A few weeks ago the Alabama DOR issued a ruling pertaining to a case that involved a wedding photographer. I have written many times about how the close connection between the services a wedding photographer provides and the taxable tangible personal property that is produced due to those services — creates an obligation for the photographer to collect sales tax on the entire amount paid for wedding photography services.
In plain english — if you charge $3500 for wedding photography services and provide a disk or thumb drive of images to a client, or a wedding album, or canvas wraps, etc. — that entire $3500 is subject to sales tax. This is the way these transactions are treated in MANY states, but still photographers can’t seem to get it right. And what’s even worse, the photographers’ CPAs can’t even seem to get it right half of the time. Well, here is a ruling in Alabama that nicely lays out how many states approach the application of sales tax to the business of wedding photography. But again remember, this ruling is ONLY for the state of Alabama, each state has it’s own sales tax laws and regulations.
The case is Jaclyn L. Robinson d/b/a/ Robinson Studio & Design vs. State Dep’t of Rev., Admin Law Div., Dkt. No. S. 13-807, issued September 8, 2014. Bradley Arant Boult and Cummings LLP provide a great synopsis on their website HERE.
I think what struck me most about this case is the statement the wedding photographer involved made — she said most wedding photographers doing business in Alabama are applying sales tax to their transactions just as she was, improperly. This too is the case in many states. The tax guidance for wedding photographers may be non-existent and the department of revenue itself may not even have a clear idea as to how a particular transaction should be taxed. I suggest that every photographer out there contact their DOR with a formal letter ruling request, laying out their particular transactions, and asking for taxability determinations. This can save your butt big time, and it forces your department of revenue to look at the gray areas and provide business owners with some clarity.
If you have failed to pay sales tax when you should have, check to see if your state has a voluntary disclosure program. Such programs may allow you to come forward anonymously and possibly reduce the amount of money you owe the Department of Revenue or Tax Commission. These programs provide incentive for doing business the legal way. If you own a photography business, you need to understand sales and use tax. No excuses….