Should I charge sales tax when selling digital photos

Q: I recently started a small business providing product photography. I send my clients digital photographs through the Internet, so there are no physical goods exchanged (e.g., prints or CDs). I also retain the copyright and intellectual property rights but offer unlimited use to my clients. Is this transaction sales tax free because it is a service?

The transaction is exempt from California sales tax not because it is a service, but because it is not the sale of tangible personal property. According to the Board of Equalization Sales and Use Tax Annotation 120.1200, the transfer of digitized photographs that are not in a tangible format (disk, tape, or other storage medium) is not a taxable sale.

Jennie Hoopes, CPA, a team member with Sweeney Kovar, LLP, in Danville, Calif. You can reach her at (925) 648-3660(925) 648-3660 or

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