When Does Sales Tax Apply to Photographers in New Jersey?
For the past few months, I’ve been doing a lot of reading and research regarding tax laws and photography. Taking pictures and designing comp cards started out as a hobby, but our NJ photography studio has begun to pick up steam and it was time to transition to being a Real Business, so to speak.
One thing that still confuses the hell out of me, though, is sales tax.
Note: I am not an attorney, an accountant, or in any way your official legal tax advice. I write this in the spirit of sharing and helping those who are also researching the same questions. Your mileage may vary, and when in doubt contact the tax authorities (like I have, and from whom I’m awaiting some clarification).
Photographic Services Are Taxable. Simple, Right?
My initial thoughts on the topic were that photographic services were taxable. A long time ago, I had stumbled on some state document that suggested that. While doing some more research, I found that document again: NJ S&U-4.
This document, an official (if sometimes unhelpful) guide to New Jersey’s Sales & Use Tax lists many types of services and declares whether they are taxable or not. Web Site Design and Interior Design, for example, are exempt from sales and use tax. Printing services, on the other hand, are not. Interestingly, neither “Design” nor “Graphic Design” made the list, but anyway…
On the topic of photographers, it offers the eminently helpful statement:
Photographer’s Services … T
Umm, yeah, that’s about it. That says that photographer’s services are taxable, but there’s no further discussion of what exactly is a photographer’s service and what is not.
But Digital Photographs Are Not Taxable. Hmm…
To make things somewhat more confusing, however, there is one other mention of the word “photograph” in the document. Under the section on “Digital Property.” While things like digital music are explicitly taxed, this tax is…
not imposed on other types of digital property that are delivered electronically, such as digital photographs, digital magazines, etc.
So… how are a photographer’s services taxable, while the photographs themselves are not? Seeing as this statement appears in another section (that on digital property), it could be that it is taken somewhat out of context. Perhaps it doesn’t apply to professional photographers, but to other people (stock photography websites?) that specialize in selling photographs without producing them.
Professional Photographers & New Jersey Sales Tax
To make matters even more confusing (and seemingly contradictory), New Jersey has also published a “helpful” summary of tax rules relating to photographers – ANJ-2. If you search for this, note that there is a new revision issued in 2009 (the one I linked to), but an older revision (from 2000) is still floating around the Internet. They are slightly different.
Here, there is a section titled, “Electronic Transmission.” It reads:
If a photograph is either scanned, taken with a digital camera, or computer-generated and then transmitted solely by e-mail or other form of electronic transmission, the transaction is treated as the sale of intangible property, which is not subject to tax.
This would seem to suggest that, unless tangible property exchanges hands (a DVD of images, a physical proof, a photo book, etc), the images themselves are not taxable. That then begs the question: are the “photographic services” taxable? If someone hires me to shoot a portrait session and I deliver their proofs electronically, I have not sold them any tangible property and this seems to present a conundrum. The initial document states that services are taxable, while the new document states that the digital images are not.
Contact the NJ Division of Taxation
I hate bugging people to answer questions that have answers. I am more than willing to put in the time to research an issue, read all of the relevant material, and come to my own decision. But in this case… I haven’t got a clue what’s right, and what’s not.
And at the end of the day, I don’t want to be in an argument with a tax auditor and find out that he doesn’t agree with my interpretation of the New Jersey Sales and Use Tax. [Which, for the record, seems clear enough to me that if I bill someone for a portrait session / event and deliver nothing but an online gallery, the session/event itself should not be taxable. But, I can easily see how this would be unclear to someone in charge of generating as much revenue as possible for the state.]
So, I fired off an e-mail to the NJ Division of Taxation. I cited the relevant documents (as I did above), and I provided a few, clearly detailed scenarios. Hopefully, I can get an answer (in writing) that clarifies when I should and should not be collecting sales tax. If I receive a useful response, I’ll be sure to share it here… but again, do your own due diligence. I am not your attorney nor am I your accountant.
Tell us what do you think.