Is a one-time sale of the right to reproduce a photograph subject to sales tax, and what about buying the photograph outright?

Plain-English summary

Alan/Anthony, Inc. planned to act as a sales representative for photographers, offering customers (newspapers, magazines, advertisers) a catalog of images. When a customer picks an image, Alan/Anthony sends a transparency or print, the customer reproduces it in one issue only, then returns the unchanged transparency. Alan/Anthony bills for one-time reproduction rights, keeping a commission and paying the rest to the photographer. Sometimes Alan/Anthony instead buys a photograph outright from the photographer and then licenses one-time reproduction rights itself. It asked whether the reproduction-rights sale is taxable.

The Department answered in two parts:

• Selling the one-time reproduction right — not taxable. Under Reg. § 526.7(f), granting a right to reproduce an original photograph (or painting, illustration, sculpture, manuscript, etc.) is not a taxable license-to-use or sale where the payment is in the nature of a royalty under artistic/literary-property law. And mere temporary possession or custody of the photograph for the purpose of making the reproduction is not a transfer of possession that would convert the right into a taxable license (citing Howitt v. Street and Smith Publications and Frissell v. McGoldrick). This is true whether the photographer or Alan/Anthony owns the photo. So the one-time reproduction-right sale is not subject to sales or use tax.
• Buying the photograph outright — taxable. When Alan/Anthony purchases the photograph itself from a photographer, that outright sale of tangible personal property is subject to sales tax under §§ 1105(a) and 1101(b)(5).

Bundling caveat: if the reproduction right cannot be purchased separately from other taxable services Alan/Anthony provides, the items are treated as one, and the entire charge becomes taxable.

What this means for you

Photographers, stock agencies, and licensors

Granting a reproduction/usage right — where the customer only takes temporary custody of the image to make the reproduction and the payment functions as a royalty — is not a taxable sale in New York. Keep the transaction clearly a license of the right to reproduce (image returned, no permanent transfer of the physical item) to stay within Reg. § 526.7(f).

Buying imagery outright is different

If you buy the physical photograph (transparency/print) itself, that's a taxable purchase of tangible personal property. The royalty/reproduction-right exemption applies to licensing the right, not to acquiring ownership of the item.

Watch the bundling rule

If you fold a nontaxable reproduction right into a package with taxable services and it can't be bought separately, the Department taxes the whole charge. Price and invoice the reproduction right as a separately purchasable item to preserve its nontaxable treatment.

Accountants and tax professionals

Reg. § 526.7(f) treats reproduction-right grants as nontaxable royalties, and temporary custody for reproduction is not a taxable transfer of possession (Howitt; Frissell). An outright purchase of the image is a taxable § 1105(a) sale. The standard bundling rule taxes an otherwise-exempt item combined with taxable services when not separately purchasable.

Common questions

Q: Is selling the right to reproduce a photograph taxable?
A: No. A one-time reproduction right is treated as a nontaxable royalty, and the customer's temporary custody of the image to make the reproduction isn't a taxable transfer of possession.

Q: What if I buy the photograph itself?
A: That outright purchase of the physical photograph is a taxable sale of tangible personal property.

Q: Does it matter who owns the photo — the photographer or the agency?
A: No. The Department said the reproduction-right sale is nontaxable whether the photographer or the agency owns the photograph.

Q: When could the reproduction right become taxable?
A: If it's bundled with other taxable services and can't be purchased separately, the entire combined charge is taxable.

Q: Can another taxpayer rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described; another taxpayer with different facts cannot rely on it.

Citations and references

Statutes and authorities:

• Tax Law § 1105(a) (tax on receipts from retail sales of tangible personal property)
• Tax Law § 1101(b)(5) (definition of "sale," including a license to use or consume)
• Sales and Use Tax Regulations § 526.7(f) (reproduction rights; royalty treatment; temporary custody not a transfer of possession)
• Howitt v. Street and Smith Publications, Inc., 276 N.Y. 345; Matter of Frissell v. McGoldrick, 300 N.Y. 370

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_60s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (60) S
Sales Tax
July 30 , 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920527A

On May 27, 1992, a Petition for Advisory Opinion was received from Alan/Anthony, Inc.,
145 Avenue of the Americas, 2nd Floor, New York, New York 10013.
The issue raised by Petitioner, Alan/Anthony, Inc., is whether the one-time sale of
reproduction rights of photographs is subject to sales and use taxes.
Petitioner is considering offering a new service, in which it would act as sales representative
for a group of photographers. In this capacity, Petitioner would present customers such as
newspapers, magazines and advertisers with a free catalog of photographic images from which they
would choose photographs.
When a customer selected an image, Petitioner would provide a photographic transparency
or print to the customer, who would reproduce it in one issue only of a newspaper, magazine or
brochure. The customer would then return the unchanged transparency to Petitioner.
Petitioner would bill the customer for the sale of one-time reproduction rights in the
photograph. Ownership of the photographs would be retained by the photographer and the
transaction would involve only the right to reproduce the photographic image once. Petitioner would
receive a commission on the sale of the right to reproduce and would pay the photographer the
amount billed less commission.
It is also anticipated that Petitioner would, on occasion, purchase photographs outright from
photographers. In this case, Petitioner would pay the sales tax to the photographer for purchase of
the photograph. In such situations, Petitioner would sell one-time reproduction rights to customers
and would retain the entire amount received as revenue.
Section 1105(a) of the Tax Law generally provides for the imposition of tax upon every retail
sale of tangible personal property, with certain exceptions not relevant herein.
The term "sale" is defined for purposes of Section 1105(a) of the Tax Law by Section
1101(b)(5) of the Tax Law as follows:
"Sale, selling or purchase. Any transfer of title or possession or both, exchange or
barter, rental, lease or license to use or consume, conditional or otherwise, in any
manner or by any means whatsoever for a consideration, or an agreement therefor,
including the rendering of any service, taxable under this article, for a consideration
or any agreement therefor."

-2­
TSB-A-92 (60) S
Sales Tax
July 30 , 1992

Section 526.7(f) of the Sales and Use Tax Regulations provides, in part, exemption from
sales and use taxes in the following instances:
(f) Reproduction rights
(1) The granting of a right to reproduce an original painting, illustration, photograph,
sculpture, manuscript or other similar work is not a license to use or a sale, and is not
taxable, where the payment made for such right is in the nature of a royalty to the
grantor under the laws relating to artistic and literary property.
(2) Mere temporary possession or custody for the purpose of making the
reproduction is not deemed to be a transfer of possession which would convert the
reproduction right into a license to use. See Howitt v. Street and Smith Publications,
Inc., 276 N.Y. 345 and Matter of Frissell v. McGoldrick, 300 N.Y. 370.)
Accordingly, pursuant to Sections 1105(a) an 1101(b)(5) of the Tax Law the outright sale
of the photographs from a photographer to Petitioner would be subject to sales tax.
Concerning the sale of a reproduction right, pursuant to Section 526.7(f) of the Sales and Use
Tax Regulations the granting of a right to reproduce a photographic transparency or print is not a
taxable license to use or a sale since the customer merely takes temporary possession or custody of
the photograph and payments for the right to reproduce are made in the nature of a royalty. This
would be so whether the photograph is owned by the photographer or Petitioner. Therefore, the sale
of one-time reproduction right of the photographs would not be subject to sales or use taxes.
It is noted that if the right to reproduce the photographs furnished to its customers cannot be
purchased separately from the sale of other taxable services provided by Petitioner, the combination
of the items listed must be considered as one, and the entire charge for all items would be subject
to sales tax.

DATED: July 30, 1992

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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