New York State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in New York, with full citations and the original source on every page.
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How are receipts from internet sales of gift certificates and gift checks sourced for the New York receipts factor?
They are intangible other business receipts sourced to where the customer accesses the website. Selling merchant certificates, gift certificates, and gift checks over the internet is not a sale of tan…
Are royalties from licensing patents and other intellectual property to manufacturers sourced to New York based on where the licensee manufactures?
Yes. Royalties from licensing product and process patents are allocated to New York under section 210.3(a)(2)(C) when the licensee uses the patents in New York, and royalties from licensing trade secr…
In a section 338(h)(10) stock sale, is a subsidiary's actual distribution of unwanted assets to its parent treated as part of a complete liquidation for Article 9-A?
It follows the federal treatment. Where a target corporation actually distributes unwanted assets to its selling parent in connection with a section 338(h)(10) stock sale, and the distribution is trea…
Is a trade acceptance draft purchased by a company investment capital under section 208.5, or business capital, for Article 9-A?
It is investment capital. A trade acceptance draft purchased by company C is a 'qualifying corporate debt instrument' and is not subsidiary capital in C's hands, so it constitutes investment capital u…
Is an out-of-state manufacturer that keeps inventory at an unaffiliated New York firm which modifies the goods subject to Article 9-A franchise tax and required to register as a sales-tax vendor?
Yes to both. Company A, an out-of-state blower manufacturer, keeps inventory at unaffiliated Company B in New York, which attaches motors and pulleys to order before shipping to customers. Because tha…
May a corporate member of an LLC taxed as a partnership claim the investment tax credit (or empire-zone ITC) on the LLC's property, and qualify as a new business eligible for a refund?
Yes. A corporate member of an LLC treated as a partnership may claim the investment tax credit (or the empire-zone ITC) on its allocable share of qualifying property the LLC places in service, just as…
How does a company source receipts from licensing databases and electronically transmitting circulars, forms, manuals, and reports in the Article 9-A receipts factor?
They are other business receipts sourced to where the customer accesses the data. Receipts from licensing databases and electronically transmitting circulars, forms, manuals, and reports are 'other bu…
Is a registered limited liability partnership that elects to be taxed as a corporation federally also taxed as a corporation under New York Article 9-A?
Yes. Under section 208.1, the term 'corporation' includes an association taxable as a corporation, so a registered limited liability partnership (RLLP) that elects under the federal check-the-box rule…
Is a corporation subject to Article 9-A tax for the years it was active, and after it was dissolved by proclamation while merely holding property as nominee?
It is taxable for its active years but not after dissolution. The corporation (JN Parkville Inc/Corp) is subject to the Article 9-A franchise tax under section 209.1 for the taxable years it was incor…
Is a foreign corporation that holds New York real property for investment subject to the Article 9-A franchise tax?
Yes. A foreign corporation that owns real property in New York for investment purposes is owning property in the state within section 209.1 and 20 NYCRR 1-3.2(d), which subjects it to the Article 9-A …
How does a company allocate receipts from leasing dark fiber-optic strands in the Article 9-A receipts factor?
Source them by fiber miles. For dark-fiber leases, fiber miles within New York equal the number of strands leased under a contract multiplied by the route miles located in New York. The New York porti…
Are offshore feeder (Spoke) funds doing business in New York merely by being partners in a New York-present master (Hub) fund that only trades securities or commodities for its own account?
No. Under the self-trading exemption in section 209.2-a, an offshore (alien) Spoke feeder fund is not deemed to be doing business, employing capital, or maintaining an office in New York merely becaus…
Is a water-works corporation that is an instrumentality of a town water authority and a section 1411 not-for-profit local development corporation subject to New York franchise or utility taxes?
No. Country Knolls Water Works -- whose sole member is the Town of Clifton Park Water Authority (a public benefit corporation) and which was reincorporated in 1995 as a not-for-profit local developmen…
Must a voluntarily dissolved corporation that merely holds record title to real property file Article 9-A franchise tax returns?
No. A voluntarily dissolved corporation that is merely the record title holder of real property, and is otherwise inactive, is not doing business in New York under section 209.3, and is not subject to…
Is a not-for-profit independent system operator that controls the bulk electric grid and runs spot markets -- but does not own the grid or buy or sell electricity -- subject to section 186, section 186-a, or the Article 9-A franchise tax?
No. The New York Independent System Operator -- a not-for-profit that has operational control of the bulk electric transmission grid, administers spot markets, and maintains reliability, but does not …
Does equipment used to inspect, repair, rebuild and repaint used shipping pallets qualify for the production-machinery sales tax exemption or the investment tax credit as manufacturing?
