Were photographs sold to publishers or advertising agencies purchases for resale, and could stock-photo film be bought for resale?

Plain-English summary

A photographer asked three sets of questions about publishers, advertising agencies and speculative stock shots. In the first, a newspaper or magazine publisher used a supplied photograph to reproduce the image in a publication sold subject to tax. The publisher used rather than resold the physical photograph, so its in-state sale or lease was taxable even though the publication sale was also taxed. The original photo did not become an ingredient or component merely because its image appeared in the publication.

A sale to an advertising agency was likewise retail unless the agency insisted it bought the specific photograph for resale in the regular course of business and supplied a certificate saying so. The agency had to pass title to its client before using the photograph. Otherwise, the letter said both the photographer's sale to the agency and the agency's sale to its client were taxable, although the source prints our retail sale where context indicates the photographer's sale.

Depending on the agency-client contract, Regulation 1540(a)(2) could instead make the agency a purchasing agent for its client. The photographer then treated the transfer to that client as the taxable retail sale. The regulation was enclosed but is absent from CDTFA's PDF.

For speculative stock shots, slide-transparency film processed into slide photographs held solely for resale could be bought for resale if no use occurred first. Negative film processed into negatives that the photographer used to make positives was a taxable manufacturing aid. Prints held solely for resale before use could also be bought for resale.

Demonstration and display while offering stock slides or prints for sale did not destroy resale treatment. There was no fixed holding period after which unsold stock automatically became taxable, and destruction was not a taxable use. Other use generally triggered use tax measured by the photographer's purchase price, subject to a briefly mentioned exception for certain qualified-organization donations under Regulation 1669(b).

Source posture and live annotation

The source quotes the photographer's three questions but does not reproduce the August 10 inquiry or any completed transaction. It supplies no photographer, publisher, agency or client identity; physical photograph; film; negative; positive; print; publication; advertising project; agency agreement or disclosure; certificate; stock folder; purchase price; sale date; destruction or donation record; return; audit; assessment or later outcome. It does not resolve an actual agency relationship or whether particular stock property was ever used.

The live 420.0173 annotation, in the 2026 revision of the Business Taxes Law Guide, retains publisher copying, no physical incorporation, agency resale and certificate, stock-film resale, demonstration/display, later use tax, destruction and September 21, 1992 date. It says that if the photographer uses the slides to make positives the film is a manufacturing aid; the source says the photographer cannot buy negative film for resale when those negatives will be used to make positives. The live page therefore changes the kind of property used. It omits double-tax and permit-number questions, pre-use title passage, agency-as-client-agent route, stock prints, no holding-period rule, donation exception, missing Regulation 1540 enclosure, source wording defects, absent 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 small 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

Photographers, publishers, agencies and tax professionals

Follow the physical photo or film, not only the reproduced image. For agency transactions, document whether the agency resells before use or acts as a disclosed purchasing agent. For stock property, record initial resale intent, distinguish slides or prints held for sale from negative film used as a manufacturing aid, and track any use beyond demonstration and display.

Common questions

Q: Did putting a photo's image into a newspaper make the original photo a component?

A: No. Copying was use of the physical photograph; the original itself did not become part of the publication.

Q: When could an advertising agency buy a photo for resale?

A: When it bought the specific property for resale, gave the stated certificate and passed title to its client before any use.

Q: Could the agency instead buy for its client?

A: Potentially, depending on the contract, under the Regulation 1540(a)(2) agency route described in the letter.

Q: Which stock-film purchase was taxable?

A: Negative film used to produce positives was a taxable manufacturing aid. The source distinguished that from slide-transparency film processed into slides held solely for resale.

Q: Did unsold stock become taxable merely with time?

A: No fixed period applied. Demonstration/display and later destruction were not taxable uses under the letter; other use generally triggered use tax.

Citations and references

• California Sales and Use Tax Regulation 1668(d) — cited for the specific-property resale-certificate statement
• California Sales and Use Tax Regulation 1540(a)(2) — cited for agency purchase on a client's behalf; described as enclosed but not reproduced
• California Sales and Use Tax Regulation 1669(b) — mentioned for certain qualified-organization donations without further facts
• August 10, 1992 inquiry; photos; film; prints; publications; agency agreements; disclosures; certificates; stock records; prices; donations; returns; audits; assessments; and outcomes — described or implicated but not included

Verbatim support

From the official September 21, 1992 Senior Tax Counsel letter:

Although tax does not apply to the sale of tangible personal property which is actually incorporated into the newspaper or periodical which is sold, a photograph does not become an ingredient or component part of the publication merely because the photographic image is reproduced in the publication.

