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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Is a machine used to master compact discs exempt production equipment, and does it matter whether the discs are made for sale?
It is exempt when used to produce discs for sale, and the for-sale requirement is decisive. Script Systems, Inc. makes a compact disc-interactive 'Authoring System' that records video, audio, and text…
If a business believed for 11 years that it was a validly incorporated New York corporation — filing corporate tax returns and paying corporate taxes the whole time — but later discovers the incorporation paperwork was never actually completed, was it a corporation subject to franchise tax all along?
Yes. Because the organization held itself out as a corporation and conducted business as one since 1977 — filing corporate returns and paying corporate taxes — it is treated as a corporation subject t…
When a property owner pays a management company for workers, are the payments exempt wages, and is the management fee taxable?
The payments are not exempt wages, and whether the whole charge is taxable depends on what the worker does. A CPA firm asked about property owners that hire a management company to recruit and pay wor…
Are purchases, leases, and service contracts for equipment at a project owned by an Industrial Development Agency and used by a private company exempt from sales and use tax?
They are exempt, so long as the Industrial Development Agency owns the property. The Chase Manhattan Bank, N.A. planned to relocate a financial-services processing center to Brooklyn under a New York …
Is an electronic voice-messaging and telephone-answering service taxable as a telephone or telegraph service?
Yes — an all-electronic voice-messaging and answering service is a taxable telephone or telegraph service under Tax Law § 1105(b), except for interstate and international messages. Tigon Corporation l…
Are the fees and dues a real-estate multiple listing service charges its member brokers subject to sales tax?
Yes. All of the listing service's charges — including the one-time initiation fee and the annual dues — are receipts from a taxable information service. Mohawk Valley Listing Service, Inc. is a New Yo…
Is a design change to a printing press taxable, and does it matter whether the change happens before or after the press is delivered to the customer?
It depends on timing: a design change made before the press is delivered is exempt, but one made after delivery is a taxable repair subject to local (but not state) tax. William R. Barlow sells printi…
Are the charges for confidential product-testing reports about a company's own products a taxable information service?
No — confidential reports about only the customer's own products are an exempt personal and individual information service. Garden Way Incorporated, a maker of lawn and garden equipment, hired a Flori…
Is a country club member's voluntary contribution to a clubhouse renovation subject to the sales tax on club dues?
No — a truly voluntary contribution is not taxable dues, even though mandatory assessments for the same project would be. Joseph W. Burns, a Senior member of the Wykagyl Country Club, asked whether hi…
A small company provides both a telephone answering service and a telex/fax relay service — does owning no transmission equipment of its own keep it out of New York's Article 9 telegraph/telephone tax, or does the telex/fax activity still count as a taxable transmission business?
A telex/fax service is taxable under Article 9 as a telegraph/telephone business regardless of whether the company owns any transmission equipment or lines, while a telephone answering service is an A…
Are the amounts a country club pays a management company for workers who maintain its grounds subject to sales tax, when the club hires and supervises the workers but the management company runs the payroll?
They are taxable. Skyline Golf and Country Club, Inc. paid a management company for workers who maintain and service its grounds; the club hired, scheduled, supervised, and could fire the workers, but…
Does a freelance photographer have to charge sales tax on separately billed reimbursable expenses like travel, film, and lodging?
Yes — separately billed reimbursable expenses are part of the taxable charge for the photographs. Peter Vadnai, a freelance photographer, billed clients separately for expenses (food and lodging, airf…
Are advertising envelopes used to mail promotional material out of state from a New York post office exempt from sales and use tax?
It depends on the date: taxable for mailings before September 1, 1989, and exempt for out-of-state mailings on or after that date. Garden Way Incorporated used 'promotional covers' — envelopes heavily…
Is a fee for baling garbage and arranging to ship it out of state for disposal subject to sales tax?
Yes — baling garbage is taxable processing, so the per-ton fee is subject to sales tax. Michael J. Berger and Co., CPA's asked about a client planning to receive garbage from local carting companies, …
Is a telecommunications management company's bundle of services — including its management and membership fees and its usage reports — taxable as telephone service?
It is all taxable telephone service under § 1105(b), except interstate and international charges. Peat, Marwick Main & Co. asked about a client, a telecommunications management company that selects an…
When a securities broker-dealer invests customer funds in repurchase agreements (repos) with banks, is that investment "investment capital" under New York's franchise tax, or something else — and does it matter whether the repo is really a purchase of securities versus a secured loan?
It depends on whether the repo is, in substance, a purchase of the underlying government securities (in which case it can be investment capital if it meets the other statutory requirements) or in subs…
New York Advisory Opinion TSB-A-89 (6)I: Issue raised is whether, under Article 22 of the Tax Law, a 'small partnership' is subject to the penalty for failure to file or late filing a partnership return imposed under section 685(h)(2) of the Tax Law, where such partnership is not subject to the failure to file penalty pursuant to section 6698 of the Internal Revenue Code.