No. A pallet-pooling company's automated inspection, repair/rebuild and painting/stenciling of used industry-standard pallets is repairing and reconditioning previously manufactured pallets, not the p…
Is a foreign life insurer doing business in New York only through investment partnerships subject to Article 33 (not Article 9-A), and must it file a return if its Article 33 tax is capped at zero?
Yes to Article 33, and yes it must still file. A foreign life insurer doing business in New York only through its interests in general and limited partnerships and LLCs is subject to the Article 33 fr…
After its spin-off from General Motors, is Delphi a new business eligible to elect a refund of its investment tax credit under section 210.12(e)?
Yes, for the period after the spin-off. For the short period while Delphi was still more than 50% owned by GM (a 9-A taxpayer) it was not a new business under section 210.12(j)(1). After GM's May 28, …
Is a gain under a residual sharing agreement -- compensation for market information provided from New York to help an affiliate price a vessel sale -- excluded from gross earnings for section 184 purposes?
No, it is not excluded. A Great Lakes shipping corporation's receipt under a residual sharing agreement -- its 20% share of the proceeds when an affiliate sold a vessel, in return for market and opera…
Is an alien corporation providing international callback service through a New York switch doing business under Article 9 or 9-A, and how are its and its US subsidiary's telecommunication receipts sourced?
The alien parent (FORCO) is principally engaged in a telephone business, so it is classified under section 183 rather than Article 9-A, but on these facts it is not doing business in New York and so o…
Is a mutual redevelopment company organized and operating under Article 5 of the Private Housing Finance Law subject to the Article 9-A corporation franchise tax?
No. Two cooperative affordable-retirement housing corporations organized and operating as mutual redevelopment companies under Article 5 of the Private Housing Finance Law are not subject to the franc…
Does a corporation's section 1452(d) election to remain taxable under Article 9-A survive a merger of its parent bank, a name change, and a change in its business activities?
Yes. The corporation's one-time section 1452(d) election to continue being taxed under Article 9-A (rather than Article 32) was not revoked by the merger of its parent bank into another bank, by its n…
How is a federal IRC section 338(h)(10) election treated for New York tax when the target sold is an Article 9 corporation, and how is the parent's stock-sale gain treated?
The TSB-M-91(4)C treatment of section 338(h)(10) elections is for Article 9-A purposes only. For the Article 9-A parent selling the target's stock: if the parent is a selling affiliate, the election i…
Is the dollar limit on the economic development zone capital credit applied separately to each corporation in a combined group, or once at the combined-group level?
Per corporation. The total economic development zone capital credit allowable to a taxpayer -- the $300,000 aggregate cap and the $100,000 per-category cap under sections 210.20(a), 1456(d)(1) and 151…
Are charges for audio-conference bridging services -- conference management without providing the transmission -- subject to New York sales tax or to the section 186-e and 186-a gross receipts taxes?
No. When a provider supplies only audio-conference bridging services -- reserving and programming a bridge, issuing passcodes, verifying participants and assisting them, while the participants buy tra…
Is the Article 9-A exclusion for dividends received from subsidiary capital limited to the amount of those dividends excluded for federal income tax purposes?
No. In computing entire net income under Article 9-A, the exclusion for dividends received from subsidiary capital under section 208.9(a)(1) is not limited to the amount the corporation excluded (or d…
Does an aluminum manufacturer that began doing business in New York through a merger qualify as a new business eligible for the refundable investment tax credit?
Yes. An aluminum-ingot manufacturer that began doing business in New York on June 30, 1997 through a merger qualifies as a new business for the refundable investment tax credit under sections 210.12(j…
How does a company that guarantees advertisers a television audience -- but is not a broadcaster -- allocate its receipts for the Article 9-A receipts factor?
As service receipts. A company that contracts with advertisers to guarantee their commercial messages reach a specified audience at a specified cost-per-thousand is not a broadcaster, so it cannot use…
How are an exchange's monthly market-data subscription fees from licensing vendors sourced for the receipts factor of the Article 9-A business allocation percentage?
The monthly market-data subscription fees the New York Mercantile Exchange receives from its data vendors are other business receipts under section 210.3(a)(2)(D) of the Tax Law. They are New York rec…
When a trucking corporation moves from Article 9 (sections 183/184) to Article 9-A, may it deduct a net operating loss carryforward from its Article 9 years?
No. A trucking corporation that was taxed under sections 183 and 184 of Article 9 through 1997 and became subject to Article 9-A on January 1, 1998 may not claim an Article 9-A net operating loss dedu…
Is an out-of-state manufacturer with two New York sales representatives, one working from a home office, subject to Article 9-A, or is it protected by Public Law 86-272?
