On October 6, 2022, the Supreme Court of Mississippi held that digital images are not subject to sales tax as tangible personal property or specified digital products. The taxpayer was a digital wedding photographer that sold wedding photography services to customers and then transferred the digital images to the customers via DVDs or flash drives. Following an audit and sales tax assessment, the Supreme Court of Mississippi held that the sales of wedding photography packages – including digital images – were not subject to sales tax. First, the court held that digital images were not “tangible personal property” by nature of being transferred by DVD or flash drive, as opposed to an electronic means of transfer. Rather, this approach “literally places form over substance” and is “an arbitrary distinction.” Instead, the court observed that the tangible drive or disk is “incidental to the nontaxable photography service being provided.” Second, the digital images were not taxable as “specified digital products” because the term does not include “still digital images.” Finally, photography services are not enumerated as taxable.
Mississippi Dep’t of Revenue v. EKB, Inc., Dkt. No. 2021-SA-00441-SCT (Miss. Oct. 6, 2022).