Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 420.0343


420.0343 Unexposed Film Received in Connection with Film Processing. A photo finisher distributes unexposed rolls of photographic film to customers who contract to have the photo finisher develop exposed film and to produce prints therefrom. The unexposed roll of film is given to the customer at the time he places the order for developing and prints. A separate charge is made for the prints and for the developing. The developing charge is claimed to be nontaxable pursuant to Regulation 1528(b)(3)(a). No specific charge is made for the unexposed film. In some instances the customer fails to pick up the order and pay the agreed charges. No attempt is made to collect these charges.

Under the above situation, the unexposed film, the finished prints, and the developing service all represent consideration received by the customer in exchange for the payment of the agreed contract price. While the customer receives the unexposed film prior to the time he receives delivery of the prints and developing service, it is nevertheless clear that the customer receives the unexposed film only if he agrees to pay the price specified for the prints and the developing and not as a gratuity. Accordingly, the unexposed film must be regarded as sold rather than self consumed. This conclusion is not altered by the failure of the photo finisher to enforce collection with respect to persons who fail to pick up their finished prints and negatives. The failure to collect the contract price on these transactions is based on business expediency rather than the absence of a remedy.

The delivery of the unexposed film is considered to be a premium under Regulation 1670(c). This section also provides for an allocation of gross receipts to the retail sale of a premium sold with a food product or other item not subject to sales tax. Since the customer is required to pay the entire contract price in order to obtain the premium, it is consistent with Regulation 1670(c) to allocate a portion of the total contract price to the unexposed roll of film sold and delivered as part of the contract. 4/17/70.