Does a photographer owe Texas sales tax on a fee charged for licensing the use of a copyrighted photograph, versus on photographs delivered to a Texas advertising agency for an ad?

Plain-English summary

A Texas photographer wrote to the Comptroller's Tax Policy Division asking two questions: (1) whether licensing the use of an existing transparency for print advertising, while retaining the copyright, is subject to sales tax, and (2) whether delivering photographs shot for a Texas advertising agency's ad is subject to sales tax.

On the first question, the Comptroller confirmed that a charge for licensing photographic images for publication is not subject to sales tax, and more broadly that a fee charged for the right to use a copyrighted image or illustration (including copyrighted transparencies) is not taxable to the customer. The response also referenced an earlier letter (ref. #9310L1267C04) involving an image management service for architectural photographers and designers, which had reached the same conclusion. That earlier letter separately noted that charges for developing film are subject to sales tax, though a photographer may accept a resale certificate in lieu of tax if the film is being developed to sell the photographs and negatives, and that no Texas tax is required on photographs developed and shipped to points outside Texas (as long as records are kept showing what was shipped out of state).

On the second question, the answer was different: yes, Texas sales tax is due when a photographer is hired by a Texas advertising agency to shoot photographs and delivers those images for use to the agency in Texas. That is treated as a sale of tangible personal property (the photographs themselves), not a licensing arrangement. The advertising agency may issue a resale certificate in lieu of tax if it is incorporating the photographs into finished art or acting as a seller of the photographs to its own client.

What this means for you

Photographers who license the use of images

If you retain the copyright to a photograph, illustration, or transparency and simply charge a fee for the right to use it (for example, for a limited time in a periodical), that licensing fee is not subject to Texas sales tax. This is true even if your business is organized somewhat differently from the specific facts in this letter.

Photographers hired to shoot and deliver photographs

If you are hired to shoot photographs and you deliver the actual photographs to a Texas client (such as an advertising agency) for their use, that is treated as a sale of tangible personal property, and you must charge Texas sales tax on your invoice — even if you retain the copyright and consider your service to be "licensing" the specific use. The dividing line in this letter is whether you are handing over physical/deliverable images versus only granting a right to use images you already provided.

Advertising agencies and other business buyers of photography

If you buy photographs from a photographer and you are incorporating them into finished art, or you are reselling them to your own client, you can issue a resale certificate to the photographer in lieu of paying tax at that point in the transaction.

Photo labs and image management services

Charges for developing film are subject to sales tax. However, if you are having film developed in order to sell the resulting photographs and negatives, you may give the lab a resale certificate instead of paying tax on the developing charge. You are not required to collect Texas tax on photographs you develop and ship to points outside Texas, but you must keep records showing what was shipped out of state.

Common questions

Q: Is a fee for licensing the use of a copyrighted photograph subject to Texas sales tax?
A: No. A charge for licensing photographic images for publication, or for the right to use a copyrighted image, illustration, or transparency, is not subject to sales tax.

Q: I was hired to shoot photos for a Texas advertising agency's ad and I deliver the images to them in Texas — do I charge sales tax?
A: Yes. This letter treats that as a sale of tangible personal property (the photographs), so Texas sales tax is due, unless the agency provides a resale certificate because it is incorporating the photos into finished art or reselling them to its client.

Q: Are film developing charges taxable?
A: Yes, charges for developing film are subject to sales tax. A photographer may accept a resale certificate in lieu of tax if the film is being developed to sell the resulting photographs and negatives.

Q: Do I owe Texas tax on photographs I develop and ship out of state?
A: No, you are not required to collect Texas tax on photographs you develop and ship to points outside Texas, but you must keep records showing what sales were shipped out of state.

Q: Can I rely on this letter for my own business?
A: This opinion is rendered based on the specific facts submitted by the requesting photographer; the letter itself notes that other facts, though similar, may yield different results.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9510527L

Original ruling text

October 5, 1995

Dear ***

In response to your request, I have included a portion of the letter from which
Mr. Parnell quoted. The company in this correspondence was an image management
service for photographers of architecture and designers in and out of Texas.
The following services were offered:

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

Lab service - 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.

The response provided is also restated below:

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.

If your company is providing the same services (perhaps to different
industries), you may also follow this response. However, the fee you charge for
the right to use a copyrighted image or illustration (including copy-righted
transparencies) is not taxable to your customers, even if your activities are
somewhat different.

In your second question you asked, "If I am hired by a Texas advertising agency
to shoot photographs that will be used for an ad, and I deliver the images for
use to the advertising agency in Texas, do I charge sales tax on my invoice?"

Response: Yes, Texas sales tax is due. This is a sale of tangible personal
property (photographs) to the advertising agency. The advertising agency may
issue a resale certificate in lieu of the tax to you, if they are incorporating
the photographs into finished art or if they are acting as a seller to their
client.

This opinion is rendered based on the facts you submitted. Other facts, though
similar, may yield different results. You may also write to Tax Policy Division,
Comptroller of Public Accounts.

Sincerely,
Tax Policy Division

September 29, 1995

Att.: Tax Policy/Sales Tax Policy
Controller Of Public Accounts
P.O. Box 13528
Austin, TX 78711

Dear Controller:

I am writing to request, in writing, clarification of a sales tax situation for
a photographer in Texas. David Parnell in the state's sales tax office quoted
ref. #9310L1267C04 from a letter regarding photography: "A charge for the
licensing of photographic images for publication is not subject to sales tax."
I would like to get this in writing.

Specifically, I am a photographer licensing the use of an existing transparency
for print advertising in periodicals over a limited period of time. I retain
the copyright to the picture. As I understand the reference above, I would not
charge sales tax when I bill my Texas client. Is that correct?

Also, I have another question: If I am hired by a Texas advertising agency to
shoot photographs that will be used for an ad, and I deliver the images for use
to the advertising agency in Texas, do I charge sales tax on my invoice? Again,
I retain the copyright to the images and am only licensing the specific use of
the photographs for a limited period of time in a limited venue.

Please respond in writing.

Sincerely,