Were a freelance news photographer's retainers and hourly charges taxable when he delivered exposed film to newspapers?

Plain-English summary

A photographer used his own equipment, bought film tax-paid, remained on call for two newspapers, and received hourly payments for assignments regardless of how many pictures the newspapers printed. He delivered the exposed film to them.

Tax counsel treated the exposed negatives as photographs and their transfer as a sale of specially produced tangible personal property. Assuming the photographer was an independent contractor, tax applied to his full receipts, including the retainer and hourly amounts used to determine the price.

The billing could not be divided into taxable property and deductible travel, equipment, labor, or other service components. The letter expressly left open reconsideration if evidence showed that the photographer was actually an employee.

Citations and references

• California Revenue and Taxation Code section 6006(f) (as cited)
• Sales and Use Tax Ruling 2, section B — cited; enclosed copy not reproduced in the official PDF
• Sales and Use Tax Ruling 23 — cited; enclosed copy not reproduced in the official PDF
• Photographer's May 23, 1957 refund claim and statement that the income should have been listed as salary — claim quoted only in part; claim, correspondence, and complete employee-status evidence not reproduced in the official PDF
• News photography, photographer-owned equipment, tax-paid film, weekly on-call retainers for two newspapers, hourly assignment charges, unchanged charges when no picture was printed, and delivery of exposed film — facts supplied; contracts, assignments, time and payment records, invoices, expense records, film and image records, and newspaper records not reproduced in the official PDF
• Prior advice to other photographers engaged in similar activities — described but not identified or reproduced in the official PDF
• Official Annotation 295.0340's weekly retainer, independent-contractor assumption, hourly payment regardless of picture count, exposed-film delivery, and Nov. 6, 1957 date — annotation omits the refund-claim provenance, employee-status caveat and reconsideration offer, two-newspaper and no-picture facts, own-equipment and tax-paid-film facts, authorities, enclosures, expense and billing analysis, prior-advice reference, missing records, and later outcome and supplies no additional claim or hearing record
• Possible employee-status submission, audit or refund determination, oral legal-hearing-officer hearing, formal Board hearing, appeal, or other later agency action — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-0340.pdf

Original ruling text

295.0340

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 6, 1957

Dear Mr.
We base our opinion regarding your claim for refund of May 23, 1957, on the following statement of facts. You are in the business of taking photos of newsworthy events. We assume you use your own photographic equipment and you state that you purchase all film on a tax paid basis. You are paid a weekly retainer to be on call for two newspapers. If an assignment is filled for these papers or other papers, you are paid on an hourly basis regardless of the number of pictures taken. The same charge is made although no pictures are actually printed in the papers. You state that you "should have listed your income as salary." If you are in fact an employee, a different result would obtain taxwise. However, we assume you are an independent contractor. If you would care to submit evidence that you are an employee, we shall be glad to reconsider the matter. As indicated by Section B of Sales and Use Tax Ruling 2, copy enclosed , commercial artists or any other persons or firms engaged in the creation or production of drawings, paintings, designs, photographs, or other art work are retailers of such property sold to advertising agencies for use by the agencies in the rendition of their services, advertisers, or others. Effective January 1, 1950, tax applies to the gross receipts from the furnishings of drawings, paintings, designs, photographs, letterings, assemblies, or other art work used for reproduction as well as display purposes. Section 6006(f) of the Law, pamphlet copy enclosed, defines "sale" as including "a transfer for a consideration of the title or possession of tangible personal property which has been produced, fabricated, or printed to the special order of the customer." (Underscore added.) It is our position that the furnishing of exposed negatives constitutes the furnishing of photographs within the meaning of Ruling 2. We also believe your activities constitute the producing or fabrication of tangible personal property for the special order

of the newspapers. We believe the transfer of possessions of the exposed film is a sale within the meaning of Section 6006(f). As explained by Sales and Use Tax Ruling 23, copy enclosed, tax applies to sales of photographs and photostat copies, whether or not produced to the special order of the customer, and to charges for the making of photographs and photostat copies out of materials furnished by the customer. No deduction is allowed on account of such expenses of the photographer as travel time, rental of equipment, or salaries or wages paid to assistants or models whether or not such expenses are itemized in billings to customers. From the point of view of sales tax, the photographer is regarded as selling pictures. The tax applies to his gross receipts from the sale. For sales tax purposes, he is not being paid for services but for the pictures. It is a single transaction and the measure of tax is not altered by subdividing the billing into components and valuing each component. In other words, the tax applies to the full amount received by the photographer and the method which the parties have adopted for determining this amount is immaterial. We have advised other photographers engaged in activities similar to yours that the tax applies as herein indicated. Based upon the facts as herein presented, we believe the tax to be properly computed and shall so advise the Board. However, if we have misunderstood the facts or you feel the law has been misapplied, you may request an oral hearing before a legal hearing officer in Santa Rosa or, if more convenient, in San Francisco, or you may request a formal Board hearing. Please advise us of your wishes in this regard.

Very truly yours,

Jack D. Paulson
Assistant Counsel

JDP:jle
Enclosures: Sales and Use Tax Rulings 2 and 23 California Sales and Use Tax Law cc: Santa Rosa -Compliance