Collection of sales tax is one of those things that photographers should be charging but may not be charging correctly. This is because it can be hard to find information online, because each state approaches the issue differently and because as photographers we may (or may not) deal with things like prints, electronic image delivery, sitting fees, out of state clients and license and usage fees. It can be very confusing.
I’ve directly contacted the state of Maine in the past to ask questions about sales tax, and have had many discussions with other local photographers including Kathleen Kelly, a Scarborough-based commercial photographer who has gotten answers from the state. Recently I corresponded with a tax section manager, Peter, from Maine Revenue Services regarding my most oft-seen scenarios.
His responses revealed a few surprises. I’ll explain further, but must note that I’m not a lawyer or a tax professional. You should hire a good CPA to handle your business taxes and if you have further questions, contact the state directly.
First, some things I already knew: I don’t charge tax to my out-of-state clients, but I do to my in-state ones. Sometimes I don’t charge tax as a separate line-item to clients in-state. In these cases I’m still required to pay the state the appropriate state sales tax. Electronic file delivery is considered a tangible product, just like a CD of images or a box of prints. It’s taxable.
If you charge usage or license fees, however, it gets interesting. If your license is unlimited in terms of time, then it’s subject to tax. If your license is restricted to ten years or less, it’s not subject to state tax. This is a recent decision on the part of the state of Maine to treat photography licensing like software licensing. Note that they use a length of time (10 years), not type of use (brochures, web, etc) to define the restriction.
A couple of things to make sure of: Make sure to apply sales tax to line items in your invoices. Things like postage using common carriers (USPS, FedEx, UPS) are not taxable. Reimbursed expenses aren’t either.
As always, consult a professional when deciding how to approach state sales tax, and actively seek answers that pertain to your specific situation. remember that just because you didn’t know the right way to go doesn’t make you immune from being held responsible by the state later.