Bakewell v. Commissioner of Revenue, 2009 WL 427029 (Minn.Tax Regular Div. Feb. 19, 2009).

The Appellants ran a wedding photography business that charged only for the service of a photographer, but provided their customers with DVDs containing digital images, and assigned all copyrights to its customers.   According to the Court:

The business operated differently from traditional wedding photography businesses. Traditional wedding photographers retained customers’ negatives and the copyrights to the photographs and packaged their services to include a set of finished prints as part of the cost of hiring the photographer.

The appellant didn’t collect sales tax from its customers. The question before the Court was whether providing DVDs containing digital images constituted a retail sale of tangible personal property, taxable under Minnesota’s sales tax statute.

Minn. Stat. § 297A.62, subd. 1 states that a sales tax is imposed on gross receipts from retail sales made in Minnesota.  “Sale” is defined as “any transfer of title or possession, or both, of tangible personal property, whether absolutely or conditionally, for a consideration in money …. “  And, “tangible personal property” is defined as “personal property that can be seen, weighed, measured, felt, or touched, or that is any other manner perceptible to the senses.”

The Court found that the DVDs were tangible personal property and that the business practice was taxable:

DVDs contain the photographs in a readily useable form . . . The customer is not paying for just the photographs, it is also paying for the ease of portability and retrievability of the images provided by the DVD. We find, therefore, that the DVDs are tangible personal property.

The Court noted, however, that if the photographers had only transmitted images to their customers electronically via email or the internet, a sales tax wouldn’t be assessed.  It was the fact that the images were “transferred on . . . DVD that ma[de] it taxable.”

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