Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 100.0037.500


100.0037.500 Transfer of Photographs into External Computer Harddrive.
A commercial photography studio (Studio) downloads digital photography from the studio's computer hard drive to an external computer hard drive supplied by the studio's client or by the client's agent. The Studio performs the transfer of the photography on its own premises or at another studio that is being rented for the production of the photography. When the digital transfer of the photographs is completed, the client or its agent removes and takes possession of the computer hard drive it supplied. The Studio does not transfer any tangible personal property containing the electronic photographic imagery, such as CD-ROMs, DVDs, or other electronic media or hard copies, to the client or its agent. Does such an electronic transfer of photography qualify as a nontaxable electronic transfer of artwork?

Under Regulation 1540(b)(2)(B), a transfer of artwork electronically is not considered a transfer in tangible form if:

". . . the file containing the electronic artwork is transferred through remote telecommunications (such as by modem or over the Internet), or if the file is loaded into the client's computer by the advertising agency or commercial artist, and the client does not obtain title to or possession of any tangible personal property, such as electronic media or hard copy."

In the above scenario, the photographs are transferred to an external computer hard drive that the client provides to the Studio. Once the photographs are transferred onto this external hard drive, the hard drive is returned to the client. An external hard drive is designed to store data and is not a computer. (Regulation 1502(b)(3).) An external hard drive is a form of storage media. (Regulation 1502(b)(13).) For purposes of Regulation 1540(b)(2)(B), a file is considered loaded into the client's computer when a person transfers the file directly into the permanent storage memory of the client's computer. Therefore, the above transfer would not be considered an electronic transfer under Regulation 1540(b)(2)(B). Instead, the transfer of the photography onto the external hard drive provided by the client or its agent would be considered taxable fabrication labor of the storage media. 7/21/04. (2005–2).