Truprint wins UK photo book tax case

An article from the UK's Daily Mail newspaper reports that photofinisher Harrier LLC--which trades under the Truprint brand--has won a court case against Her Majesty's Revenue and Customs, challenging the collection of value-added taxes for sale of photo books.

Under the UK's Value Added Tax Act 1994, there are a number of exemptions to VAT for goods and services that are considered to be essential items, known as zero-ratings. Along with obvious necessities such as food and clothing, books are considered to be exempt from value added tax, unless they are stationery items which lack significant preprinted content. HM Revenue and Customs apparently believed photo books to fall outside of this zero-rating, perhaps given that they're predominantly photographic content. (A 2003 notice from the government department outlining eligible items makes reference only to written works, and specifically excludes photographs and photograph albums from zero-rating.)

At a hearing in London, First–tier Tribunal (Tax) Judge Roger Berner ruled in favor of Harrier LLC, whose US-based parent company District Photo Inc. also operates US photofinishers Clark Color Labs and York Photo. (The Truprint website is actually operated by HP's Snapfish division, which was previously owned by District Photo, before being acquired by the IT giant in 2005.) The full text of the judgement in the case has yet to be released on the Tribunals Judiciary website, but should be available soon, for those interested to read Judge Berner's reasoning.

Interestingly, the Tax Tribunal considers this to be a lead case, meaning that in addition to Harrier's case against HM Revenue and Customs, there is at least one other case before the tribunal pertaining to the same issues. No details are available with regards to the other case(s), but in light of Judge Berner finding for Harrier LLC, it seems that other UK-based photofinishers will also find themselves able to offer photo books without collecting VAT.

According to the Daily Mail, the UK government will now have to return some £545,800 (approx. US$854,000) in VAT collected by Truprint between 2006 and 2009, as well as subsequent VAT payments said to number in the tens of thousands of pounds. In addition, the government must bear legal costs for both sides in the case, said to total around £500,000 (approx. US$782,000).

It isn't immediately clear whether Truprint received VAT payments from its customers at the time of sale during the period in question, and hence whether the company is entitled to keep the refunded taxes, or must in turn refund its own customers. Should further information come to light, you can be sure to find it on our news page. More details can be found in the Daily Mail article.