Yeah, they'll take them for a fee. I believe it was $10-15 when I did mine last year.
Yes they do, but I recommend getting your passport pictures taken at the Walgreens down the street. Its costs around $18 to get the pictures taken and printed, you're in and out in maybe 10 minuets, maybe more if there is a line or the person is slow. They will give you two printed out pictures. The pictures have had to be taken in the last 6 months. I recommend doing that because it makes your time in the passport office way more efficient.
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