A photographer may contract with a third party to provide prints or image files to the customer. Two common arrangements are as follows:
- Third Party Host: The photographer delivers the finished digital image files to the third party. The third party hosts digital image files on their server for a specified period of time. The customer may download the images at any time during that period.
- Third Party Printer: The photographer delivers the image files (or negatives) to the third party printer. The printer in turn produces the specified number of prints and delivers these to the customer, or makes the prints available for pick up.
In both cases the taxability of the photographer’s income can vary according to the terms of the agreement between the photographer and the third party.
Example 5: After taking photographs, Acme Photography forwards them to a third party who then makes the photos available for download for the customer. Under the terms of the agreement, the third party is paid by Acme for this service. The third party does not charge the customer anything when the customer downloads the images. The customer is a consumer purchasing family photos. The photographer is making a retail sale of digital photos and must collect and remit sales tax on all charges to the customer. The photographer’s gross income is also subject to the Retailing B&O tax.
Example 6: Using the same facts as Example 6 above, except Acme’s customer is a business that will use the photos in an advertising campaign under a licensing agreement with Acme. Acme retains ownership of their intangible property, the photos. Acme’s gross income is subject to the Royalties B&O tax. Acme should not collect sales tax from their customer. See “Licensing of Photographs” in this guide for more detail on licensing transactions.
For scenarios involving third parties that are not addressed in this guide, the Department recommends that you request a binding tax ruling. See “Need Assistance?” in this guide below for instructions on requesting such a ruling.
Sourcing sales tax when photographs are fulfilled by third party
Sales are sourced to the location where the customer receives the photo if that location is known. Thus a photo received by a customer in Seattle would be sourced to Seattle (location code 1726), and taxed at the corresponding Seattle sales tax rate. See “Collecting Sales Tax – Local Tax Rates” in this guide for more information.