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Video production businesses typically provide a variety of services, such as production services of motion picture or videography (you can see definitions at the end of this page).
What taxes do I owe on edited master copies that I produce?
You owe business and occupation (B&O) tax under the Service and Other Activities classification if you are a videographer hired to prepare a one-of-a-kind master copy. This copy would include edits, dubs, titles, or a combination of the event recording with other video material, so that you essentially create an original work.
You would not owe retailing B&O or retail sales tax. That’s because the law considers this work a professional service that you perform primarily through human effort. The physical copy of the work (master copy) is merely tangible evidence of the service you provided.
Examples may include:
- training films
- television commercials
- other similar types of video production
Although you can electronically transfer a master copy to the customer, the master copy is not considered a digital good that otherwise would be subject to retailing B&O and retail sales tax.
What taxes do I owe when I sell the master copy?
When you, the videographer, sell the ownership of an edited master copy, you owe B&O tax on the selling price under the Service and Other classification.
When you sell the ownership of an un-edited master copy, you owe B&O tax on the selling price under the Retailing classification and retail sales tax on your return.
What taxes do I owe when I sell the rights to the master copy?
You owe B&O tax on charges for granting the mere right to use a master copy.You need to record this under the Royalty classification on your return (WAC 458-20-19403).
What if I sell copies of the master file?
You owe B&O tax under the Retailing classification and retail sales tax on what you charge for copies (tangible medium and digital files) of the master. This includes both edited and un-edited copies. You must collect retail sales tax on the gross selling price (video, delivery, insurance, etc.) based on where you deliver the product. If you deliver the item out of state, you may take an interstate and foreign sales deduction for both the B&O tax and retail sales tax.
What if I’m duplicating the file?
When you duplicate the master copy, that is a manufacturing activity, as long as you perform the activity in Washington. The manufacturing B&O tax is also due on the gross selling price. You may apply a multiple activities tax credit (MATC form) to the lesser of the B&O amounts. You can do this by completing Schedule C when you file your tax return.
Digital goods
Unedited recordings transferred electronically are considered digital goods that are subject to B&O tax under the Retailing classification and subject to retail sales tax. When the digital good is used for a business purpose, a retail sales tax exemption is provided under RCW 82.08.0208(3). In order to claim the retail sales tax exemption, the seller must obtain a Digital Products and Remote Access Software Exemption Certificate from their customer.
Reseller permit
Your business doesn't have to pay retail sales tax when you purchase blank cassettes, tapes, CDs, DVDs, and similar media that you use to produce duplicate copies for sale when you provide a copy of your reseller permit to the vendor.
How do I tax additional videography services
You may provide additional services, such as editing, dubbing, or adding titles, for other production companies. These activities are consistent with producing an original one-of-a-kind master copy. You owe B&O tax under the Service and Other Activities classification on income you get from providing such production services. You do not have to charge retail sales tax on this income.
Do I owe tax when I rent video production equipment?
You can take a retail sales tax exemption when you rent video production equipment and vehicles that you use solely for production activities (RCW 82.08.0315). However, you cannot take this exemption if you purchase the video production equipment.
You can take a use tax exemption when you use video production equipment that you acquired in another state and that you use in motion picture or video production business (RCW 82.12.0315). However, you must have acquisitioned the out-of-state equipment more than 90 days before it entered Washington.
Video production equipment include:
Grip and lighting equipment
- cameras
- camera mounts including tripods
- jib arms
- steadicams
- other camera mounts, cranes, dollies, generators, helicopter mounts, helicopters rented for motion picture or video production
- walkie talkies
- vans
- trucks, and other vehicles specifically equipped for motion picture or video production or used solely for production activities
- wardrobe and makeup trailers
- special effects and stunt equipment
- video assists
- videotape recorders
- cables and connectors
- telepromoters [teleprompters]
- sound recording equipment and
- editorial equipment.
The exemption also extends to the rental car tax.
None of these exemptions apply if your business is engaged, to any extent, in the production of erotic material (RCW 9.68.050.)
For more information, see our Special Notice on Exemptions for Motion Picture and Video Production Companies and the Buyers’ Retail Sales Tax Exemption Certificate.
Topics and definitions
Digital goods are unedited recordings transferred electronically. These are subject to B&O tax under the Retailing classification and subject to retail sales tax. When you use the digital good for a business purpose, you can claim a retail sales tax exemption (RCW 82.08.02087). In order to claim this exemption, you (the seller) must obtain a Digital Products and Remote Access Software Exemption Certificate from your customer.
"Production services" means motion picture and video processing, printing, editing, duplicating, animation, graphics, special effects, negative cutting, conversions to other formats or media, stock footage, sound mixing, re-recording, sound sweetening, sound looping, sound effects, and automatic dialog replacement.
"Motion picture or video production business" means a person engaged in the production of motion pictures and videotapes for exhibition, sale, or for broadcast by a person other than the person producing the master copy of a video production.
