Does a photographer have to charge Colorado sales tax on photos delivered digitally over the Internet rather than as prints?

Plain-English summary

A photographer who delivers photographs digitally — electronically over the Internet rather than as physical prints — asked whether those sales are subject to Colorado sales tax.

The Department's answer: yes. Digital photographs sold by a photographer are taxable tangible personal property.

Colorado imposes sales tax on tangible personal property (and on services rendered to create custom or made-to-order goods), but not on services generally. A photographer must collect sales tax on the sale of photographs. The novel question was whether electronic delivery changes that. The Department said no: transferring photos electronically does not render them intangible. Tangible personal property is corporeal — part of the physical world — whereas intangible property is merely a concept, idea, or legal right (like a copyright). The Department has traditionally viewed digital goods — digital music, movies, books, and photographs — as tangible personal property because they are part of the physical world, not just an idea. So digital photographs are taxable, whether delivered on a CD, DVD, flash drive, or electronically. (The Department noted that delivery on physical media would clearly be taxable; electronic delivery reaches the same result.)

A footnote draws an important line: electronically delivered computer software has been legislatively declared intangible (§ 39-26-102(15)) and so is not taxed. But a digital photograph is not computer software, so that software carve-out doesn't apply to it.

On pricing/sitting fees, the Department added: when a photographer charges both a sitting fee and for the photographs, the sitting fee is not taxable if it is separately stated and the photographer charges an additional fee to transfer the photographs. But if the customer pays the whole amount up front (sitting plus transfer) before the service/product is provided, it's harder to tell whether a service or a product is being sold — that depends on the facts and circumstances.

What this means for you

Photographers

Charge sales tax on the photos you sell, including when you deliver them digitally over the Internet. The medium doesn't matter — print, disc, flash drive, or download are all taxable. Special Regulation 40 governs how photographers' services and products are taxed. If you want a sitting fee to be non-taxable, separately state it and charge a distinct fee to transfer the images; bundling everything into one up-front payment muddies the service-vs-product line.

Other digital-goods sellers

The Department's reasoning extends to digital music, movies, and books — it treats them as tangible personal property too. The narrow exception is electronically delivered software, which the legislature declared intangible. Don't assume "digital = non-taxable" in Colorado.

Accountants and tax professionals

The Department rejects the "electronic delivery = intangible" argument for digital photographs, resting on a corporeal/physical-world view of tangible personal property (§ 39-26-104(1); § 39-26-102(12) for custom-goods services). The only digital good carved out by statute is electronically delivered computer software (§ 39-26-102(15)). On sitting fees, separately stating the fee plus a distinct transfer charge can preserve non-taxable service treatment; a single prepaid lump sum is a facts-and-circumstances call. See SR 40.

Common questions

Q: Are digital photos taxable in Colorado if I email or upload them instead of printing?
A: Yes. The Department treats digital photographs as tangible personal property, so they're taxable regardless of whether you deliver prints, a disc/flash drive, or an electronic download.

Q: Why are digital photos taxable when they're not physical?
A: The Department views digital goods as part of the physical world — corporeal — not mere ideas or legal rights. So they count as tangible personal property.

Q: Isn't electronically delivered digital content intangible?
A: Only computer software delivered electronically is legislatively declared intangible. A digital photograph isn't software, so that exception doesn't apply.

Q: Is my sitting fee taxable?
A: A sitting fee can be non-taxable if it's separately stated and you also charge a separate fee to transfer the photos. If the customer prepays one lump sum for everything, whether it's a service or a product depends on the facts.

Q: Can I rely on this letter?
A: No. A General Information Letter is general guidance, is not binding on the Department, and makes no determination on any specific facts. It also doesn't cover self-collected home-rule city taxes.