Unless the advertising agency passes title to the photographs to the client prior to using them, both our retail sale of the photographs to the advertising agency and the advertising agency's sale of photographs would be subject to sales tax.

On the other hand, you may not purchase for resale film which you will have processed into negatives which you will use to make positives for sale. The sale of the negative film to you is a retail sale, because you use the film as a manufacturing aid in producing the resulting prints.

There is no specific period of time which you may hold the property for resale before destroying it.

We would not consider your destruction of the property as a taxable use.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 420.0173
• Original supporting opinion: 420.0173 PDF

Original ruling text

420.0173

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM K. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego

September 21, 1992

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Dear X-------------------,
This is in reply to your August 10, 1992 letter regarding the application of sales tax to your charges for photographs. You asked the following specific questions: "1) If I supply a newspaper or magazine publisher with photographs that are reproduced in the relevant publication for which members of the public pay sales tax, do I charge the publication or newspaper sales ·tax for my photographs? Or do I just obtain their sales permit number?" Since the publisher uses your photographs in creating the publication rather than sells you photographs, your sale or lease of the photographs in this state is a retail sale subject to sales or use tax. That is true even though the sale of the newspaper or periodicals by the publisher is also subject to sales tax. Although tax does not apply to the sale of tangible personal property which is actually incorporated into the newspaper or periodical which is sold, a photograph does not become an ingredient or component part of the publication merely because the photographic image is reproduced in the publication. "2) If I supply an advertising agency with photographs for a project for their client, am I taking the photographs for the agency or the client? The agency will pay me after the client has paid them. What I would like to know is: Does the agency pay me sales tax and the client pay the agency sales tax or is there just a one time payment by the client to the agency? Is sales tax paid twice for the same goods? Does the agency give me their Seller's Permit number in lieu of sales tax?" You should consider your sale of the photographs to the advertising agency as a retail sale unless the advertising agency insists that it is purchasing the photographs for resale to its customers. In that case, you should require a resale certificate from the advertising agency containing a statement that the specific property is being purchased for resale in the regular course of business. (Sales and Use Tax Regulation 1668, Resale Certificates, subd. (d).) Unless the advertising agency passes title to the photographs to the client prior to using them, both our retail sale of the photographs to the advertising agency and the advertising agency's sale of photographs would be subject to sales tax. Depending on the contractual arrangement between the advertising

agency and its client, the advertising agency may purchase the photographs as an agent on behalf of the client. This is explained in subdivision (a) (2) of Regulation 1540, a copy of which is enclosed. In such case, you should similarly consider your sale of the photographs to the client as a taxable retail sale. "3) Do I pay sales tax for film which I use to take speculative "Stock Shots" for my photo library? A large proportion of the income to my business will be from stock shots. These are basically photos taken with the intention of selling them to either a magazine or advertising agency for example. What happens if· the photos are not resold and they just sit in my folders? These are basically taken for resale purposes. Is their any time limit as to how long a photo may be kept before it can be written off as useless?" You may purchase for resale slide transparency film that you process into slide photographs which you hold solely for resale in the regular course of business, provided you make no use of them prior to their resale. On the other hand, you may not purchase for resale film which you will have processed into negatives which you will use to make positives for sale. The sale of the negative film to you is a retail sale, because you use the film as a manufacturing aid in producing the resulting prints. You may purchase for resale prints which you will hold solely for resale prior to any use. Assuming you make no use of the prints or slide transparencies other than demonstration and display while holding them for resale, the sale to you is a sale for resale regardless that you ultimately destroy them. There is no specific period of time which you may hold the property for resale before destroying it. Generally, except for certain donations of property to qualified organizations, pursuant to Sales and Use Tax Regulation 1669, subdivision (b), if you make any use of the property other than demonstration and display for the purpose of resale, you are responsible for reporting and paying use tax measured by the sale price of the property to you. We would not consider your destruction of the property as a taxable use. We hope this answers your questions; however, if you need further information, feel free to write again. Very truly yours, Ronald. L. Dick Senior Tax Counsel RLD:wk