Does a freelance photographer have to charge sales tax on separately billed reimbursable expenses like travel, film, and lodging?

Plain-English summary

Peter Vadnai, a freelance photographer, took photographic assignments under oral agreements and billed clients separately for expenses — food and lodging, airfare, ground transportation, film and processing, equipment rental, and the like — on which he had already paid sales tax when he bought them. He argued that taxing the client's reimbursement of those expenses amounts to double taxation, and that his clients don't own the photos but only get a one-time right to use them.

The Department held:

• Reimbursable expenses are part of the taxable charge. Under Tax Law § 1101(b)(3) and 20 NYCRR § 526.5(e), expenses a vendor incurs in making a sale are not deductible from receipts — regardless of whether they're "reimbursable" or separately billed. The regulation's own example bills "Photographs, model fees, meals, travel, props" and taxes the full total.
• The whole billing is the sales price of the photos. The entire billing, including the reimbursable expenses, is the sales price paid for the finished photographs and is taxable under § 1105(a).
• One exception — a bare right to reproduce. If the client receives only a "right to reproduce" the photograph (not a sale or a license to use it) and the photograph is returned to the photographer after reproduction, that is not taxable (20 NYCRR § 526.7(f); Matter of Frissell v. McGoldrick). Merely holding the photo temporarily to make the reproduction is not a transfer of possession that turns the reproduction right into a taxable license.
• But the burden is on the photographer. Under § 1132(c), receipts are presumed taxable until the contrary is shown. So Vadnai must collect tax on the total charges unless he can substantiate that the charges were solely for the right to reproduce and that the photographs were returned.

What this means for you

If you're a photographer or other creative billing "costs" separately: New York does not let you carve reimbursable expenses out of the taxable sale. Travel, film, lodging, model fees, equipment rental — when they're part of delivering the photographs, the whole invoice is taxable, even if you list the expenses on separate lines and even if you paid tax when you bought them.

Paying tax on your inputs isn't "double taxation" in the eyes of the law. The tax on what you buy (your cost) and the tax on what you sell (the client's charge) are treated as separate transactions. If you're buying items to resell to the client as part of the finished product, consider using a resale certificate on those purchases instead.

The reproduction-rights exception is narrow — and you must prove it. A truly bare right to reproduce, with the photo returned and no transfer of possession as a license to use, isn't taxable. But under § 1132(c) you carry the burden: keep contracts and records showing the charge was solely for reproduction rights and that the photographs came back.

Common questions

Q: I bill travel and film separately and already paid tax on them — do I still charge the client tax on those?
A: Yes. Under § 1101(b)(3) and § 526.5(e), expenses aren't deductible from receipts. The whole billing is the taxable sales price of the photographs.

Q: Isn't taxing the reimbursement double taxation?
A: The Department doesn't treat it that way. The tax you paid on your purchases and the tax on your sale to the client are separate. Consider buying resale items under a resale certificate.

Q: My client only gets to use the photo once — is that a nontaxable right to reproduce?
A: Only if it's truly a bare right to reproduce and the photograph is returned after reproduction. You must be able to substantiate that; otherwise the total charge is taxable.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(3) — "receipt" allows no deduction for expenses
• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1132(c) — receipts presumed taxable; burden of proving otherwise is on the vendor/customer
• 20 NYCRR § 526.5(e) — expenses incurred in making a sale are not deductible from receipts
• 20 NYCRR § 526.7(f)(1)-(2) — granting a right to reproduce is not a license to use or a sale

Case cited:

• Matter of Frissell v. McGoldrick, 300 NY 370 (1950)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1989.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a89_20s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-89 (20)S
Sales Tax
July 17, 1989

