DEPARTMENT OF STATE REVENUE
Information Bulletin #34
Sales Tax
August 2023
Effective Date: Upon Publication
(Replaces Bulletin #34, dated December 2019)
SUBJECT: Sales Tax Application to Photography and Video Services
DISCLAIMER: Information bulletins are intended to provide nontechnical assistance to the general public. Every attempt is made to provide information that is consistent with the appropriate statutes, rules, and court decisions. Any information that is not consistent with the law, regulations, or court decisions is not binding on either the department or the taxpayer. Therefore, the information provided herein should serve only as a foundation for further investigation and study of the current law and procedures related to the subject matter covered herein.
Apart from technical, nonsubstantive changes, this bulletin has been revised to incorporate information on bundled transactions.
In general, photography, videos, and related services are not retail transactions subject to Indiana sales or use tax in Indiana. However, when a product is transferred as a part of photography or video services, the property, including any labor charges necessary to create the product, may be subject to sales tax depending on the nature of the transaction, the value attributed to both the service and the property transferred, and whether the property transferred was in an electronic format or not.
A "photograph" is a still image that is printed or captured on some form of physical medium including, but not limited to, film, paper, slides, negatives, computer hard drive, CD, DVD, removable disk, or flash memory device.
"Photography" refers to the act of creating a photograph.
A "video" is the recording of a sequence of related still images that, when shown in succession, impart an impression of motion, together with accompanying sounds, if any, and that are captured on some form of physical medium including, but not limited to, film, computer hard drive, DVD, removable disk, or flash memory device.
"Video service" refers to the act of creating a video.
"Specified digital products" means electronically transferred digital audio works, digital audiovisual works, or digital books.
"Digital audio works" means works that result from the fixation of a series of musical, spoken, or other sounds, including ringtones.
"Digital audiovisual works" means a series of related images that, when shown in succession, impart an impression of motion, together with accompanying sounds, if any.
"Transferred electronically" means obtained by a purchaser by means other than tangible storage media.
"Tangible personal property" means personal property that can be seen, weighed, measured, felt, or touched or that is in any other manner perceptible to the senses. The term includes electricity, water, gas, steam, and prewritten computer software.
APPLICATION OF SALES TAX TO SALES OF PHOTOGRAPHS, VIDEOS, AND RELATED PRODUCTS
In general, Indiana sales tax is imposed on all retail transactions made in Indiana. A retail transaction occurs when a person engages in selling at retail. A person engages in selling at retail when, in the ordinary course of his regularly conducted trade or business, he acquires tangible personal property for the purpose of resale and transfers that property to another person for consideration. When a product is transferred as part of photography or video services, the product, including any labor charges necessary to create it, may be subject to sales tax depending on the nature of the transaction and the value attributed to both the service and the property transferred.
Photography and Video Services
Bundled transactions are considered taxable retail transactions. A bundled transaction is a retail sale of two or more products that are distinct, identifiable, and sold for one, nonitemized price. In the context of photography or video services, such as those associated with a birthday, graduation, or wedding event, the service may be included with the provision of photographs or a video, which would be considered tangible personal property, making the transaction for the photography or video services a bundled transaction.
However, there is an exception to the bundled transaction rule that may apply. If a transaction includes both taxable and nontaxable products in which the sales price of the taxable products does not exceed 10% (i.e., de minimis or incidental) of the total purchase price or the total sales price of the bundled products, then it is not considered a bundled transaction, and therefore the transaction would not be subject to sales tax. In the context of photography or video services, if the charge for the photographs or videos (or other tangible personal property) does not exceed 10% of the total service or labor charges, it is not a bundled transaction and, accordingly, sales tax does not apply to the transaction.
Example #1: Photographer charges Customer $1,000 to photograph and film Customer's wedding. Photographer's total charge is comprised of $900 for the work of photographing and filming the wedding and $100 for the photographs and video transferred to Customer. The transaction is not subject to sales tax, provided that Photographer pays sales or use tax on the tangible personal property that is transferred.
For guidance on bundled transactions, please refer to Sales Tax Information Bulletin #94, available online at in.gov/dor/legal-resources/tax-library/information-bulletins/sales-tax-information-bulletins/.
Products Transferred Electronically
In pertinent part, sales and use tax is imposed on products transferred electronically only if the products meet the definition of specified digital products. Products transferred electronically mean products that are obtained by a purchaser by means other than tangible storage media. Specified digital products currently include only digital audio works (e.g., songs, spoken-word recordings, or ringtones), digital audiovisual works (e.g., movies), and digital books.
In the context of photography or video services, photos are not included in the definition of specified digital products, and therefore charges for photos transferred to a customer electronically (e.g., via the Internet or e-mail) are not subject to sales or use tax. However, videos are considered digital audiovisual works, so they are included in the definition of specified digital products. Accordingly, charges for videos are subject to sales tax even when transferred electronically.
