Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 100.1100


100.1100 License to Reproduce Photographs Transferred on Disk to Client. A photographer contracted with a company to photograph the company's staff. The photographs will be used on the company's website, as well as for public relations and marketing materials. The photographs were shot with a digital camera and the photographer downloaded them into the company's computer at the end of each day. In addition, the photographer burned some of the photographs into CDs for the company. The parties signed a written contract. The photographer itemized the various costs charged to the company on the project invoices, i.e., licensing fees, digital charges, rentals, travel, etc.

Pursuant to Regulation 1540, the transfer of photographs in tangible form to the customer is a sale. However, when the photographer downloads the photographs directly into the computer of the customer and the customer does not obtain title to or possession of any tangible personal property, such as electronic media or hard copy, this constitutes an intangible transfer of the photographs. Tax does not apply to the charges for this type of transfer. The transfer to the customer of images on a disk is a transfer of tangible personal property and the charge for the images on a disk is taxable.

If there is a transfer of tangible personal property in connection with a given project, the photographer must determine whether all or only a portion of the invoice is taxable. If the sale of the photographs is pursuant to a technology transfer agreement (TTA), then the tax does not apply to the portion of the sale representing the intangible copyright interest in the photographs. Tax will apply to the charges for transfers of tangible personal property.

In order to qualify as a TTA, the agreement must be evidenced by a writing, it must assign or license a copyright interest, and the transfer must be for the purpose of reproducing and selling other property which will be subject to the copyright interest. In the instance described above, the photographer's customer uses the photographic images for its website, and for public relations and marketing materials. Because the customer is not making and selling a product subject to the photographer's copyright interest in the photographic images, the transaction does not qualify as a TTA. Therefore, all of the photographer's charges on the projects where images are transferred to the client on disk are taxable. 7/8/03. (2004–2).