Protected. An out-of-state paper-products manufacturer whose only New York activities are two sales representatives soliciting orders -- one working from his New York home -- is not maintaining an off…
Which of a utility's distributions to its holding company during a PSC-mandated restructuring are excess dividends under section 186, and which are not?
The within-the-mandate test controls. Central Hudson's investment of its generation-auction proceeds into unregulated operations through the holding company, and the holding company's distribution of …
Are the proceeds a utility receives from a PSC-mandated auction of its generating facilities gross earnings under section 186, and how are they treated for section 186-a gross income?
The auction proceeds are not gross earnings under section 186, but the profit is gross income under section 186-a. A utility's PSC-mandated divestiture of its fossil and hydro generating facilities by…
When a section 186 utility transfers its unregulated subsidiaries to its new holding company under a PSC restructuring, does that trigger gross earnings, gross income, or an excess dividend?
No gross earnings and no dividend; section 186-a gross income only to the extent of profit. A section 186 electric utility's transfer of its unregulated subsidiaries (Energetix and RGS) to its new hol…
When a section 186 utility buys back its parent holding company's stock on the open market and then transfers it to the parent, is the transfer an excess-dividend distribution under section 186?
It depends on the transaction. A section 186 electric utility that repurchases its parent holding company's publicly traded stock on the open market -- a stock-repurchase program done outside the PSC-…
Is a utility's PSC-mandated transfer of $100 million to its holding company to fund unregulated activities an excess dividend under section 186?
No. Rochester Gas and Electric's transfer of $100 million to its holding company, made for the express purpose of fulfilling the PSC's mandate to fund certain unregulated activities under its Competit…
Does a federally tax-free liquidation of a subsidiary (IRC 332/337) or a tax-free merger into the parent (IRC 368(a)(1)(A)) require any entire-net-income modification under Article 32 or Article 9-A?
No. For both Article 32 (banking corporations, section 1453) and Article 9-A (section 208.9), entire net income starts from federal taxable income, and neither article contains any modification or adj…
Does a corporation's section 1452(d) election to remain taxable under Article 9-A survive its acquisition by a bank holding company and various mergers and transfers of business into it?
Generally yes, with one limit. The corporation's section 1452(d) grandfather election to stay under Article 9-A is not revoked by Citicorp's acquisition of it, by a later transfer to Citigroup, or by …
Does a corporation's section 1452(d) election to remain taxable under Article 9-A survive its acquisition by a bank holding company and various mergers and transfers of business into it?
Generally yes, with one limit. The corporation's section 1452(d) grandfather election to stay under Article 9-A is not revoked by Citicorp's acquisition of it, by a later transfer to Citigroup, or by …
Is a corporation dissolved by proclamation, which only holds record title to real property as nominee, subject to the Article 9-A franchise tax before and after its dissolution?
It depends on the period. The corporation is subject to the Article 9-A franchise tax under section 209.1 for the taxable years it was incorporated, up to its dissolution by proclamation, because it h…
Is a corporation dissolved by proclamation, which only holds record title to real property as nominee, subject to the Article 9-A franchise tax before and after its dissolution?
It depends on the period. The corporation is subject to the Article 9-A franchise tax under section 209.1 for the taxable years it was incorporated, up to its dissolution by proclamation, because it h…
Is a utility's PSC-mandated transfer of a subsidiary's stock to its new holding company a dividend paid subject to the section 186 excess dividends tax?
No. Niagara Mohawk's proposed transfer of its Opinac N.A. subsidiary stock to its new holding company after the share exchange, made as part of the PSC-mandated PowerChoice restructuring, does not rep…
May a corporation that bought the assets and hired the workforce of an unrelated predecessor claim the EDZ wage tax credit and EDZ investment tax credit?
Yes, subject to meeting all the requirements. New Woerner Industries -- which acquired all the assets of the unrelated old Woerner Industries and hired its employees, then sought EDZ certification -- …
Are the proceeds of a utility's PSC-mandated generating-asset auction gross earnings under section 186, and is distributing those proceeds to its holding company an excess dividend?
No to both. Consolidated Edison's PSC-mandated divestiture of its electric and steam generating assets is a forced restructuring, not the employment of capital, so the consideration it receives is not…
Is a New York corporation that never issued stock and never did any business still subject to the Article 9-A franchise tax?
Yes. A corporation incorporated in New York is subject to the annual Article 9-A franchise tax under section 209.1 for every taxable year from the date of incorporation until it is dissolved, regardle…
Is a foreign corporation that stores goods in unaffiliated New York public warehouses using a fulfillment service, and does employees visiting to inspect warehouses and meet customers defeat its Public Law 86-272 protection?
