96-056
Response
April 1, 1996
Request
Dear
Sirs:
I
am writing requesting a ruling in connection with a business venture I am just beginning.
I am providing a service to dentists, wherein I receive a photograph of a
dentist's patient with specific instructions on changes to the appearance of
the patient's smile. Upon completing the requested changes I print out a
picture which shows the before and after comparison of the patient's smile
which the dentist can then use to sell the patient on certain cosmetic dental
procedures.
The
photograph is the only tangible product of the service I am offering to the
dentists. The real value of my service lies in the changes I make to the
picture via my digital imaging system, not in the photograph itself. I believe
this is evidenced by the fact that additional copies of the image are available
for purchase by the dentist at 20% of the price of the first picture. This
price covers my expense in creating an 8" X 10" glossy photo from my
digital image rendering system.
I
greatly appreciate your consideration in this matter. Of course, my interest
would be best served if my service were not subject to sales tax liability,
however, I will respectfully comply with your ruling regardless. Please forward
your ruling to the following address.
Sincerely,
XXXXX
XXXXX
Re: Advisory Opinion - Application of sales
tax to charges for computer-enhanced
photographs
Dear
XXXXX
We
have received your request for an opinion as to the taxability of charges for
your company’s services. We find as
follows:
Under
Utah Administrative Rule R865-19S-92, the sale of computer generated output is subject
to sales tax if the primary object of the sale is the output and not the
services rendered. Under Utah
Administrative Rule R865-19S-75, sales of prints by a photographer are taxable
as sales of tangible personal property.
Both of these rules touch on the kinds of activities that make up your
finished product.
Although
you render services in manipulating the computer images, the primary object of
each sale is the computer-enhanced or generated photograph. The services rendered in producing the photograph
are incidental. In reaching that
conclusion, we note that your customers purchase and use the photographs and
that the photographs are a requisite part of each transaction. On the basis of
the transactions described in your request, your sales are taxable sales of
tangible personal property.
Please
contact us again if you have additional questions.
For the Commission,
Alice Shearer,
Commissioner