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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Does a corporation that was dissolved decades ago and holds no assets owe New York franchise tax just for signing a deed to fix a title defect from its original 1967 liquidation?
No. Signing a corrective deed solely to fill a gap in the chain of title, with no other activity and no assets, is not "conducting business" — the dissolved corporation owes no franchise tax for any y…
Are advertising market-research services — focus groups, tracking, attitude, copy, and concept studies — a taxable information service?
It is not taxable — the research is a personal, individual information service. Paul R. Comeau, of Hodgson Russ, asked about market-research services performed by or for advertising agencies — focus g…
May a lessor buy a CAT-scan machine for resale, and are its lease charges exempt under the production exemption?
The machine can be bought for resale, but the lease charges are not production-exempt. Segal Equipment Associates owns a CAT-scan machine it leases monthly to a corporation that uses it to produce dia…
Are payments under an equipment 'lease' taxable rentals, or nontaxable payments under a security agreement (financing)?
They are nontaxable — the 'lease' is really a security agreement. Eastman Kodak Company asked whether payments a company (Corporation A) makes to a finance company (Corporation C) under a lease-financ…
We're a tax-exempt nonprofit buying a condo to house mentally retarded adults. Our purchase contract makes us pay all transfer taxes even though sellers normally pay them, and we'll need a mortgage to close. Does our nonprofit status exempt us from the real estate transfer tax on the purchase, and does it exempt us from mortgage recording tax on our loan?
No exemption from transfer tax, and only a PARTIAL mortgage recording tax exemption -- a nonprofit's tax-exempt status is much narrower protection than many assume. The Guild for Exceptional Children,…
Does an unincorporated condominium association organized under New York's condominium law owe Article 9-A corporation franchise tax if it earns income beyond just common charges, like a laundry room concession?
Yes. A condominium association that earns income from a laundry room concession and storage charges — not just common-charge assessments — is providing a medium for conducting business and sharing gai…
Is a prewritten tax-preparation program taxable when the vendor personalizes it with the buyer's information to prevent copying?
Yes — the prewritten tax program (and its renewals and updates) is taxable. Lorraine L. Dunn, CPA, buys a tax-processing software program that the vendor personalizes with her name, address, Social Se…
When a stock savings bank reorganizes into a holding company structure through a transaction the IRS treats as a tax-free IRC section 351 exchange, does that reorganization also stay tax-free for New York bank franchise tax and personal income tax purposes?
Yes, tax-free for both. Cayuga Savings Bank, a New York stock savings bank, formed Iroquois Bancorp, Inc. as a holding company and executed a reorganization where a newly formed 'New Bank' merged into…
Cayuga Savings Bank asked whether reorganizing into a bank holding-company structure - becoming a wholly-owned subsidiary of a new holding company in a transaction the IRS ruled is a tax-free section 351 exchange - is likewise not a taxable transaction for New York purposes under Article 22 (personal income tax on shareholders) and Article 32 (bank franchise tax).
Yes. The Department ruled that because neither Article 22 nor Article 32 of the Tax Law contains any modification addressing a federal section 351 tax-free exchange, New York follows the same tax-free…
When a long-distance carrier offers a 900-number billing-and-collection service to business customers, are its billing/collection fees taxed the same as its communications charges under New York's transmission-company and utility-services taxes?
Yes. Because MCI's billing-and-collection revenue is directly tied to its regulated telephone service, the full amount MCI charges 900-number "Sponsors" for both the communications and the billing/col…
Are non-destructive testing services and reports a taxable information service?
They are not taxable. PCA Engineering, Inc. tests and evaluates the physical characteristics of materials (mostly metal) in structures, machines, and equipment using non-destructive methods — magnetic…
New York Advisory Opinion TSB-A-90 (4)I: Dabelstein, is whether her domicile will change as a result of marrying a nondomiciliary Army officer stationed in New York.
No, not automatically. The Department ruled that Edith Dabelstein's New York domicile does not change on her marriage date merely because she now intends to eventually follow her Army-officer husband …
Does an out-of-state bank owe New York banking franchise tax just because it buys installment contracts secured by New York property and, if a borrower defaults, forecloses or sues through a New York attorney?