Example #2: Photographer digitizes Customer's photographs and places them on a flash drive. Charges for the photographs are subject to sales tax because the photographs are in tangible form.
Example #3: Photographer digitizes Customer's photographs and sends them to Customer via e-mail. Charges for the photographs are not subject to sales tax because the photographs are transferred electronically but do not represent taxable specified digital products.
Example #4: Photographer digitizes Customer's videos and sends them to Customer via e-mail. Charges for the videos are subject to sales tax because the videos represent taxable specified digital products.
For more information related to the application of sales and use tax to products transferred electronically, please refer to Sales Tax Information Bulletin #93, available online atin.gov/dor/legal-resources/tax-library/information-bulletins/sales-tax-information-bulletins/.
Other Exempt Transactions
Some transactions ordinarily subject to sales and use tax are exempt based on the nature of the transaction or the identity of the purchaser. For instance, purchases for resale are exempt in Indiana. Additionally, an exemption is available from sales and use tax for certain purchases made by federal, state, and local government entities, as well as nonprofit entities. To claim an available exemption, the exempt entity must present the retail merchant with a Form ST-105, available online at in.gov/dor/tax-forms/sales-tax-forms/.
Taxable Sales of Tangible Personal Property
Despite operating as a service provider for some transactions, photographers also can engage in retail transactions. For instance, if charges for tangible personal property transferred to a customer exceed 10% of the total service or labor charge for a transaction, then the transaction is a retail transaction and any tangible personal property transferred is subject to sales tax. Please note that if charges for nontaxable services are not segregated from charges for taxable tangible personal property, the entire invoiced amount is subject to sales tax as a bundled transaction as explained above.
Example #5: Photographer charges Customer $1,000 to photograph and film Customer's wedding. The invoice indicates that Photographer's total charge is comprised of $850 for the work of photographing and filming the wedding and $150 for a wedding album, photographs, and video transferred to Customer. The charge for the wedding album, photographs, and video transferred to Customer ($150) is subject to sales tax.
Additionally, when tangible personal property is sold as the true object of a transaction and not merely consumed as a necessary incident to a service, the transaction is subject to sales tax. Included in the amount subject to sales tax are charges for fabrication, which include labor to create or produce a new product, such as photographs, prints, slides, or proofs. Common examples of fabrication labor subject to sales tax include, but are not limited to, the following:
• Mounting photographs or slides
• Matting and framing services
• Matte or luster spraying photos
• Making enlargement from prints, slides, or negatives
• Printing on customer-furnished paper
• Coloring or tinting new photos
• Creating slides or prints from digital images
• Digitizing images and placing them on digital storage media, such as CDs, diskettes, flash memory devices, or DVDs
• Scanning prints or slides and saving them on digital storage media
• Making prints or slides from digital images provided by customers
• Converting a customer's film or videotape to CD or DVD
• Editing (including cropping, retouching, otherwise modifying) a digital image as part of transferring the image to a storage medium
• Renting a camera, computer, or other equipment
• Renting or constructing props
• Shipping and delivery charges
PURCHASES OF A MERCHANT ENGAGED IN PHOTOGRAPHY AND VIDEO SERVICES
To the extent that a retail merchant directly uses machinery, tools, and equipment to produce, manufacture, fabricate, assemble, process, or finish other tangible personal property, transactions involving the purchase of such items are exempt from sales tax. In the context of photography or video services, the exemption does not apply to purchases of items used as part of a nontaxable service. If an item is used in both a taxable and nontaxable manner, sales tax will apply to the purchase of the item in the same proportion that the item is used in a nontaxable manner.
Example #6: Photographer purchases a camera for $500 used exclusively to photograph weddings. Photographer does not charge sales tax on his photos of weddings because charges for the tangible personal property, i.e., the photographs, transferred to his customers never exceed 10% of the total service or labor charges. Photographer must pay sales tax on the full amount of the camera when purchased.
Example #7: Photographer purchases a computer for $1,000 and uses it 50% of the time to process wedding photographs as part of his wedding service package and 50% of the time to digitize its customer's images and place them on CDs. Photographer does not charge sales tax on his photos of weddings because charges for the tangible personal property, i.e., the photographs, transferred to his customers never exceed 10% of the total service or labor charges. Photographer must pay sales tax on the full amount of the computer when purchased but may file a subsequent claim for refund with the department for 50% of the total amount paid for the computer.
For more information related to sales or purchases made by merchants engaged in photography or video services, please contact the Tax Policy Division at taxpolicy@dor.in.gov.
_________________________
Posted: 09/13/2023 by Legislative Services Agency
DIN: 20230913-IR-045230636NRA
Composed: May 31,2024 1:06:07AM EDT
A
PDF version of this document.
