Is a charge for licensing a copyrighted photograph or image for publication subject to Texas sales tax?

Subject

Licensing Fee for Copyrighted Photographs/Images Is Not Taxable, But Film Developing Is

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9310L1267C04

Plain-English Summary

The taxpayer in this letter runs an image management service for photographers of architecture and designers, serving clients both in Texas and out of state. The business offers two kinds of services: a marketing service that arranges licenses for images and architectural photographs (for submission to editorial magazines, future books, consultants, and product companies), and a photographic lab service for photographers, architectural photographers, architects, builders, interior designers, and others in the design industry.

The Comptroller's response addresses both services separately. A charge for licensing photographic images for publication is not subject to sales tax. By contrast, charges for developing film are subject to sales tax. There is one exception to the film-developing tax: the photographer may give the lab a resale certificate in lieu of paying tax if the photographer is having the film developed in order to sell the resulting photographs and negatives.

The letter also addresses out-of-state shipments: the company is not required to collect Texas tax on photographs it develops and ships to points outside Texas, but it must keep records documenting which sales were shipped out-of-state. The Comptroller enclosed Rule 3.285, "Resale Certificates," and Rule 3.286, "Sellers and Purchasers' Responsibilities," for reference, and noted that the opinion is based on the facts submitted — other, similar facts might yield a different result.

What This Means For You

If you license photographic images or artwork for publication: Per this letter, the licensing fee itself is not subject to Texas sales tax, regardless of whether the client is in-state or out-of-state.

If you operate a photo lab or offer film-developing services: Charges for developing film are taxable. If your customer (e.g., a photographer) is having film developed for the purpose of reselling the photographs and negatives, that customer can give you a resale certificate instead of paying tax — but you should keep that certificate on file to support not collecting tax on that transaction.

If you ship developed photographs out of Texas: You are not required to collect Texas tax on photographs developed and shipped to destinations outside Texas, but the letter is clear that you must keep records showing which sales were shipped out-of-state, in case that treatment is ever questioned.

Q&A

Q: Is a fee charged for licensing a photographic image for publication taxable in Texas?
A: No. The letter states directly: "A charge for licensing photographic images for publication is not subject to sales tax."

Q: Are charges for developing film subject to Texas sales tax?
A: Yes. The letter states: "Charges for developing film are subject to sales tax." However, a resale certificate can be used in lieu of tax if the photographer is having the film developed to sell the photographs and negatives.

Q: How can a photographer avoid paying tax on film-developing charges?
A: According to the letter, "the photographer may issue you a resale certificate in lieu of tax if he or she is having the film developed to sell the photographs and negatives."

Q: Does the company have to collect Texas sales tax on photographs shipped out of state?
A: No. The letter states the company is "not required to collect Texas tax on photographs you develop and ship to points outside Texas." However, it "must keep records to show what sales were shipped out-of-state."

Q: What Comptroller rules were referenced in this letter?
A: The letter references Rule 3.285, "Resale Certificates," and Rule 3.286, "Sellers and Purchasers Responsibilities," which were enclosed for the taxpayer's reference.

Original ruling text

October 27, 1993

Dear *****:

Thank you for your recent letter which is restated in part with responses
below.

** , Inc. is an image management service for photographers of
architecture and designers in the state of Texas, as well as, out-of-state.

The following services are offered:

Marketing - ** is in the business of arranging for the license
of images and architectural photographers. Areas for submittals include
editorial magazines, future books, consultants, and product companies.

Lab service - Also offered is a photographic lab service for photographers,
architectural photographers, architects, builders, interior designers, and
anyone in the design industry in the state of Texas and out-of-state.

Response: A charge for licensing photographic images for publication is
not subject to sales tax. Charges for developing film are subject to sales tax.
However, the photographer may issue you a resale certificate in lieu of tax if
he or she is having the film developed to sell the photographs and negatives.
You are not required to collect Texas tax on photographs you develop and ship
to points outside Texas. However, you must keep records to show what sales were
shipped out-of-state.

I am enclosing Rule 3.285, "Resale Certificates" and Rule 3.286, "Sellers and
Purchasers Responsibilities" for your reference.

This opinion is rendered based on the facts you submitted. Other facts, though
similar, may yield different results.

If you have questions or need more information, please call or write.
You may reach me by calling toll free, (800) 531-5441 (ext. 34680). My direct
line number is (512) 463-4680. The number for FAX transmissions is (512)
475-0900. You may write to me in care of Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9308197L.3 and/or 9308197L