No. A Connecticut bank that buys the contracts entirely outside New York, has no New York office or employees, and only occasionally enforces a security interest or takes foreclosure title here is not…
Is a charge to drive a go-kart on a track taxable, and are packaged ice cream bars sold there taxable?
The go-kart charge is exempt; the ice cream bars are taxable. Little Ozzie's Inc. runs a go-kart raceway with no admission charge — only a charge to use a go-kart on the circular track — and sells pac…
Is replacing a built-in electric wall oven a nontaxable capital improvement?
Yes — it is a nontaxable capital improvement. Robert E. Harrison asked whether replacing the built-in electric wall oven in his home's kitchen is a capital improvement exempt from sales tax. The old 1…
If a parent holding company spins off its New York lending business into a new New York subsidiary, keeps a bank account and books here, but is otherwise run entirely from Japan, does the parent still owe New York corporate franchise tax?
No. Once the parent withdraws its authorization to do business in New York, becomes a purely passive investment holding company managed entirely from Japan, and confines its remaining New York contact…
Can an S corporation carry forward research and development tax credits it earned during a year when it wasn't subject to Article 9-A tax, to a later year after it becomes a regular C corporation again?
No. A research and development tax credit computed for a year when the corporation was an S corporation — and therefore not subject to Article 9-A tax at all — cannot be carried forward to a later yea…
Can a federal contractor buy tax-free as the government's agent, and is the state estopped by an old letter that wrongly said it could?
No on both counts — the contractor owes tax and cannot rely on the old letter. West Valley Nuclear Services Co., Inc., a Westinghouse subsidiary serving as general contractor to the U.S. Department of…
Our original borrower wants off the hook for a loan; the corporate owner who guaranteed it (and later took title to the collateral) will assume the note directly instead. The lender wants a supplemental mortgage recorded to add the new owner as obligor and clean up a drafting gap so the mortgage clearly secures the note. No new money is being lent. Does that trigger additional mortgage recording tax?
No additional tax due. Carol Management Corporation borrowed $6 million from a bank in 1987, evidenced by a note; Howard Kaskel personally guaranteed the note up to $6,114,000 (principal plus two year…
Is a nonprofit professional corporation exempt from New York corporate franchise tax if it holds federal 501(c)(3) tax-exempt status but was required by state law to issue stock?
No. New York's nonprofit franchise-tax exemption applies only to corporations that have no stock or shares at all — a stock corporation stays taxable under Article 9-A even if it operates strictly on …
Our property has a title defect that makes it currently unsellable. We signed a contingent contract with one company to buy it IF we ever clear title within 15 years, at an escalating price, and simultaneously leased the property to a related company at fair rent for 5 years (with renewal options). The contingent purchase contract itself says it becomes null and void unless the state confirms this whole arrangement doesn't trigger the Real Property Transfer Gains Tax. Does it?
Yes, taxable -- a contingent purchase agreement coupled with a simultaneous lease functions the same as a lease coupled with a purchase option, which is always taxable regardless of the lease's own te…
Can a seller-installer of equipment buy the labor its subcontractors perform on installation, maintenance, repair, and warranty work for resale?
Yes. British Telecom (CBP) Inc. sells and installs electronic equipment and bills customers two ways — a per-project installation charge based on actual hours, and an annual or periodic fee for mainte…
New York Advisory Opinion TSB-A-90 (3)I: Rosenblatt, is whether as a nonresident working in New York he is entitled to deduct all or a portion of alimony payments paid to his spouse from whom he is legally separated.
No. The Department ruled that a nonresident working in New York gets no benefit from alimony payments in computing New York tax. Under Tax Law § 601(e), a nonresident's tax is computed as if a residen…
Does a New York corporation qualify for New York's reduced 'small business taxpayer' franchise tax rates if it is wholly owned by a foreign (non-U.S.) parent whose own income and capital exceed the small business thresholds?
Yes. Because the foreign parent is not an "includible corporation" in a federal affiliated group, the New York subsidiary is tested on its own numbers, not combined with its foreign parent — so it qua…
When a corporation had a federal S election in effect (but no New York S election) during its loss years, how is its New York net operating loss carryforward computed for a later year when it's a regular C corporation?
