Could a customer buy an inventory photograph for resale when either the customer or its client would copy the image?

Plain-English summary

The source considered three examples from a business selling photographs or reproduction rights. Staff Counsel first summarized the sales-tax, use-tax, retail-sale and timely good-faith resale-certificate rules, including the purchaser's California seller's-permit requirement.

In the first example, a customer selected and copied a photograph, incorporated the reproduction into a product and sold that product to its client. Although an actual photograph could be bought for resale if it were resold before use or physically incorporated into the customer's product, copying was prior use. The photo seller's transfer to that customer was therefore a taxable retail sale.

In the second example, the customer selected a photo, bought reproduction rights, did not reproduce it, charged its own client for services including furnishing that photo, and let the client reproduce it. Staff Counsel characterized this as a sale of the physical photo to the first customer and its resale before use, allowing the original seller to accept a resale certificate. The customer's later transfer to its client was the retail sale.

If no suitable photograph was found and the inventory owner charged only for research, no tangible personal property was sold. The research fee was nontaxable and did not call for a resale certificate, even if the customer passed that cost through to its client.

Source posture and live annotation

The source quotes all three hypotheticals but does not reproduce the July 2 inquiry or an actual completed transaction. It supplies no business, customer or client identity; photograph; reproduction-right agreement; physical delivery record; customer product; service contract; price; invoice; resale certificate; permit; research log; return; audit; assessment or later outcome. In the second answer, the quoted facts expressly mention reproduction rights and providing a photo, while Staff Counsel states the seller transfers and the first customer resells the photo; the absent documents do not further define title or possession.

The live 420.0168 annotation, in the 2026 revision of the Business Taxes Law Guide, closely retains all three examples and the taxable-use, resale and research-fee conclusions. It adds that the taxpayer maintains an inventory of photographs for copying by customers, while the letter's examples show selected photos but do not separately state that inventory description. It omits the internal-request posture, governing-code overview, physical-incorporation alternative, timely-good-faith and permit conditions for a certificate, missing Regulation 1528 and 1668 enclosures, uncertainty in the second example's physical transfer, absent transaction records and lack of an applied outcome.

CDTFA's Annotated Legal Opinions collection says the letters are summarized as annotations and that statutory law controls whenever a statute and annotation conflict. The official two-page PDF has a clean native text layer and one page-1 letterhead stencil rather than scanned text, so no OCR was required. Both fresh direct PDF downloads and both live-page downloads were byte-identical, duplicate default PDF text extractions matched, and the original-text section remains byte-identical to its committed version and fresh extraction after removal of only the extractor's terminal newline and form feed.

What this means for you

Photo libraries, creative agencies and tax professionals

Track the physical photograph separately from reproduction rights and service fees. A resale certificate depends on intent and actual resale before use; copying is use even when the copied image enters a product. For research-only billing, document that no photograph or other tangible property transferred.

Common questions

Q: Could a customer copy a photo and still claim it bought that photo for resale?

A: Not under the first example. Copying the physical photograph was use before any resale, making the seller's transfer taxable.

Q: When could the first customer give a resale certificate?

A: When it received the photograph, made no reproduction or other use, and resold that photo to its client before the client copied it, subject to the letter's certificate conditions.

Q: Did reproducing an image physically incorporate the original photograph?

A: The letter distinguished those ideas. Its answer treats copying as use of the original photo, not a resale of that physical property.

Q: Was a research charge taxable when no suitable photo was found?

A: No. With no tangible personal property sold, the service fee was nontaxable and no resale certificate was needed.

Q: Did passing that research cost through to another client change the answer?

A: No, according to the letter's third example.

Citations and references

• California Revenue and Taxation Code sections 6007, 6051, 6201 and 6401 — cited for retail-sale, sales-tax and use-tax rules
• California Civil Code section 1656.1 — cited for contractual tax reimbursement
• California Sales and Use Tax Regulations 1528 and 1668 — cited for photograph sales and resale certificates; described as enclosed but not reproduced
• July 2, 1993 inquiry; photos; rights agreements; delivery records; customer products; contracts; prices; invoices; certificates; permits; research records; returns; audits; and outcomes — described or implicated but not included

Verbatim support

From the official November 4, 1993 Staff Counsel letter:

If, instead, the customer makes any use of the photos prior to resale, such as copying the photographs, your customer is using the photos and may not purchase them for resale.

