Were photo-lab prints produced and shipped for professional photographers' online customers wholesale sales under this SC PLR?

Plain-English summary

The taxpayer hosted professional photographers' online galleries, produced prints ordered by the photographers' customers, processed payment, shipped the prints, retained its service fee and lab charges, and remitted the remaining proceeds to the photographer.

The Department treated the lab's sale of prints to the photographer as a wholesale sale because the photographer resold the prints to the customer. The lab had to prove wholesale status or obtain a properly completed resale certificate. Shipping, handling, and credit-card processing charges made with the wholesale print sale followed that nontaxable wholesale treatment.

The photographer remained the retailer. The photographer owed sales tax on the total gross proceeds charged to the customer, including the prints, shipping, handling, and other fees, unless a separate exemption applied.

What this means for you

Photo labs and fulfillment providers

Direct shipment to the photographer's customer did not prevent wholesale treatment when the photographer was the reseller and the lab maintained the required documentation.

Professional photographers

The photographer's retail tax base included the complete customer charge, not merely the net amount later received after lab and platform deductions.

Online storefront operators

The legal roles mattered more than which party operated the website, processed the card, or physically shipped the product.

Common questions

Q: Were the lab's print sales taxable retail sales?
A: No, when properly documented as sales for resale to the photographer.

Q: Was a resale certificate important?
A: Yes. Without proof or a proper certificate, sales were presumed taxable retail sales.

Q: Were the lab's shipping and processing charges taxable?
A: Not when made as part of the documented wholesale print sale.

Q: Who collected tax from the final customer?
A: The photographer, as retailer, was liable on the total customer charge.

Q: Can another platform rely on this PLR?
A: No. It applied only to the requesting taxpayer's structure and facts.

Citations and references

• S.C. Code §§ 12-36-110 and 12-36-120 (retail and wholesale sales)
• S.C. Code § 12-36-950 (presumption, proof, and resale certificates)
• S.C. Regulation 117-309.2 (photographers as sellers of tangible personal property)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR07-7.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214
Website Address: http://www.sctax.org

SC PRIVATE LETTER RULING #07-7

SUBJECT:

Sales of Photograph Prints via an Internet Website
(Sales and Use Tax)

REFERENCES:

S. C. Code Ann. Section 12-36-910(A) (2000)
S. C. Code Ann. Section 12-36-1310(A) (2000)
S. C. Code Ann. Section 12-36-1110 (Supp. 2006)
S. C. Code Ann. Section 12-36-60 (2000)
S. C. Code Ann. Section 12-36-110 (2000)
S. C. Code Ann. Section 12-36-120 2000)
S. C. Code Ann. Section 12-36-950 (2000)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #05-2

SCOPE:

A Private Letter Ruling is an advisory opinion issued to a specific
taxpayer by the Department to apply principles of law to a specific
set of facts or a particular tax situation. It is the Department’s
opinion limited to the specific facts set forth, and is binding on
agency personnel only with respect to the person to whom it was
issued and only until superseded or modified by a change in
statute, regulation, court decision, or another Departmental
advisory opinion, providing the representations made in the request
reflect an accurate statement of the material facts and the
transaction was carried out as proposed.

Question:
Are sales by ABC, Inc. of photographic prints to professional photographers, as described
in the facts, subject to the sales and use tax?
Conclusion:
Sales by ABC, Inc. of photographic prints to professional photographers, as described in
the facts, are wholesale sales not subject to the sales and use tax since the photographer is
reselling the photographic prints to his customers, provided ABC, Inc. can document that
such sales are wholesale sales or obtains a properly executed resale certificate from the
professional photographer.

1

All charges by ABC, Inc. to the professional photographer that are made in conjunction
with, or as part of, the sale at wholesale of the prints, such as shipping, handling, and
credit card processing, are not subject to the sales and use tax.
Note: The photographer is liable for the sales tax on the gross proceeds of the sale (total
charge for the prints, shipping, handling, and other fees) to the customer, unless the sale
is otherwise exempt under the law.
Facts:
ABC, Inc. (“ABC”) operates a business that, among other things, sells cameras, film, and
other photographic equipments at retail, provides one hour photo processing services, and
provides professional quality photography print services. ABC sells tangible personal
property and photographic services to professional photographers.
ABC also provides web hosting that allows the linking of the Internet sites of
professional photographers with its own Internet site for the purposes of ordering
photographic prints. This system is known as X System (“X”).
X is available primarily to professional photographers who have retail licenses and who
provide resale certificates to ABC. ABC collects and remits sales tax on all other sales.
The following are the products and services provided to professional photographers:
ABC’s web hosting service through X includes online proofing, e-commerce shopping,
online storage, and direct access to ABC’s lab services for order fulfillment. ABC’s
service also allows the photographer to send digital files to the lab for uploading to X.
ABC offers several web hosting packages.
X allows the public to access the work of a photographer and order prints and other
products offered by the photographer. The ordering process through X works as follows:

1. The photographer uploads a photography database to his or her website hosted
   by ABC through X.
2. The photographer may have a separate website, but customers are redirected
   to the X hosted website when ordering.
3. A customer accesses a photographer’s website and select prints to be ordered
   by filling an online “shopping cart.”
4. Once the customer has completed the ordering process, the customer proceeds
   to the “checkout.”
5. The customer selects a payment method and shipping preference.

