But the Bakewell approach, which the MDOR urges, literally places form over substance. It makes an arbitrary distinction between digital images transferred from Burton’s computer to the client’s computer by disk, which Bakewell ruled was taxable, and digital images transferred from Burton’s computer to the client’s computer by electronic mail, which under Bakewell would not be taxable. In reality, EKB’s clients did not pay EKB thousands of dollars for a jump drive or DVD that they could purchase at an office-supply store for a few dollars. Clients paid EKB thousands of dollars for Burton to take digital photographs of their wedding. And the undisputed facts show EKB’s customers did not receive Burton’s photographs in tangible form—they did not receive printed photographs, negatives, or film. Instead, they receive purely digital images. 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.
Source: forbes.com
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