Liesa Cole has been working in Alabama as a commercial photographer for 20 years. She said the industry standard has always been that commercial photography companies are exempt from paying state sales tax. Photo by Liesa Cole.
The champagne is on ice but the bottle will remain corked for now, Liesa Cole said with a laugh — at least until she is absolutely sure that it’s time to celebrate.
On June 15, Jefferson County Circuit Judge Houston Brown granted a summary judgment in favor of Cole’s commercial photography company, Omni Studios, after nearly two years of litigation between Omni and the Alabama Department of Revenue.
Without warning, Cole was ordered by the Revenue Department to pay six years’ worth of back sales taxes, totaling $28,000. The problem, however, is that commercial photography is a profession that has been exempt from sales tax in Alabama because they do not provide tangible goods, but professional services.
Cole believes that she has spent more on lawyers than the amount she is being ordered to pay. Now, “this nightmare is close to being over, although it seems like it will never end,” she said.
The one caveat of the summary judgment was that the Revenue Department has until July 30 to appeal the decision. While Cole was overjoyed to hear the news of the summary judgment, she is keeping a guarded sense of optimism until the deadline to appeal has expired.
“I just want this thing to be put to bed,” Cole said on Friday. “I’m saving the cartwheels in the street until after July and we know we aren’t going to have to deal with an appeal.”
Brown’s order for summary judgment upholds the legal position that as a commercial photography studio, Omni should not have any obligation to pay sales tax; that the company produces no taxable goods.
“As a commercial advertising production studio, Omni’s professionals use their talent, expertise, and experience, in consultation with their clients, to gather the necessary resources to produce both still and video images that fit a particular commercial need,” the order reads.
“Section 40-23-2(1) of the Alabama Code (1975) imposes a sales tax on the retail sale of tangible personal property in Alabama. However, tangible personal property delivered as an incident to professional services is not taxable under the statute,” according to Brown’s summary judgment.
It is unclear whether the Revenue Department plans to appeal the decision. Amanda Collier, a representative with the agency said, “The department is in the process of reviewing and evaluating the recent decision entered by the Circuit Court in the Omni Studios case. A decision concerning an appeal will be forthcoming.”
Cole, who has been in the commercial photography business for 20 years in Alabama, thought that once the court made the decision to grant her a summary judgment the Revenue Department would stop pursuing “erroneous” back taxes from commercial photographers. However, that does not seem to be the case.
“I was thinking that this decision would sort of be a community-wide victory. I assumed that our case would affect everyone else’s and that all the other photographers who are being asked to pay these back taxes would benefit from our case. But I just found out they are still going after people,” Cole said.
She believes that since the tax code hasn’t been changed and the legislation that would essentially protect commercial photographers in Alabama from being subjected to Revenue Department audits won’t come before the legislature until at least next session, photographers are still at risk of audits and litigation.
Edward Badham, a Birmingham-based commercial photographer, has also come into the Revenue Department’s radar. Initially he was ordered to pay $46,000 worth of back taxes, but during the time he has spent fighting his case, he has been fined even more and has accrued interest on his back taxes. Now, he is being told he owes $48,000 to the Revenue Department for taxes he never had to pay during his time in the industry.
According to Badham, the Revenue Department is still pursing a case against him despite the decision for a summary judgment in favor of Omni Studios.
“I just don’t understand this. Are they going to make every one of us go to court and have the same trial 50 times and get the same opinion from the judge?” Badham asked.
A photo of the gate in front of Omni Studios. Cole pointed out that her studio does not include a storefront where customers can walk in and buy photos. Photo by Cody Owens.
“It’s a victory, no doubt. But it just blows my mind they are still pursuing us, saying we need to pay these taxes when there is now a very clear precedent that says — what we knew all along — we don’t sell taxable goods,” Badham said.
While frustrated, Badham is still able to find humor in the “absurdity of it all.”
Badham likens his situation with the Revenue Department to a scene in Monty Python and the Holy Grail where King Arthur comes across the Black Knight who is guarding a bridge that Arthur must cross.
A fight ensues and Arthur cuts off both of the Black Knights arms. “It’s just a flesh wound!” the knight yells while continuing to challenge Arthur.
“It’s like the Revenue Department just won’t quit. We’ve clearly won. They’re sitting there with no arms and no legs still trying to fight this like the Black Knight,” Badham said. “At first it was suspicious, but now there is a very clear precedent and they still won’t stop.”
Last week Badham received a notification regarding his appeal with the Revenue Department. While he was waiting to hear the verdict on Cole’s case, Badham said that he has not filed a lawsuit against the Department. Even now, he is in a holding pattern until Cole’s case is completely resolved.
Badham will be meeting with the Revenue Department to go over his receipts and continue to appeal his case on July 23, seven days before the deadline for the Department to appeal their case with Cole.
“I thought this case would stand as a precedent, especially the way that the opinion is worded,” Cole said. “But because the code is vague, the Revenue Department is still exploiting that and coming after photographers.”
Cole pointed out that her studio does not include a storefront where customers can walk in and buy photos. In fact, there is a gate on the entrance to the building where Omni is located. “[The Revenue Department] hasn’t ever been to our place. They think we just sell pictures to people walking on the street. But that is just not what we do at all.”
In the order for summary judgment, Brown makes a clear distinction between commercial photography and retail photography, which typically is associated with things like family portraits, in which case there is a sales tax involved.
“This model differs from that of retail photographers who are typically paid based on the specific product delivered,” the order reads. “Omni’s charges cover a range of services and are payable in all instances, whether any still or video images are ultimately produced or whether the client decides to use any still or video images produced during the production. In all cases, the daily rate, and all other charges, are due and payable when the services are rendered regardless of any other circumstances.”
Another point of contention that Badham brings up is that while commercial photographers are coming under fire for not paying taxes they were never required to pay, the Revenue Department has not audited videographers in the state. While Badham doesn’t believe that they should be taxed either, he said it is an interesting distinction to make.
“What we do is essentially the same thing as videographers, except one is still motion and the other is not. It’s just so bizarre to me,” Badham said. Cole and Badham both named several other photographers in Alabama who are being ordered to pay six years’ worth of back taxes as well.
The Revenue Department declined to comment on the other pending cases involving commercial photographers.
“I wasn’t really looking past the court hearing. I was relieved that we weren’t going to have to go to trial,” Cole said when asked about what her next step will be. “But I didn’t really have a contingency plan in place because I can’t imagine they would appeal a summary judgment like this.”
