The Texas Comptroller's Office has released guidance that addresses the sales and use tax responsibilities of artists. It reminds taxpayers that artwork is taxable tangible personal property. Taxable artwork includes ceramics, drawings, paintings, sculptures, graphic design, and crafts. It also includes photographs and videos, whether digital or in a tangible format.
Texas requires artists who engage in business in the state to register for a sales tax permit. This includes online sellers and artists that sell their work at local art shows and art galleries. With the exception of art sold through online marketplaces, artists are responsible for collecting state and local taxes on their sales. This includes sales from any location operated by an artist where the artist received three or more taxable orders in a calendar year.
Artists can purchase materials that are incorporated into a final product tax-free for resale. Examples include paint, canvases, ink, and yarn. Artists can also use the manufacturing exemption for materials used to manufacture, fabricate, or process tangible personal property for sale. The materials used to create artwork must (1) be directly used or consumed during the process, (2) be necessary or essential to the process, and (3) directly make or cause a chemical or physical change to the product.