Over 15 years ago when I joined Bleu, we talked to our CPA about sales tax on our photography coverages and we confirmed our knowledge was correct...that we must charge sales tax on the creation fee, and we have been doing this properly.
Recently, I have gotten clients who ask this question now that we shoot digital, and we do not have to purchase and shoot on physical "film"....But the same laws are in effect when we shoot digitally...because the final product could never exist without the service of a photo coverage.
I just read a wonderful article that explains this state sales tax concept, by Kristin Korpos, attorney and MBA specializing in the business of photography. I wanted to share the overview of her way of explaining why we charge sales tax on the creation of images. Her entire article is in the 2/2014 archives of Rangefinder, a brilliant magazine published for professional photographers. The article is "The Sales Tax Primer: What to Charge, How to Charge and Why."