MN – Photographers; be careful what you include with service.

MN Dept. of Revenue recently issued a judgement to a photography studio for it’s issuance of the photographs taken in digital form to its customers.  Previously, in the film era, the photographer would give the negatives to customers to obtain their own prints and they were considered as only providing exempt services. 

But, now that the digital world has arrived, and the photographer now gives DVDs with the photos taken, the services are taxable because the received disk provides a usable form. 

Sounds like there is a planning opportunity here… if the photographer gives the photos through a website and allows the customers to have full rights to those photos, it would not be taxable.  

Unless and until MN decides to tax digital property -like some states are starting to do.  (Online Books, Music, etc.)

You can read the case and decision here.