Storing goods in unaffiliated New York public warehouses is the use of a fulfillment service under section 209.2(f), and it does not create nexus. Employees traveling into New York to examine those wa…
Does a foreign corporation become subject to Article 9-A by storing a day's inventory in a New York common-carrier warehouse for just-in-time delivery, or does the fulfillment-services exemption apply?
The storage would otherwise create nexus, but the fulfillment-services exemption applies. A foreign manufacturer's storage of about one day's inventory in a New York common-carrier warehouse for just-…
Does a manufacturer's tooling, provided free to New York subcontractors to make components for its own products, qualify for the investment tax credit?
Yes. Xerox's tooling (dies and molds) that it provides without charge to New York subcontractors -- usable only to make components for Xerox and used under Xerox's supervision -- is not leased within …
Is rent paid to store inventory in a warehouse, where the space is controlled by the warehouse operator, included in the property factor of the Article 9-A business allocation percentage?
No. The amount a company pays to store its inventory at an unaffiliated warehouse, where the charge is computed by the cubic feet used for a designated space and the space is under the control of the …
Is rent paid to store inventory in a warehouse, where the space is controlled by the warehouse operator, included in the property factor of the Article 9-A business allocation percentage?
No. The amount a company pays to store its inventory at an unaffiliated warehouse, where the charge is computed by the cubic feet used for a designated space and the space is under the control of the …
When a utility buys its parent holding company's publicly traded stock on the open market and keeps it, is that a constructive dividend subject to the section 186 excess dividends tax?
No. When Rochester Gas & Electric buys the publicly traded common stock of its parent holding company on the open market and continues to hold it, there is no distribution of property to its sharehold…
Does a sale of a subsidiary in an IRC section 338(a) transaction require the target to recapture the investment tax credit it previously claimed under section 210.12?
Yes. When a section 338(a) election treats the sale of a target's stock as a deemed sale of all its assets, that is a 'disposition' for New York investment tax credit purposes, so the old target must …
How are New York's College Choice Tuition Savings Program and its participants taxed for franchise tax, personal income tax, and estate and gift tax purposes?
The Program (and its trust fund and LLC) is a governmental arrangement, not a corporation or association, so it owes no franchise tax, income tax, or unrelated-business income tax. For participants: c…
Do a public warehouse's added services -- contract negotiation, site visits, and quality-control inspections -- change its status as a fulfillment-services provider, and do out-of-state customers get New York nexus by using it?
The added steps do not change the result. Distribution Unlimited's public-warehousing activities -- including the new contract-negotiation, site-evaluation, and periodic inventory and quality-control …
After a mail-order retailer closes its New York stores, does holding over the now-vacant leased store space until the leases can be terminated keep it taxable, or is that property de minimis under Public Law 86-272?
Exempt, with a final return required. After Egghead closed all its New York retail stores, its remaining New York activity is mail-order solicitation (catalogs and a web page, orders approved and ship…
Is a telephone answering service subject to the section 186-e excise tax on telecommunication services, and is it taxed as a telephone business under sections 183 and 184?
No to both telephone-tax treatments. Viewed from the customer's perspective, an answering service is a general business -- the receptionist takes calls, distills messages, and relays them -- so it is …
Are foreign Importer Notes that PEFCO holds -- notes fully guaranteed and controlled by the Export-Import Bank -- investment capital under section 208.5, or are they loans made in the business of lending funds?
They are investment capital. Although PEFCO advances the funds, the Export-Import Bank controls the Importer Notes -- it selects the obligors, sets the interest rate by its formula, and drafts the cre…
How does an interstate trucker that switches from Article 9 (sections 183/184) to Article 9-A as a New York S corporation compute its short-period entire net income, and how does that flow through to nonresident shareholders?
The trucking company computes entire net income as if it were a New York C corporation for its full federal taxable year, then prorates that income under section 208.9(h)(1) for the six-month short pe…
For the section 1505(b) test of whether more than 95% of an insurer's premiums are annuity consideration, does 'premiums' include reinsurance premiums and all direct premiums (in and out of New York)?
Yes to both. For purposes of the section 1505(b) test -- whether more than 95% of an insurance corporation's premiums are received as consideration for annuity contracts (or for the section 1510(c)(2)…
How do the real estate transfer tax, sections 186 and 186-a, the petroleum business tax, the subsidiary capital tax, and the stock transfer tax apply to a utility's PSC-mandated restructuring into a holding-company structure?
Across five taxes, the PSC-mandated restructuring is largely tax-neutral. Real estate transfer tax: the share exchange, subsidiary spin-offs, and generation-asset transfers within the affiliated group…
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These are official tax letter rulings and advisory opinions issued by New York's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.