The New York State Department of Taxation and Finance recently released an Advisory Opinion regarding the taxability of the temporary transfer of photographs. In this case, the seller is a photographer who works on a commission basis to take pictures that the client asks for. He then gives the client either a physical copy of the images or sends digital files. After the client uses the images for the contracted purpose, the images are then sent back to the photographer within one year of the original transfer. The client is only contracted to use the images for a specific purpose set forth in the initial contract and does not retain unlimited ownership and usage rights. If the client wants to use the images for a different purpose than the original contract allows for, they pay the photographer a separate fee for that use.

Due to the above facts, the temporary transfer of photographs is deemed non-taxable for either physical or digital versions of said photographs. That decision hinges on two main facts of the case: (1) the temporary nature of the transfer, and (2) the fee structure.

Regarding the first fact, the transfer is considered temporary, because the contract states that “the original photographs must be returned unaltered within one year from the date the client receives the original photographs.” Despite the fact that the client may then alter copies of the images, they must return the original, unaltered photographs by the end of the year.

As for the second fact, the fee structure was deemed to be “in the nature of a royalty,” because the photographer is paid a new fee each time the client wants to use their reproductions of the images for a purpose not laid out in the original contract. Essentially, instead of a lump sum (or installment) payment for all possible uses of the images, the client pays royalties for each new use, because the photographer retains the copyright to the images.

It is important to note, however, that in cases where the client retains the rights to the photographs or images, the results would be different. If the client receives physical negatives or prints of the photos, or if the photos are delivered via thumb drive or CD – that would be considered a sale of tangible personal property and would be taxable. If the photos are sent via purely digital means (eg: over email), then that is not a sale of tangible personal property and would not be subject to sales tax.

If you are unsure about the taxability of the transfer of photographs, reach out to the EFPR Group SALT team so we can help you.