No automatic exemption. A three-partner 'small partnership' that qualifies for the federal reasonable-cause safe harbor against the IRC § 6698 penalty (because it has 10 or fewer partners under IRC § …
Is a monthly subscription newsletter a tax-exempt periodical?
Yes — a monthly subscription newsletter that meets the periodical tests is an exempt periodical. Brownstone Publishers, Inc. asked whether its 'New York CO-OP & Condo Insider,' a monthly subscription …
Which interior-design installations — floor coverings, shelving, cabinetry, drapery, blinds, lighting — are tax-free capital improvements, and who pays tax on the materials?
It depends on permanence and, for floor covering, on a June 1, 1989 rule change. Hafner Associates, Inc., an interior designer, asked whether 20 different installations are tax-free capital improvemen…
New York Advisory Opinion TSB-A-89 (5)I: Issue raised is whether, for personal income tax purposes, Petitioner can take a resident credit, pursuant to section 620 of the Tax Law, for 'C Corp' taxes paid to North Carolina on 'S Corp' earnings reported in New York State.
Yes. Because North Carolina does not recognize S corporation status, Petitioner's wholly North-Carolina electrical contracting company paid North Carolina's corporate net income tax directly, even tho…
Does a company owe New York tax on parts it buys out of state, receives in New York, then uses to repair cars at out-of-state race tracks?
No — the parts are purchased for resale, so there is no sales or use tax. BRM Motorsports, Ltd. transports race cars to out-of-state tracks and repairs and maintains them there; it buys parts out of s…
Is tax-processing software that requires analysis of the customer's needs and program modification exempt as custom software, and are annual license renewals also exempt?
Yes to both, if the software charge is separately stated. Computer Language Research, Inc. sells in-house tax-processing systems (Fast-Tax) whose preparation requires it to analyze each client's speci…
When a manufacturer computes whether a building is 'principally used' more than 50% for production and storage (to qualify for the investment tax credit), does unfinished, unused excess-capacity floor space count in the calculation?
Yes. Unfinished excess-capacity space that can only support storage must be included in the denominator of the usable-business-floor-space fraction (total floor space, excluding only bathrooms/cafeter…
When a bank amends its federal return (not involving a net operating loss or capital loss carryback) and files a timely New York refund claim, does New York's 90-day interest cutoff for late-filed amended returns still apply even though the bank never separately sent a copy of the federal refund approval form to New York State?
No. Because the bank's New York refund claim (Form CT-8) itself satisfied the 90-day amended-report filing requirement, and the refund wasn't based on a net operating loss or capital loss carryback (s…
Can a utility get a refund of sales tax it collected more than three years ago, if it now refunds the tax to its customer?
No — the three-year statute of limitations bars it, even if the utility now refunds the customer. Niagara Mohawk Power Corporation collected 7% sales tax on a corporate apartment owner's utility bills…
Does New York's new 1989 corporate-acquisitions tax (the "M&A Act") apply to the Kohlberg Kravis Roberts leveraged buyout of RJR Nabisco, which closed just before the law took effect, or to the internal merger and any later restructuring that followed?
No. Because the M&A Act took effect April 19, 1989 and RJR Acquisition Corporation's purchase of 74.3% of RJR Nabisco's stock closed February 9, 1989 — before the effective date — that acquisition fal…
Our state agency is redeveloping West 42nd Street/Times Square. Private developers will finance construction, with us named mortgagee even though private lenders are the real economic parties -- and developers will reimburse us for the mortgage recording tax we'd otherwise owe, into a project fund. Is recording those mortgages exempt from BOTH the state and New York City mortgage recording tax?
Exempt from the state tax; the City tax question is outside the Department's authority to answer. This is the TRUE origin ruling for UDC's West 42nd Street/Times Square redevelopment mortgage recordin…
When tenants build out their leased space in a tower on land owned by the U.S. Postal Service, are the tenants' construction materials also sales-tax exempt?
Yes. This Modified Advisory Opinion extends the exemption to the developer's space tenants (subtenants): materials that the space tenants and their contractors buy to build and install their tenant im…
When a computer maker uses its own products, is the use tax based on its selling price or its cost, and are service-contract replacement parts bought for resale?
The use-tax basis depends on whether the company made the item or bought it for resale, and its service-contract replacement parts are purchased for resale. Barrister Information Systems manufactures …
Bernstein Government Short Duration Portfolio, a series of the Sandford C. Bernstein Fund, Inc. (a registered open-end mutual fund), asked whether the term 'obligations of the United States' in Tax Law § 612(c)(1) - which governs the regulated investment company (RIC) pass-through exemption for interest-dividends - includes obligations of federal agencies (not just direct US Treasury obligations), such as those specifically enumerated in Technical Services Bureau Memorandum TSB-M-86(8)I.
