Update: An Answer About Photographers, New Jersey, and Sales Tax
Well, it took a while, but the New Jersey Department of Revenue finally got back to me. I e-mailed them back in April to get some clarification regarding when photographers should charge sales tax (see previous post here).
My general problem was this. The publication on sales and use tax listed photographic services as a taxable service. Yet another publication specifically stated that digital photographers were not taxable. So, if I do a portrait session or cover an event and deliver all of the files electronically, should I be charging sales tax?
Here, in it’s entirety, is the response I received:
Although the S&U-4 lists Photographic Services as taxable, in reality, photographers are not treated as sellers of a service but rather as sellers of property. Thus, if the pictures are not taxable, none of your charges related to those pictures are taxable.
Digital photographs that are delivered electronically are not subject to sales tax. However, if the photographs are sent electronically and your customer then orders physical product (i.e. prints), this would be a separate sale and subject to sales tax.
Thank you for contacting the Division of Taxation.
To me, this clarifies things fairly well.
If I am offering my services and delivering all of the files electronically, then the services are tax exempt. Any subsequent sales involving physical products would be taxable.
For example, let’s say I did a portrait session. On the sales slip, the charge was $100 for a one hour portrait session, with 12 to 24 edits delivered electronically. This would not be taxed. After reviewing the proofs, the client ordered a print package for $100. This second sale would be taxable and incur $7 in sales and use tax.
Does this matter? Well, that depends. For portrait sessions, this doesn’t provide a big cost savings to your client. However, think of weddings. If you’re spending $1000+, that’s $70+ in sales tax. If you don’t mind a bit of transparency in your pricing, you can disaggregate your fee from the cost of the products and save your client some money.
For example, let’s say you had a $2,000 wedding package that included an album and a predetermined number of prints. Instead of making this one package, you could write up an initial sale for $1,000, which included the event coverage, editing, and delivery of proofs. A second sale could enumerate the other purchases (book, disc with proofs, prints), either as a package for $1,000 or individually.
The people that would benefit most from this, though, are the clients and photographers who aren’t dealing in albums, prints, etc. More and more clients are looking for nothing but proofs, and they’ll either assemble their own album or print their own proofs, for better or worse. If you’re providing this service, why not cut out the sales tax and save your clients some money? The only taxable part of the transaction would be a disc with proofs on it, so split it up. Charge for your services tax free, and charge a nominal fee separately if the client wishes to order a disc.
While I don’t have anything against paying taxes, per se… I also don’t feel the need to pay any more than I have to. Small business owners already pay a ton of taxes. If you’re a sole proprietor, you’re not only paying income tax but you’re coughing up for self employment taxes to cover medicaid and social security. If you’re doing fairly well for yourself, this could put your tax rate on profits at or above 40% (25% federal income tax, 15% self employment tax, plus state income tax).
Disclaimer: By the way, let me be clear. I am not a tax professional, an account, a lawyer, or in any way shape or form your tax advisor. I am a photographer struggling to understand the taxes and laws surrounding our profession, and for the good of the order I’m sharing what I’ve learned. Follow this advice at your own risk, and if you have questions or concerns I advise you to contact the NJ Division of Taxation yourself. They may take a while to get back to you, but in my case… they did.
Filed Under: Random Thoughts
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