Under these facts, you are selling the photo to your client who then resells it prior to any use. In this case, you may accept a resale certificate.

Under these facts, you have not sold any tangible personal property to your customer and therefore no tax applies to your research charge.

Since you are not selling tangible personal property to your customer, there is no reason for your customer to provide you with a resale certificate even though the customer may include this charge in the bill to his client.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 420.0168
• Original supporting opinion: 420.0168 PDF

Original ruling text

420.0168

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

MEMBER
First District, Kentfield
BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

November 4, 1993

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Re:

X------------------------

Dear X------------------,
This is in response to your letter of July 2, 1993 in which you request clarification of the application to tax in specified circumstances. Each of your examples is recited below followed by our analysis. Sales and Use Tax Law Generally Revenue and Taxation Code section 6051 imposes a sales tax on all retailers measured by their gross receipts from retail sales of tangible personal property. Although the sales tax is imposed upon the retailer, the retailer may collect sales tax reimbursement (usually itemized on the invoice as "sales tax") from the purchaser if the contract of sale so provides. (Civ. Code § 1656.1.) When the sales tax does not apply, Revenue and Taxation Code section 6201 imposes a use tax on the storage, use or other consumption of tangible personal property in this state. (Rev.
& Tax. Code § 6401.)
A "retail sale" or "sale at retail" means a sale for any purpose other than resale in the regular course of business in the form of tangible personal property. (Rev. & Tax. Code § 6007.) A purchaser who purchases property for resale in his or her regular course of business may issue the seller a resale certificate. If timely taken in good faith from a person who is engaged in the business of selling tangible personal property and who holds a California seller's permit, the resale certificate relieves the seller from liability for the sales tax and the duty of collecting the use tax. (Regulation 1668 (copy enclosed).) Application of Tax to Specific Transactions "(a) Our customer selects a photo, makes a reproduction of it, and incorporates the reproduction into a product that he then sells to his client. My understanding in this case is that we cannot accept a resale certificate because our customer is considered to have ‘consumed’ our photo rather than resold it. Is this interpretation correct?" Generally, tax applies to sales of photographs. (Regulation 1528 (copy enclosed).) If the actual photograph purchased by your customer will be resold to the client prior to any use by your customer or if it will be incorporated into the property produced by your customer who then resells that property, then your customer can purchase the property ex-tax by issuing a resale certificate. If, instead, the customer makes any use of the photos prior to resale, such as copying the photographs, your customer is using the photos and may not purchase them for resale. Your

facts state the customer reproduces, or uses, the photo prior to reselling it; thus, your interpretation is correct. "(b). Our customer selects a photo and purchases the reproduction rights from us but does not actually reproduce it. Instead, he charges his clients a fee for his services which include providing his client with our photo. His client then reproduces the photo. In this case, may we accept a resale certificate from our customer?" Under these facts, you are selling the photo to your client who then resells it prior to any use. In this case, you may accept a resale certificate. "(c) Our customer is looking for a photo for his client to reproduce. However, suppose our customer does not find the right photo and instead of billing him for reproduction rights, we instead bill him a service fee to cover our research costs. Our customer charges his client an amount which includes what he had to pay for our service fee. Can we accept a resale certificate from our customer?" A resale certificate is provided by the purchaser where the purchaser intends to resell the tangible personal property acquired. Under these facts, you have not sold any tangible personal property to your customer and therefore no tax applies to your research charge. Since you are not selling tangible personal property to your customer, there is no reason for your customer to provide you with a resale certificate even though the customer may include this charge in the bill to his client. If you have any further questions, please do not hesitate to write again. Sincerely,

Ms. Sukhwinder K. Dhanda
Staff Counsel
SKD:plh
Enclosures – Regulations 1528 and 1668
Bc:

Out of State Administrator
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