The photographic tax stamp was applied between the years of 1864-1866 as a means to recover costs incurred during the American Civil War. The first income tax in America was also a means of paying for the war, however this photographic tax was specific to the luxury of photographs, ambrotypes, daguerrotypes and any other form of photography. The amount of the tax was based on the cost of the photograph.
Photographs up to 25 cents = 2 cent tax
Photographs 26 to 50 cents = 3 cent tax
Photographs 51 cents to $1 = 5 cent tax
Photographs greater than $1 required additional 5 cent taxes for every dollar or fraction of a dollar
When you consider that the photograph might have cost 20 cents, a 2 cent tax was a whopping 10%, just for a photograph! And so, the luxury tax was born. The photographer was expected to collect the tax, cancel the stamp by some means such as writing his initials across it, and then submit the taxes to the Federal Government in Washington DC.