When you’re running a small business, ensuring you stay compliant with local tax laws is crucial. But in a photography business, taxes can get confusing.
Are you delivering a service or selling a product? And if you’re sending photos to clients digitally, do you have to pay taxes on shipping? What if you’re working with a client who lives in a state with sales tax, while you operate out of a state with no sales tax?
We’ll walk you through some of the nuances of tax law when it comes to the photography business. If you still have questions after reading this piece or want to be absolutely sure you’re complying with local tax laws, don’t hesitate to hire a tax professional.
What exactly is sales tax?
You buy a cup of coffee that costs $2.99. You hand over three dollars, and the barista gives you an uncomfortable look. You’re a few cents short. Why? You might have forgotten about the sales tax, a tax imposed by either the state or local government at the point of sale. The owner of the business collecting this tax must then pay this tax to the government at a specific time.
Income tax, on the other hand, is paid on the income you earn as a professional. If you’re a photographer, you’ll have to pay a certain percentage of your income as income tax; the amount will depend on the state where you live.
Do photographers have to collect sales tax?
It’s clear you have to pay income taxes as a photographer. But what about collecting sales tax? After all, photography is different from selling a product at a store. What is the “point of sale” for a photographer?
The answer isn’t exactly straightforward. If a client purchases photographs from you, then they have to pay sales tax on those photographs, assuming you live in one of the 45 states that collects sales tax. After all, buying photographs is an exchange of “tangible personal property.”
But what about sitting fees? If this service doesn’t result in photos being bought, this sitting fee likely isn’t subject to sales tax as no goods have changed hands.
What about shipping charges?
Assuming you print your photographs and ship them to your clients, you’ll need to see if shipping charges are taxable in your state. This mostly comes down to whether or not shipping charges are included in the total purchase price (which is taxed). If so, they’re technically taxable. This is the case in most states, though you’ll want to make sure you research this before including shipping costs in the full purchase order.
Sending images digitally cuts out the need for shipping — but digitally transferring photos can still be considered an exchange of tangible personal property. Again, you’ll have to assess the laws specific to your state when it comes to selling digital goods.
What does this all mean for you?
In short, you need to stay informed and compliant.
Freelance photographers who travel to another state for a project — to shoot a wedding, for instance — need to always be aware. Maybe the state where you shoot a wedding doesn’t collect sales tax, but the brick and mortar store where you develop photographs and meet with clients is located in a state that does collect sales tax. You’ll need to check with both states’ government websites. If you’re in a state that collects sales tax, and most of your business happens there, it’s safe to assume that you’ll have to collect sales tax on your transactions.
Don’t worry: Many photographers find questions of taxation confusing and not particularly exciting. The best thing you can do if you have questions is to reach out to a tax professional. As you get your business off the ground, they can give you the information you need to conduct business in a way that complies with local, state, and federal tax laws.