Citations and references

Statutes:
- § 39-26-104(1), C.R.S. (sales tax on tangible personal property)
- § 39-26-102(12), C.R.S. (services to create custom/made-to-order goods are taxable)
- § 39-26-102(15), C.R.S. (tangible personal property excludes electronically delivered computer software)

Rules:
- 1 CCR 201-5, Special Regulation 40 (photographers; services and products)
- Department Rule 24-35-103.5 (GIL / PLR procedure)

Source

• Landing page: Colorado Sales & Use Tax Letter Rulings
• Original PDF: GIL-15-025.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-15-025
December 15, 2015
XXXXXXXXXXXXX
Attn: XXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
Re: Digital Photographs
Dear XXXXXXXXXXX,
You (“Taxpayer”) submitted a request for guidance to determine whether digital photographs are
subject to sales or use ax.
The Colorado Department of Revenue (“Department”) issues general information letters and
private letter rulings. A general information letter provides a general overview of the relevant tax
issues but is not binding on the Department. A private letter ruling provides a specific determination
for a specific set of facts, is binding on the Department but not on the taxpayer, and requires
payment of a fee. For more information about general information letters and private letter rulings,
please see Department Regulation 24-35-103.5 at www.colorado.gov/revenue/tax > Tax Library >
Rulings.
The Department treats this request as one for a general information letter. It is important to
remember that general information letters, such as this one, are general discussions of tax law and
are not binding on the Department. If Company would like the Department to issue a private letter
ruling on the issue raised here, the retailer can submit a request and fee in compliance with
Department Regulation 24-35-103.5.
Issue
Is the sale of a digital photograph subject to sales tax?
Background
Taxpayer is a photographer and delivers photographs digitally.
Discussion
Colorado imposes sales tax on the sale of tangible personal property but not services, unless the
services are rendered in the creation of custom made goods or goods made to order. § 39-26102(12) and 104(1), C.R.S. Department Regulation 1 CCR 201-5, SR 40 sets forth guidance on
the application of sales tax to photographers and the sale of their services and products.
DR 4010A (06/11/14)

Specifically, a photographer must collect sales tax on the sale of photographs to customers. In
some cases, a photographer transfers to customers photographs on photographic paper or as
celluloid negatives. More recently, however, digital technology allows photographers to create
digital photographs that are transferred to the customer either on compact disc, digital video disc
or, as in the case described here, electronically over the Internet.
The principal issue raised in this request is whether the transfer of photographs electronically
constitutes a sale of tangible personal property. It is worth noting that if the digital photographs are
transferred on CD, DVD or flash drive, there would be no question that the sale is subject to tax.
We do not believe that transferring the photographs electronically renders the photographs
intangible.1 Tangible personal property is corporeal in nature – that is, it is part of the physical
world. Conversely, intangible property is merely a concept, idea, or legal right, such as a
copyright. The Department has traditionally viewed digital goods, such as digital music, movies,
books, and photographs, as tangible personal property because they are not merely a concept or
idea, but, rather, are part of the physical world. Therefore, digital photographs sold by a
photographer are subject to sales tax.
There are various ways photographers charge for their work. When a photographer sells both a
sitting fee and photographs, the sitting fee, if separately stated and if the photographer charges an
additional fee to transfer the photographs to the customer, is not subject to tax. If, however, the
customer pays the entire amount for the sitting fee and transfer of photos prior to the service /
product being provided, it is more difficult to determine whether a service or product is being sold.
Such a determination will depend on the facts and circumstances of the transaction.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are knowledgeable on
state taxes issues. However, the Department does not make a specific determination here on any
of the issues raised and the Department is not bound by this general information letter.
The Department administers state and state-administered local sales and use taxes. This letter
does not address sales and use taxes administered by home-rule cities and home-rule
counties. You may wish to consult with local governments which administer their own sales or use
taxes about the applicability of those taxes. Visit our web site at www.colorado.gov/tax for more
information about state and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation, this redacted letter
will be made public within 60 days of the date of this letter. Please let me know in writing within
that 60 day period whether you have any suggestions or concerns about this redacted letter.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue

1

Computer software delivered electronically has been legislatively declared intangible. § 39-26-102(15),
C.R.S. (tangible personal property does not include electronically delivered computer software). Digital
photographs are not computer software and, therefore, their sale is not governed by § 39-26-102(15),
C.R.S.