, barters, rentals, leases or licenses to use or consume tangible
personal property.
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(c) Rentals, leases, licenses to use. (1) The terms rental, lease and license to use
refer to all transactions in which there is a transfer for a consideration of possession of
tangible personal property without a transfer of title to the property. Whether a
transaction is a “sale” or a “rental, lease or license to use” shall be determined in
accordance with the provisions of the agreement. . . .
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(e)(4) Transfer of possession with respect to a rental, lease or license to use,
means that one of the following attributes of property ownership has been transferred:
(i) custody or possession of the tangible personal property, actual or
constructive;
(ii) the right to custody or possession of the tangible personal property;
(iii) the right to use, or control or direct the use of, tangible personal
property.
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3

TSB-A-05(34)S
Sales Tax
September 27, 2005

(f) Reproduction rights. (1) The granting of a right to reproduce an original
painting, illustration, photograph, sculpture, manuscript or other similar work is not a
license to use or a sale, and is not taxable, where the payment made for such right is in
the nature of a royalty to the grantor under the laws relating to artistic and literary
property.
(2) Mere temporary possession or custody for the purpose of making the
reproduction is not deemed to be a transfer of possession which would convert the
reproduction right into a license to use. (See Howitt v. Street and Smith Publications,
Inc., 276 N.Y. 345 and Matter of Frissell v. McGoldrick, 300 N.Y. 370.)
(3) Where some use other than reproduction is made of the original work, such as
retouching or exhibiting a photograph, the transaction is a license to use, which is
taxable.
Example 1: A person contracts with an artist for a right to reproduce one of the
artist’s paintings on a book cover. No other right is given by the artist for the use
of his painting. The person who obtains the reproduction right to the painting may
have copies made and returns the painting to the artist without alteration, change
or correction, and without having destroyed or publicly exhibited the painting.
The transfer is not held to be a transaction subject to the sales tax, as a rental,
lease or license to use.
Example 2: A photographer takes photographs and furnishes the same to a
magazine publisher for the purpose of reproduction. In the course of reproduction,
the photograph is retouched by the publisher. After reproduction, the photograph
is returned to the photographer. The receipts from such transaction are subject to
the tax as a license to use.
Example 3: A dealer collects photographs and photographic prints. He furnishes
the prints to a magazine publisher for the purpose of further reproduction. After
reproduction, the prints are returned to the dealer. The prints may or may not be
changed or altered. The receipts from such transactions are subject to the tax.
Since the dealer merely collects the photographic prints and does not have the
right to grant the right to reproduce the original, the transaction is deemed to be a
license to use tangible personal property.
Section 526.8(a) of the Sales and Use Tax Regulations provides, in part:
The term tangible personal property means corporeal personal property of any
nature having a material existence and perceptibility to the human senses. Tangible
personal property includes, without limitation:

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(3) artistic items, such as sketches, paintings, photographs, moving picture films
and recordings;
Opinion
Petitioner has a stock photo business in which Petitioner sells photographic images
owned by Petitioner.
When a photograph is sold on paper, slide, negative, CD, video, etc., such sale is the sale
of tangible personal property and is subject to sales tax under section 1105(a) of the Tax Law.
On the other hand, Petitioner’s sale of photographic images delivered solely
electronically with no tangible format transferred to the customer is not subject to sales tax.
(See The Stock Market Photo Agency, Inc. Adv Op Comm T & F, November 12, 1999,
TSB-A-99(48)S;Universal Music Group, Adv Op Comm T& F, April 18,2001, TSB-A-01(15)S.)
Charges for the use of a photographic image in a book, newspaper, periodical or some
other printed medium are not subject to sales tax where the rights purchased are in the nature of a
royalty under the laws relating to artistic and literary property. Similarly, royalty payments for
permission to reproduce the photographic depiction itself in or on another product (e.g., poster,
brochure, advertising copy, etc.) are not receipts from the sale, lease or license to use the
photograph itself. (See section 526.7(f)(1) of the Sales and Use Tax Regulations.)
If the charges to the customer for the use of the photograph are in the nature of a royalty,
the transfer of temporary possession or custody of the photograph to the customer for the sole
purpose of making the reproduction (i.e., incorporating the photograph into a poster, book cover,
brochure, etc.) is not considered to be a transfer of possession which would convert the royalty
right into a taxable use. (See Alan/Anthony, Inc., Adv Op Comm T & F, July 30, 1992,
TSB-A-92(60)S; and section 526.7(f)(2) of the Sales and Use Tax Regulations.)
However, if some use, other than mere reproduction, is made of the original photograph,
such as retouching or exhibiting the photograph, the transaction is a lease or license to use which
is taxable. The transaction is also taxable if the customer were to receive permanent possession
or use of the photograph or a copy of the photograph. (See Sherman Grinberg Film Libraries,
Inc., Adv Op Comm T & F, December 26, 1991, TSB-A-91(79)S; and section 526.7(f)(3) of the
Sales and Use Tax Regulations. Petitioner must actually possess the right to grant reproduction
rights in the original photograph, or its copies, in order for Petitioner’s charges to be considered

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in the nature of a nontaxable royalty. See section 526.7(f)(3), Example 3 of the Sales and Use
Tax Regulations.

DATED: September 27, 2005

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.