The New York NOL carryforward is limited to the amount that would have been allowed under IRC § 172 as if the corporation had never made the federal S election during the loss years — recomputing the …
Robert L. Hoffman, a lifelong Connecticut resident who worked for IBM for 29 years and 3 months - the first 20 years and 6 months entirely outside New York and the final 8 years and 9 months entirely within New York - asked what portion of the lump-sum 'Financial Assistance Payment' IBM gave him upon early retirement is subject to New York personal income tax.
Because the payment did not qualify as an annuity, it is treated as compensation for past services and allocated under Personal Income Tax Regs § 131.20. Under the default rule (retirement-year portio…
E. Parker Brown II asked whether, under Personal Income Tax Regs § 131.5, a nonresident partner's distributive share of a partnership's interest income - earned on a promissory note secured by a purchase-money mortgage taken back on the sale of New York commercial property - constitutes income derived from or connected with New York sources.
No. The Department ruled that the interest is not New York-source income to the nonresident partner. Because the note is intangible property (not the underlying real property) and the partnership cond…
Are a private investigator's guard, security-consulting, litigation-support, due-diligence, and corporate-investigation services subject to New York City's protective/detective-services tax and the statewide information-services tax, and how are they sourced?
It depends on the service, and two different taxes are in play. Peat, Marwick, Main & Co. asked about services of its client RST, a licensed private investigator based in New York City. New York City …
Are soldiers who live off-post in federally leased Section 801 military housing treated as residing on a military base, or as New York residents whose vehicle purchases are taxable?
They are treated as New York residents, so their vehicle purchases are taxable. The Staff Judge Advocate at Fort Drum asked whether soldiers living off-post in federally leased 'Section 801' family ho…
Are stock-for-stock exchanges, contributions of assets to a corporation's capital, and the transfer of custom software in a corporate reorganization subject to New York sales tax?
No — none of the described transfers is a taxable retail sale. Nomura Securities International, Inc. (NSI) planned a three-step corporate restructuring, and asked whether the transfers were excluded f…
When a New York bank computes the IBF modification for its international banking facility, does it need to first add back interbranch income and expenses between the IBF and its foreign branches that got washed out (netted to zero) in federal taxable income?
Yes. Because interbranch transactions between the IBF and the bank's foreign branches offset to zero in federal taxable income (an IBF isn't a separate entity federally), the bank must first restore t…
When a company sells stone and gravel and also delivers it to customers, which parts of its revenue count as "transportation" for deciding whether it's taxed as a transportation corporation under Article 9 instead of a general business corporation under Article 9-A?
Delivery/hauling charges count as transportation revenue (Article 9) in all three billing setups — pure delivery fees, separately stated delivery charges, and the delivery-attributable portion of a lu…
Is installing a bolted-and-wired trash compactor in an apartment building a capital improvement, or a taxable sale and installation of equipment?
It is not a capital improvement. Multi-Pak Sales Corp. manufactures trash compactors and sells them from a catalog, installing them (as New York code requires) under the trash chutes of apartment buil…
When is replacing air-conditioning condensing units or thru-the-wall units a nontaxable capital improvement, and when is the work taxable repair of tangible personal property?
It depends on what is installed and how permanently. ANC Heating and Air Conditioning, Inc. asked whether replacing air-conditioning condensing units (for an upgrade or after a breakdown) and replacin…
As part of a corporate restructuring, our wholly-owned subsidiary is transferring a New York City parcel of real estate to us, its parent company, for no consideration -- just an accounting entry moving the property's book value between our respective capital accounts. Does this trigger New York Real Estate Transfer Tax?
Exempt. American Telephone and Telegraph Co. (AT&T) was the parent of AT&T Resource Management Corporation (AT&T-RMC), which held one share of stock, all owned by AT&T. As part of a 1990 corporate res…
Are a tenant's contractors exempt from sales tax on materials built into a building whose title vests in the tax-exempt Port Authority?