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S890309A

On March 9, 1989 a Petition for Advisory Opinion was received from Peter Vadnai, 180
Valley Road, Katonah, N.Y. 10536.
The issue raised is whether "reimbursable" expenses incurred by Petitioner in the
performance of photographic assignments and billed separately to clients are subject to sales tax in
those instances where Petitioner pays sales tax when such expenses are incurred?
Petitioner, a freelance photographer, enters into oral agreements with clients to perform
photographic assignments for such clients. Petitioner contends that expenses incurred during the
performance of the photography assignments are incurred in behalf of and reimbursed by the clients.
The expenses incurred result from expenditures for food and lodging, air fares, ground
transportation, film and processing, equipment rental, etc.
Petitioner arranges for and "pays out" the money for all expense purchases required to
complete an assignment. Petitioner pays all sales tax due when making such purchases. Petitioner
contends that reimbursement of incurred expenses occurs when clients make payment of the amounts
billed, and that by such reimbursed expenses being considered part of the total receipts subject to
sales tax, double taxation occurs.
Petitioner also contends that the clients do not own the photographs resulting from the
photography assignments but merely have the right to use the photograph one time for a use specified
in advance.
Section 1101(b)(3) of the Tax Law defines "receipt" as the amount of the sale price of any
property and the charge for any service taxable under Articles 28 and 29, without any deduction for
expenses.
Section 526.5 of the New York State Sales and Use Tax Regulations states as follows:
Receipt. [Tax Law §1101 (b)(3)] (a) Definition. The word receipt means the amount
of the sale price of any property and the charge for any service taxable under articles
28 and 29 of the Tax Law, valued in money, whether received in money or otherwise,
The following subdivisions of this section discuss elements of a receipt.
*
TP-9 (9/88)

*

*

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TSB-A-89 (20)S
Sales Tax
July 17, 1989

(e) Expenses. All expenses including telephone and telegraph and other service
charges, incurred by a vendor in making a sale, regardless of their taxable status and
regardless of whether they are billed to a customer are not deductible from the
receipts.
Example 1:

A photographer contracts with a customer to furnish photographs at $50.00
each in addition to expenses.
The customer is billed as follows:
Photographs (2)
$100
Model Fees
60
Meals
10
Travel
25
Props (Flowers)
5
Total Due
$200
Receipt subject to tax is $200

Section 1105(a) of the Tax Law imposes sales tax on "The receipts from every retail sale of
tangible personal property ... ."
Accordingly, the portion of receipts billed by Petitioner as expenses, whether or not
"reimbursable", which are incurred in the performance of photographic assignments cannot be
excluded from the total receipts subject to tax. The entire billing, including any "reimbursable"
expenses incurred by Petitioner, is considered to be the sales price paid by Petitioner's clients for the
finished photographs resulting from such photographic assignments and therefore is subject to the
sales tax imposed under Section 1105(a) of the Tax Law.
It is noted that Petitioner's contention that the client's do not own the photographs resulting
from photography assignments but merely have the right to use the photographs one time for the use
specified in advance infers that Petitioner has granted the clients "a right to reproduce".
Pursuant to 20 NYCRR 526.7 (f) (1) and (2), the granting of a right to reproduce is not a
license to use or a sale and is not taxable. Mere temporary possession or custody for the purpose of
making a reproduction is not deemed to be a transfer of possession which would convert the
reproduction right to a license to use. (Matter of Frissell v. McGoldrick, 300 NY 370; 88 NYS 2d
896; 91 NE 2d 305 (1950).)
However, under Section 1132(c) of the Tax Law, all receipts for property of any type
mentioned in Section 1105(a) of the Tax Law are subject to tax until the contrary is established, and
the burden of proving that any receipt is not taxable shall be upon the person required to collect tax
or the customer.
Upon audit by the department, or at such other times as the department requests, the vendor
or user must present all...records..., kept in a manner suitable to determine the correct amount of tax

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TSB-A-89 (20)S
Sales Tax
July 17, 1989

due, together with such documentation, summaries or schedules as the department may request... .
20 NYCRR 533.2 (a) (2).
Accordingly, Petitioner's must collect state and local sales tax on the receipts from the total
charges to the client's for the sale of the photographs unless Petitioner can properly substantiate that
such charges are not subject to tax because the charges were solely for the right to reproduce the
photographs and the photographs were returned to the Petitioner after reproduction.

DATED: July 17, 1989

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.