Do I Charge Sales Tax to Out-of-State Clients?

A question I often hear on discussion forums is “Do I need to charge sales tax for an out of town client?” The short answer is, “No” and “It depends.” Let’s discuss.

The answer to the question depends solely on where you deliver the finished product. If you work in State A and deliver your product, be it proofs, prints or albums, to State B, no tax will ever apply (assuming you’re in the USA). Now I often hear people respond to this question with a “You should ask your local state taxing agency.” That however isn’t necessary.

If you’ll recall from your Civics 101 class, only the US Congress has the authority to regulate interstate commerce. When you ship your products from one state to the other, that’s interstate commerce and thus not subject to taxation by individual states. In the absence of a national sales tax, individual state tax rates and policies don’t apply.

But what if you did the shoot in the state where the client lives? Doesn’t matter so long as your business is physically located in another state and you ship the product across state lines. The client must take deliver of the product in their state; if you hand deliver the product in your home state so that the client can take it home, then tax is due in the full amount.

For that reason, it’s important that you use a trackable shipping source such as Fed Ex or UPS and maintain good records. In the event of an audit, you may be asked to provide evidence that all those out-of-state shipments are legitimate.

The caveat to this discussion is that this advice applies solely to photographers working in the USA. Other countries have Value Added Tax (VAT) that applies to all sales. If you’re in Canada, the UK or elsewhere, you’ll need to check with your national taxing agency for specifics. To be clear however, if you live and work in the US and ship out of the country, no sales tax applies (although various tariffs may be due from the client to their home country).

John Mireles

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About johnmireles

Photographer, writer, thinker, climber, outrigger canoeist, bad guitar player and even worse singer.
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17 Responses to Do I Charge Sales Tax to Out-of-State Clients?

  1. Thank for the tip, I have an out of state client that I did not charge tax for, but she is coming to my town soon so I was going to hand deliver her album. But now I know I better just ship it to her out of state to be safe. thanks!

  2. Mitchell Burt says:

    THANK YOU! I have had countelss photographers argue this with me and actually you are the ONLY other photographer who I’ve spoken with that has this right. It doesn’t help that many states go to lengths to confuse this fact in their discussion of sales tax guidelines. The other point that many photographers seem to have an uninformed sense of security about is the misconception that photography is a service and therefore not subject to sales tax in any case. Strictly it’s true that if you are hired to simply shoot something for a client then there is no tax due. Presumably that client will want to actually make use of the resulting images however, and once you deliver them in any physical or virtual form, you’ve delivered a product and sales tax applies IF the client resides and receives the images in a state other than your registered state of business. Moreover the tax applies to all components that went into the production of that product, so if, for example, you charge a shooting fee separately from an order for prints, then the shooting fee is considered to be part of the final delivered product and tax should be applied to entirety of the exchange – ie, on the shooting/sitting fee as well as the price of the prints. For this reason you should determine if tax is going to apply to the client up front. In our case we secure a date by retainer (which is legally defined as consideration to secure a unique inividual’s time on a given date/time) rather than by deposit (which is defined as a partial payment on a good or service in order to secure its availabilty or prouction) and that is arguably NOT subject to sales tax….but that’s not the kind of semantic discussion that I ever want to have with an auditor.

  3. kkorpos says:

    hum…but if I photographer lives in State A, and the clients live in State B, and you often shoot in State B, meaning you drive into that state on a regular basis (for example, more than 3 times a year) would you consider the photographer having nexus in State B, i.e. doing business in State B. I mean, they are physically there doing business when they do the shoot…and many states would consider this action enough to warrant them to register to collect sales tax from that client that lives in State B….something to consder : )

  4. Ellen Zaslaw says:

    Is is it legal and proper or tax evasion to deliver product to an in-state client’s out-of-state family member?

    • johnmireles says:

      Ellen: I asked this question of the California Board of Equalization – the agency in charge of collecting sales tax. They said so long as I deliver the product out of state, that’s all that matters. I’m not expected to know nor be responsible for what happens afterward. When I do have a client using their parent’s address, I let it be known that every deliverable must be shipped to that address. That’s also the address that’s on the contract.