2

6. ABC makes the prints and ships the prints as directed.

7. ABC, through X, processes the credit card charge and collects the payment.
   ABC retains the 4% service fee (7% for products not handled by ABC), the
   print costs charged the photographer by ABC, and the shipping charges if the
   product is shipped by ABC. The remaining amount of the total proceeds is
   sent to the photographer. In other words, the receipts from the customer are
   distributed as follows:
   (a) Gross Proceeds plus Sales Tax
   (b) Less: Service Fee (4% or 7%) (This includes the fee charged by
   Verisign.)
   (c) Net Amount Received by ABC
   (d) Less: Print Costs charged the photographer by ABC
   (e) Less: Shipping Costs
   (f) Net Amount Sent to Photographer
   Through this ordering process, the photographer’s customer views only the
   photographer’s website. In other words, ABC is essentially an invisible layer between the
   photographer, the photographer’s customer and ABC’s lab. If ABC ships the ordered
   printed directly to the photographer’s customer, the shipping documents will not indicate
   that the package is mailed from ABC.
   Discussion:
   Code Section 12-36-910(A) imposes the sales tax and states:
   A sales tax, equal to [six] percent 1 of the gross proceeds of sales, is
   imposed upon every person engaged or continuing within this State in the
   business of selling tangible personal property at retail.
   Code Section 12-36-1310(A) imposes the use tax and states:
   A use tax is imposed on the storage, use, or other consumption in this
   State of tangible personal property purchased at retail for storage, use, or
   other consumption in this State, at the rate of [six] percent 2 of the sales
   price of the property, regardless of whether the retailer is or is not engaged
   in business in this State.
   1

Beginning June 1, 2007, the total state sales and use tax rate is 6%. Code Section 12-36-1110, which
increased the sales and use tax rate by 1% beginning June 1, 2007, states:
Beginning June 1, 2007, an additional sales, use, and casual excise tax equal to one
percent is imposed on amounts taxable pursuant to this chapter, except that this additional
one percent tax does not apply to amounts taxed pursuant to Section 12-36-920(A), the
tax on accommodations for transients, nor does this additional tax apply to items subject
to a maximum sales and use tax pursuant to Section 12-36-2110 nor to the sale of
unprepared food which may be lawfully purchased with United States Department of
Agriculture food coupons.
2

See footnote #1.

3

Code Section 12-36-60 defines the term “tangible personal property” and states:
“Tangible personal property” means personal property which may be seen,
weighed, measured, felt, touched, or which is in any other manner
perceptible to the senses. It also includes services and intangibles,
including communications, laundry and related services, furnishing of
accommodations and sales of electricity, the sale or use of which is subject
to tax under this chapter and does not include stocks, notes, bonds,
mortgages, or other evidences of debt. Tangible personal property does
not include the transmission of computer database information by a
cooperative service when the database information has been assembled by
and for the exclusive use of the members of the cooperative service.
Based on the above, in order for the sales or use tax to apply, there must be a retail sale of
tangible personal property.
Code Section 12-36-110, defines the terms “retail sale” and “sale at retail” to mean, in
part:
Sale at retail and retail sale mean all sales of tangible personal property
except those defined as wholesale sales. The quantity or sales price of
goods sold is immaterial in determining if a sale is at retail.
Code Section 12-36-120 defines the terms a “wholesale sale” and “sale at wholesale” to
mean, in part, the sale of
(1) tangible personal property to licensed retail merchants, jobbers,
dealers, or wholesalers for resale, and do not include sales to users or
consumers not for resale.
As such, when a photographer’s customer orders photographs from a photographer via
the photographer’s website that is hosted by ABC and ABC prepares the prints as
described in the facts, ABC is selling the prints at wholesale to the photographer who in
turn is selling the prints at retail to his customer 3 .
However, Code Section 12-36-950 states:
It is presumed that all gross proceeds are subject to the tax until the
contrary is established. The burden of proof that the sale of tangible
personal property is not a sale at retail is on the seller.

3

See SC Regulation 117-309.2 which states, in part, that “[p]hotographers … are primarily engaged in the
business of selling tangible personal property to their customers.” See also the last paragraph of Code
Section 12-36-70, which defines the terms “retailer” or “seller.” While this provision would allow the
Department to consider ABC the retailer for purposes of the transactions in question for the efficient
administration of the sales and use tax law, the Department will not exercise that authority in this case.

4

However, if the seller receives a resale certificate signed by the purchaser
stating that the property is purchased for resale, the liability for the sales
tax shifts from the seller to the purchaser.
The resale certificate must include the purchaser's name, address, retail
sales tax license number, and any other provisions or information
considered necessary by the department.
The department may require the seller to provide information it considers
necessary for the administration of this section.
Based on the above, sales of prints by ABC are presumed to be sales at retail subject to
the sales and use tax unless ABC can prove a sale is a wholesale sale or unless ABC
obtains a properly executed resale certificate from the photographer.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
December 14
, 2007
Columbia, South Carolina

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