Does a monitor a photographer uses to let customers preview and crop a photographic image before it's printed qualify for the Texas manufacturing sales-tax exemption?

Plain-English summary

A photographer asked the Comptroller whether monitors used in the business qualify for the sales-tax manufacturing exemption. The photographic image is transmitted electronically from a Photovix video processor to the monitor, where the customer views it; the picture can then be enlarged to actual size, cropped, and the negative taped to a cropping card.

The Comptroller ruled the monitors do not qualify for the manufacturing exemption. Even though the monitor is part of the cropping/production process, it's used primarily as a marketing tool — letting the customer see and approve the image before the final print is made. Texas Tax Code § 151.318(c)(4) excludes from the manufacturing exemption any equipment used in sales or distribution activities, and that's how the Comptroller characterized this customer-viewing function.

What this means for you

Photographers and photo-finishing businesses

Equipment that shows customers a preview of their photos — so they can approve, crop, or select a print — is treated as a sales/marketing aid, not exempt manufacturing equipment, even if the same device also plays a role in preparing the image for production.

Businesses claiming the manufacturing exemption on multi-purpose equipment

If a piece of equipment serves a dual role (e.g., part of the production process but also used to make a sale or show a customer the product), the sales/marketing use can disqualify it from the manufacturing exemption under § 151.318(c)(4), regardless of its other uses.

Common questions

Q: Does a monitor used to preview a photo for a customer qualify for the manufacturing exemption?
A: No. The Comptroller found it's used primarily as a marketing tool, which Tax Code § 151.318(c)(4) excludes from the manufacturing exemption.

Q: Does it matter that the monitor is also used for cropping the image before the final print?
A: Based on this letter, no — the Comptroller focused on the monitor's role in letting the customer view the image, calling that a marketing use, and denied the exemption on that basis.

Q: Can I rely on this letter for my own photography business?
A: No. This opinion is based on the facts presented to the Comptroller, and the outcome may change if the facts are different.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.318(c)(4) (manufacturing exemption excludes equipment used in sales, distribution, or transportation activities)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9603076L

Original ruling text

March 6, 1996

Dear Mr. ***:

In your letter, you asked if the monitors qualify for the manufacturing
exemption. The photographic image is transmitted electronically from a Photovix
video processor to the monitor. The image is displayed on the monitor for the
customer to see. Then the picture can be enlarged to actual size, cropping
done, and the negative taped to the cropping card.

The monitors do not qualify for the manufacturing exemption, because they are
used primarily as a marketing tool. Texas Tax Code 151.318 (c)(4) excludes
from the manufacturing exemption equipment used in sales or distribution.

This opinion is based upon the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free at 1-800-531-5441 extension 50892. The direct line is
512/475-0892. You may also write to Tax Policy Division, Comptroller of Public
Accounts.

Sincerely,

John J. Fitzgibbons, CPA
Tax Policy