      I would suggest that you contact your state agency to see what they say. My guess is that so long as you’re not conspiring with them to bring the product back into the state, you’re okay. I’m not a lawyer so please don’t take my word as the definitive one on this subject.

  5. Julie Mikos says:

    Hahaha, Ellen. You really got someone t the CA BOE to know an answer to this question? That’s a surprise. For many years I didn’t charge sales tax for out of state clients, but my tax accountant scolded me and I finally went to the DWF and posted the question. Someone from Ca said I had to charge sales tax for out of state. That’s when I called the BOE and they didn’t know. I really don’t know what to do anymore, but I KNOW out of state inquiries sometimes go with a photographer that ISN’T charging them CA sales tax. Ugh.

    • johnmireles says:

      I’m surprised the BOE didn’t have a definitive answer for you. This is basic, basic stuff for the BOE. I believe there’s even an out-of-state line on the tax return. I’m in California and I can tell you that in my 20 years of business I’ve never ever collected tax for an out of state transaction.

  6. Ellen Zaslaw says:

    I’ve now spoken with the New York State tax bureau. It’s very clear: no tax on wdddingsvwhose productsvarevsent out of state (in principle the client is responsible for paying uncollected sales tax like this to her state, when she does her income taxes, but that’s no concern of ours). The out-of-state address doesn’t need to be on the contract–indeed it may not apply at the time of signing. All that matters is that it be genuine at the time of delivery. That also means that shipping to a relative isn’t usually legitimate.

  7. Ellen Zaslaw says:

    That needed editing! Sorry, the iPad went nuts and I hit “send” when a client came in the door.

  8. Shane says:

    I recently found your website through the DWF. I have a question about your contracts, but I will send an email inquiry for that. My question is, I have a studio in upstate New York and the bride lives in California. But the wedding is taking place in New York. So you’re saying it doesn’t matter where the photography takes place? It JUST matters where the physical products (album, etc), are delivered? Thanks! (P.S. Congratulations on your recent “Day in Court” victory).

  9. Lynnette says:

    I’m having trouble deciding the right answer to this question. I’ve been to many forums and have been hearing so many different answers. Wondering if you may know the answer to this…..
    I live in Texas and recently did a destination shoot in Hawaii, I came home to Texas to edit and order my clients products and plan to ship it back to them in Hawaii (of course)… do I charge Texas Tax, Hawaii Tax or neither?

  10. Siri says:

    Sheesh! Our accountant has us registered in each state of our tri-state area, even though our business is located in Maine. What if the photographers are located in two states. Like Maine and Massachusetts? Would we have to pay in New Jersey if we did a shoot there?

    • johnmireles says:

      I can’t speak to your specific situation, but, in general, if your business maintains a physical presence in any given state, you must collect sales tax for any shoots delivered in that state. The reason why a CPA would register a business with three states is because the business has a physical location in those three states. If the business does not have a physical location of some sort in each of those three states, I don’t see why it would collect tax for each of the three states. It’s been my experience that accountants are not always well versed in the intricacies of sales tax so I always suggest going directly to the tax agency for the final word.

  11. CSinno says:

    What if you are merely delivering digital files over a FTP (from your computer within your state to an out-of-state person (ie, NYC based photographer to a NJ/PA resident? Is that photo shoot and digital files taxed or not? What if they are in the same state (NY – > NY)…? I am reading conflicting information online these days (not here, but in general) and trying to make sense out of it all. I am newly self-employed. Thanks for your feedback in advance.

    • johnmireles says:

      Every state is different when it comes to the application of tax for in-state sales. Digital downloads are not taxable in California (where I’m located), but they are taxable in other states.

      Transactions where the delivery of the final product – whether in physical or digital format – is out of state are not subject to sales tax. So if you’re delivering from your computer in New York to one in New Jersey, then no tax is due. If it’s from your computer to another computer in New York, I’d suggest you contact your state tax agency. They should have a phone in number for you to call and get the direct answer.

      One final note on this, if anyone ever has a question where they’re receiving conflicting responses as to the applicability of sales tax, always contact the state tax authority directly. If you’re still not sure, write a letter with your question. When they respond in writing, you’ll have their letter to fall back on if you’re ever audited. In California, if you have a letter from tax agency, you cannot be penalized for following its instructions.

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