Yes — the materials are exempt. Salomon, Inc. leased office space in 7 World Trade Center and planned major structural improvements. The land under the building is leased from the Port Authority of Ne…
Are electronic voice-messaging and telephone-answering services a taxable telephone/telegraph service, and how are they sourced and rated?
Yes, they are taxable telephone/telegraph services. G.T.E. Telemessager Incorporated runs a computerized voice-messaging network ('VMX') that lets subscribers store, retrieve, redirect, and broadcast …
Does hiring a New York lettershop to mail catalogs make an out-of-state mail-order company a New York vendor that must register and collect sales tax?
Hiring the New York lettershop does not, by itself, make the out-of-state company a New York vendor — but its own solicitation of New Yorkers can. Geran Mailing, Inc., a New York direct-mail (lettersh…
Is encoding a TV commercial a taxable service the monitoring company must pay, and are the broadcast-monitoring reports it sells taxable?
The two charges are treated differently. VidCode Inc. verifies for advertisers whether their TV commercials actually aired as contracted, by first encoding a unique signature onto the master copy of e…
Does New York tax a sale shipped from New York to an out-of-state customer, or a drop shipment, when the customer takes delivery outside New York?
No — New York does not tax these sales, because the customer takes delivery outside New York. Audio-Video Corporation, based in Albany, asked about two situations, both involving Florida sales reps wh…
If a purchase order shows the sales tax separately, must the tax also be separately stated on later subcontractor progress billings?
No — showing the tax separately on the accepted purchase order is enough. New Ric Construction Company, Inc. separately stated the sales tax on its contract/purchase order, and its subcontractors late…
Are charges to a bank for repossessing vehicles a taxable service, and how are the repossessor's expenses and storage treated?
The charges to the bank are not taxable. Key Bank, N.A. hired vendors to recover and repossess vehicles from customers who defaulted on leases or loans, and asked whether those charges are subject to …
Are construction materials exempt when a tenant builds a new building on land owned by a tax-exempt religious corporation that takes title to the materials?
Yes — the materials are exempt from both state and city sales tax. 101 Limited Partnership leased land in New York City for 99 years from the Corporation of Trinity Church, a religious corporation tha…
Does an out-of-state company owe New York corporate franchise tax just because its employees taught four five-day training courses in New York, even though another state's tax rules would attribute the income to that other state instead?
Yes. Sending employees into New York to teach paid courses is sufficient presence to constitute "doing business" in New York and triggers Article 9-A franchise tax, regardless of whether another state…
Are consumer-marketing analysis reports built from a large shared database a taxable information service, or an exempt personal/individual service?
They are taxable. National Demographics and Lifestyles, Inc. sold manufacturers marketing reports — a Consumer Analysis Report, an NDL F/O/C/U/S report, and a Market Development Index — plus annual su…
Does producing office furniture — cutting and welding steel parts, powder-coat painting, and upholstering chairs and panels — count as "manufacturing" for New York's investment tax credit and economic development zone tax credit?
Yes. Gathering raw materials and cutting, welding, painting, and upholstering them into finished office chairs and modular panels is "manufacturing" under the statutory definition, qualifying the acti…
New York Advisory Opinion TSB-A-89 (9)I: Issue raised is whether the maximum tax provisions contained in section 603-A of the Tax Law, as in effect prior to repeal, apply to a limited partner's distributive share of partnership income for 1985 and 1986, where the partnership's income is derived from services performed on its behalf by its partners, where the limited partner had relatively little capital invested in the partnership, and where he was allocated his distributive share as compensation for personal services actually rendered by him to and on behalf of the partnership.
It depends on facts to be resolved in audit. If Mr. X's distributive share is found to derive from personal services he actually performed, to be 'earned income' of the partnership, and capital is not…
Is cellular telephone service taxable, are all its bundled charges taxed, and what local rate applies?
Yes — cellular service is taxable, and all its bundled charges are taxed. Cellular Telephone Company (trading as Metro One) asked whether its two-way mobile telecommunications service is subject to ta…
Is a government tax bulletin published quarterly a tax-exempt periodical?
