I work with quite a few professional photographers and I’m always being asked about Missouri sales tax. There seem to be different answers about what is considered taxable and non-taxable here in Missouri. Well, I decided to get to the bottom of this – I called the Missouri Department of Revenue and this is what they told me.
Service – is not subject to sales tax. So if you perform the service of photographing a wedding (for example) the service portion of your work is not subject to sales tax.
Product – is subject to sales tax. So, if you produce a tangible product that you can hold in your hand – like a wedding album – that product is subject to sales tax. Even if you ship that product out of the state–it’s going to be subject to Missouri sales tax. Note – that’s for photographers only! Let’s say you manufacture a product – like wedding garters for example. You sell those garters online to people all over the country. If you sell that garter in Missouri, yes, that’s subject to tax, but if you sell it to someone outside of the state – then there is no Missouri sales tax. Photographers are treated differently on this issue.
Combined service/product is subject to sales tax. Let’s say you are going to photograph a wedding and the fee is $5,000 and that includes a wedding album book that you provide the bride and groom with at the end. In a situation like this – because the service and the product are priced as one unit – then the whole thing is taxed!
What’s the lesson here? You separate out the price of your service from your product! So if that album is worth $500 – then you say the service of taking the photos is $4,500 and the album is $500. You need to break it out so that your clients will not be taxed on your service of photographing the event.
Here’s a few more things to consider:
Electronic downloads are not taxable. If your client can purchase the photos by downloading them online – the photos are not subject to sales tax. It doesn’t matter if the downloads occur across state lines or in Missouri – downloads are not subject to sales tax. (That would include things like video games or apps as well.)
One more thing – if you paid sales tax on the product instead of using your business exemption – then you don’t have to charge sales tax on that product! So if you take the photos and have the wedding book printed up by someplace that charges you sales tax – then you don’t have to charge sales tax when you sell the book! Remember, even in this situation, you still need to break out the service fee from the product!
Some other thoughts –
What about saying the service is $5,000 and the album is free? My opinion is that would make the whole thing taxable. Your clients are basically getting the wedding book for $5,000 and I believe that would make your service taxable.
Okay, so what if I said the service is $5,000 and the wedding album is a penny? Once again, I would think that would still make your service taxable. Being realistic, the wedding album is worth more than a penny. I think you need to price the album at a fair market rate to pass Missouri scrutiny.
The big take away here though is that you must separate out your service fee from your product fee or else you’ll be paying sales tax on all of your work.