Washington Digital photos subject to retail sales tax

The Administrative Review and Hearings Division (ARHD) determined that the taxpayer’s sales of digital photographs are subject to retail sales tax. The taxpayer, a portrait photography business, protested the Department of Revenue’s assessment of retail sales tax on its sales of digital photographs on the grounds that it provided “photography for hire” services, which are not subject to retail sales tax. The ARHD noted that the taxpayer’s contracts with customers specified that the sale included edited images, which are produced and edited by the business before being electronically transferred to the customer. The ARHD concluded that because electronically transferred images are considered a “digital good,” and sales of digital goods are subject to retail sales tax, the Department properly classified the business’s sales as retail sales. Because the taxpayer was required to collect retail sales tax on each transaction, the taxpayer is liable to the state for the amount of the tax, regardless of whether the failure was the taxpayer’s fault or a result of acts beyond the taxpayer’s control. (Washington Tax Determination No. 20-0178, 06/26/2020, 41 WTD 199, released 05/16/2022.)