Yes — it qualifies as an exempt periodical. The New York City Department of Finance asked whether receipts from selling its 'Finance Quarterly Bulletin' are exempt as a periodical under Tax Law § 1115…
I sold gasoline to a buyer who claimed it was tax-exempt for export to Ontario, Canada, but never gave me fully proper exemption paperwork before the Department denied my refund. Am I stuck owing the New York motor fuel tax and prepaid sales tax?
Yes, without properly completed exemption documentation the seller remains responsible for the tax. New York's motor fuel tax and prepaid sales tax are presumed to apply to all fuel sold in the state,…
Can a retailer advertise and sell an item at a uniform tax-included price, and what must it do at the register?
Yes, with conditions. Amerada Hess Corporation asked whether advertising and selling Hess toy trucks at a uniform 'tax included' price would violate Tax Law § 1132(a), § 1133(d), or other provisions. …
New York Advisory Opinion TSB-A-89 (8)I: Issue raised is whether, for purposes of Article 22 of the Tax Law, the gain on the sale of a business in New York State and the subsequent purchase of another business would qualify for the exclusion of a capital gain under section 612(o) or the deferral of a capital gain under section 612(p).
No. The Department ruled that Robert Goodheart's capital gain from selling his stock in Low Surgical and Medical Supply Co. qualifies for neither the section 612(o) exclusion nor the section 612(p) de…
Robert F. Abend, Jr. asked whether living aboard a sailboat that will never enter New York State - while maintaining no New York abode and spending no more than 30 days a year in the state - would establish a permanent place of abode elsewhere and change his domicile away from New York for personal income tax purposes.
No. The Department ruled that living aboard a sailboat, even one that never enters New York and is used to cruise the southern US coast, the Bahamas, and the Caribbean, doesn't create the kind of fixe…
Are wheelchair wheel covers exempt as medical equipment, and are the maker's production and subcontracting costs also exempt?
Yes — the covers are exempt, and so are the related production costs. New Directions International Inc. manufactures plastic wheelchair wheel covers that clip over the spokes to keep the occupant's fi…
Can a customer's purchase orders serve as sales-tax exemption certificates if they include only part of the ST-120 or ST-121 form?
No — the purchase orders are not valid exemption certificates. Edward Joy Co. received purchase orders from General Electric that contained only portions of the information required on Form ST-120 (Re…
A demolition and excavation contractor that also hauls debris and leases trucks/machinery wants to switch from filing as an Article 9 transportation corporation to Article 9-A — which of its many revenue streams count toward the 50%-of-receipts "principally engaged" test, and can the Department just decide the classification in an advisory opinion?
Carting/hauling of others' debris and soil is Article 9 transportation revenue; hauling the company's own property is neither Article 9 nor Article 9-A revenue; material sales, disposal service, machi…
We operate a famous oceanfront resort under New York's Innkeepers Law as a transient lodging facility, not a residence -- our rooms mostly lack kitchens, and we're contractually required to keep operating as a hotel for decades. We're selling 51-week annual time-share interests in the resort as cooperative shares to the public, with no single buyer ever acquiring a controlling interest. Since we're a hotel, not a residential cooperative, are these timeshare sales exempt from New York's Real Property Transfer Gains Tax?
Taxable -- selling cooperative timeshare shares triggers the gains tax on cooperative-plan transfers regardless of whether any single buyer ever gets a controlling interest, and regardless of whether …
Is trash collection taxable, and does a credit for customers who separate recyclables make it a nontaxable sale for resale?
Trash collection is taxable, and the recycling credit does not change that. A solid-waste hauler asked whether collecting trash is taxable under Tax Law § 1105(c)(5) and whether a bill credit offered …
Are a securities-quotation network's charges a taxable telephone service, a taxable information service, or an untaxed trade-execution service?
The three activities are taxed differently. NASDAQ, Inc. asked whether charges for using private telecommunication lines to provide stock quotations and execute securities trades are subject to the te…
When is selling an electric thermal storage heating system a taxable sale of goods, and when is installing it a nontaxable capital improvement?
It depends on who installs it. Joseph J. Guido, d/b/a Guido's Electric & Bldg. Supply, sells electric thermal storage heating units and systems and asked how four sales scenarios are taxed. The Depart…
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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.