How did Texas tax a modeling agency's promotional package, agency-book listing fee, composite cards, and installment payments?

Plain-English summary

A modeling agency sold a promotional package combining a photo session, personnel, printed photographs, slides, a portfolio case and inserts, marketing selection, an agency-book listing, packaging, and postage. The Comptroller allowed the annual fee for inserting the model's picture in the National Agency Book to be excluded from tax only when separately stated.

The rest of the package charge was taxable because it related to producing and selling the client a tangible portfolio. A separate charge for 500 composite cards with photographs and typesetting was also a taxable sale of tangible personal property.

Clients paid through a plan before the photo session, and payments could be forfeited on cancellation. If the agency did not collect all sales tax at the start and did not identify part of each periodic payment as tax, it could report the tax when the final payment was made. The contract also needed to state that the price included sales tax or list the tax separately.

What this means for you

Separately stating the advertising-style annual listing fee mattered. Bundling it into the portfolio package would not satisfy the condition stated in the letter. The tangible portfolio and composite cards remained taxable despite the professional services used to create them.

Common questions

Was the annual National Agency Book listing fee taxable? It could be excluded when separately stated to the client.

Was the rest of the promotional package taxable? Yes. It was related to producing and selling the client a tangible portfolio.

Were composite cards taxable? Yes, as tangible personal property.

When could the agency report tax under its payment plan? At final payment if tax was not collected at inception and no part of the periodic payments was identified as sales tax.

Did the letter decide still-photography versus motion-picture services? No. That distinction appears in STAR's caption, not in the operative letter.

Citations and references

• The letter cites no statute or administrative rule.
• Its separately-stated condition applies specifically to the annual picture-insertion fee for the National Agency Book.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8705L0819A14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller May 15, 1987

Dear *****:

This is to confirm the information given to **** in our recent
telephone conversation concerning the taxability of various charges
included
in your contracts with clients.

The services you described and my response are outlined as follows.

PROMOTIONAL PACKAGE for $ **

A. Photo session with the following personnel

1. Professional commercial photographer
2. Professional commercial make-up artist
3. Professional commercial hair stylist
4. Photographer's assistant for props and sets
5. Commercial Marketing Expert "to determine products and
   characters for photo session"

B. The portfolio will include

1. 7 - 11" x 14" custom black and white prints
2. 4 - 11" x 14" custom color prints
3. Color slides
4. Portfolio case
5. 6 vinyl 11" x 14" photography inserts
6. Vinyl inserts to hold 40 color slides
7. Black and white proofs on contact sheets

C. Promotions

1. Picture insertion in National Agency Book for 1 year ($ ** annual
   fee)
2. Marketing Expert for photographic selection
3. Agency book, packaging and postage expense

Response: The $ ** annual fee for picture insertion in the "National
Agency Book" may be excluded from the sales tax as long as the charge is
separately stated to the client.

The remainder of the $ ** charge ($ ****) is related to the
production and sale to the client of tangible personal property (a
portfolio) and is taxable.

COMPOSITES for $ **

Composites will include:

1) 500 5in x 8in composite cards
2) 1 color picture placed on composites
3) 3 black and white pictures placed on composites
4) Typesetting

a) name
b) vital statistics
c) company name
d) company emblem
e) company phone numbers

PURPOSE OF COMPOSITES

Composites are a promotional tool designed to promote the model. They
are
business cards which are given to and kept by clients for future
bookings.

Response: The charge for composites is a taxable sale of tangible
personal property.

According to *** and your accountant, the client must pay the
total
amount due in his/her account prior to the photography session. Any
money
received will be forfeited if the client cancels or drops out of the
program
prior to completion of the payment plan.

Your contracts contain the following provision:

NOTE: To insure confirmation, all monies are to be received by
***** prior to receiving your shooting date.

No reimbursements will be made if the request exceeds 48 hours
after the initial monies have been received. Client must adhere to
the payment plan established at registration. Any money received
will be forfeited upon cancellation by the client.

If the total amount of sales tax due is not collected at the inception of
the
payment plan, or no part of the periodic payments are identified to the
model
as sales tax, then the sales tax may be reported at the time the final
payment is made. Also, you should include a statement that the price
includes sales tax or identify the sales tax as a separate item in the
contract.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
Julie Pesl
Tax Policy Section
Tax Administration Division