Photographs can be made from film (negative or positive transparencies) or from digital or electronic files, and sold as prints. In Texas, sales of photographs provided to customers as physical prints or as a digital or electronic image are subject to tax. All expenses directly related to the production and sale of photographs and invoiced to the customer are also subject to tax. This includes the labor charge associated with a photo or videography session, such as the sale, processing, or remodeling of tangible personal property. In Texas and many other places, you have to charge sales tax for your services.
This applies to photographers who charge a flat rate for their services and deliver all usable images to the client. The sales tax rate is 8.25%, including local and state taxes. Digital products that are sold for permanent or “less than permanent” use are also subject to tax. This includes digital audiovisual works such as movies, audio works such as music and ringtones, and digital books. Below is a list of states that generally tax the sale and use of digital products, followed by a list of states that generally exempt them.
Digital goods are considered to be included in that definition by Arizona DOR and are taxable in Arizona as tangible personal property. To adopt digital product taxation, states must define digital products and ultimately make some basic decisions about taxation. When Frank Sinatra sang “My Way”, he could never have imagined the ways in which his song could be saved, delivered and sold in the future. This includes electronically delivered digital products, such as software, downloaded music, ringtones, and reading materials that are tax-exempt in Virginia. The sale of a digital copy of a publication is subject to tax, provided that the publication can be downloaded to the subscriber's electronic device. Some don't tax digital products because they're considered intangible, while others consider them tangible because they can be seen if they're not preserved.
It's important for photographers and other service providers to understand the rules regarding digital product taxation in their state.