The Mississippi Supreme Court vacated a sales tax assessment levied on a photography business Thursday, finding its wedding photography services were not subject to sales tax.
The unanimous decision affirmed the March 24, 2021 decision of the Chancery Court of Lafayette County, Mississippi based on trial proceedings that took place on November 3, 2020. Advocating on behalf of the vindicated taxpayer was Shareholder, Will Janoush.
In a unanimous decision, the justices said that EKB Inc. was not liable for sales tax on its photography services and digital products, such as jump drives and DVDs containing photos that were sent to clients, upholding the findings of the Lafayette County Chancery Court. The decision vacates the sales tax assessment levied by the Mississippi Department of Revenue.
The Legislature added photography to the list of taxable services in 1954, the court wrote in its decision, only to remove it a year later and instead opt to tax film development and photo finishing. In 2009, the Legislature did not add digital images to the definition of specified digital products it made subject to tax.
"Thus, it is clear the Legislature has not authorized the [Department of Revenue] to assess taxes on photography," the court said.
The department had argued that tangible personal property had been transacted in the form of flash drives, coffee table books, printed photos and matte photos given to customers in exchange for the contract price set. As some personal property was included, the entire wedding package was subject to sales tax, the department said. The department had assessed $75,500 in unremitted sales tax and interest payments on EKB's sales of wedding photo packages.
In its decision, the court said that customers of EKB did not pay thousands of dollars for a jump drive or DVD, but for digital photos to be taken of their wedding.
"The tangible drive or disk is incidental to the nontaxable photography service being provided, much like the paper on which a lawyer prints a will, which is not subject to sales tax," the court said.
James Williams Janoush of Barnes Bailey & Janoush PA, legal counsel for EKB, said that the courts ruling the jump drive and DVD were incidental to the transaction was central to the case.
"Whatever tangible personal property involved, like a jump drive, was so incidental to the services provided it shouldn't transform all of EKB's wedding contracts into taxable sales. We think that is the most important part of it," he said.
In March, the state Supreme Court agreed to review the case instead of referring it to an appellate court.
Representatives of the department did not immediately respond to requests for comment Thursday. The department is represented in house by Justin P. Warren and Morton W. Smith.
The case is Mississippi Department of Revenue v. EKB Inc. et al., case number 2021-SA-00441, in the Mississippi Supreme Court.
Link to opinion: https://courts.ms.gov/Images/Opinions/CO163773.pdf