The Department pointed petitioner to TSB-M-86(8)I as the governing reference: RIC dividends attributable to the fund's investment in 'obligations of the United States and its possessions' - which, per…
Are gastrostomy (stomach) feeding tubes for patients who cannot eat by mouth exempt from New York sales tax?
Yes. Gastrostomy feeding tubes are exempt from New York sales and use tax on two possible grounds. First, a tube that completely or partially replaces the function of a permanently inoperative or perm…
Is asbestos removal taxable when it is done only as a necessary step in replacing a home's boiler — a capital improvement?
No — not on these facts. Although asbestos removal is by itself a taxable service of repairing/maintaining real property under Tax Law § 1105(c)(5), when it is performed as a constituent part of a cap…
William and Mary Yuriko Kochiyama asked whether the $20,000 restitution payments they were entitled to receive under the federal Civil Liberties Act of 1988, for the U.S. government's internment of Japanese Americans during World War II, are subject to New York State and New York City personal income tax.
No. Because the Civil Liberties Act of 1988 itself directs that this restitution be treated for federal tax purposes as damages for human suffering (and so is excluded from federal adjusted gross inco…
Are construction materials exempt from sales tax when a private developer builds an office tower on land owned in fee by the U.S. Postal Service, so that the finished work becomes Postal Service property?
Yes. Because the materials become an integral component of real property owned in fee by the United States Postal Service — an exempt federal instrumentality under Tax Law § 1116(a)(2) — and title to …
Is a foreign nonprofit agricultural cooperative, authorized to do business in New York under the Not-For-Profit Corporation Law, automatically exempt from New York corporate franchise tax?
Not automatically. Being a nonprofit cooperative or being authorized under the Not-For-Profit Corporation Law doesn't by itself exempt a cooperative from Article 9-A tax — but if the cooperative actua…
When a partnership (not a corporation) operates a cellular telephone utility business in New York, are its corporate partners individually subject to New York's Article 9 telephone-business franchise tax, and can the partnership's own section 186-a utility gross-receipts tax be passed through to be paid by the partners instead?
Each corporate partner that is itself principally engaged in the telephone business (through the partnership, since each partner acts as the partnership's agent) is subject to Article 9 tax under sect…
Does a contractor owe sales tax on materials used to rehabilitate privately owned homes, when the work is paid for with state and federal housing-program funds?
Yes. A contractor must pay sales tax on materials it buys to rehabilitate and improve privately owned homes and rental property, even though the work is funded and administered through New York State …
How are wages received by Nathaniel Moore, a nonresident professional football player for the Miami Dolphins, allocated to New York State for the 1985 and 1986 tax years under section 632(c) of the Tax Law?
Nonresident professional athletes allocate their wages to New York based on the ratio of games played within New York to total games played for the year - not the standard days-worked formula used for…
Are the dues and initiation fees of a golf and country club owned by one company taxable, when members have no ownership or control and anyone on the waiting list can join?
No. Because members of this owner-operated golf and country club have no proprietary interest, no control over its management or activities, and membership is not exclusive (new members are simply tak…
Can a photofinisher buy its film processors and printing equipment tax-exempt as production machinery, when part of the work develops the customer's own film?
It depends on the step. Machinery a photofinisher uses to develop a negative from film the customer already owns is NOT exempt, because that step is a taxable processing service on the customer's prop…
New York Advisory Opinion TSB-A-89 (10)I: Issue raised is whether, under several sets of circumstances, a nonresident individual is subject to tax under Article 22 of the Tax Law when the individual has commodity trading profits or receives dividends from a corporation.
No, in every scenario Petitioner described. The Department ruled that a nonresident commodities trader who trades solely for his own account - even while physically present on a New York exchange floo…
Is it a taxable sale when a company moves a division's assets into a brand-new corporation in exchange only for that corporation's stock?
No — not if the assets go to the new corporation solely in exchange for its stock. Transferring property to a corporation upon its organization in consideration for the issuance of its stock is expres…
Is machinery sold to the solid-waste industry exempt from sales tax — recycling equipment that turns scrap into materials for sale versus equipment that just compacts trash for a landfill?
It splits by what the machine does. Machinery used to process scrap (metal, wood, paper, cardboard) into usable materials that will be SOLD is exempt production machinery under Tax Law § 1115(a)(12) —…
If a U.S. company's export-sales subsidiary is a Foreign Sales Corporation (FSC) that properly uses the IRS's safe-harbor administrative pricing rules to set its commissions, does that automatically mean New York can't require a combined franchise tax report between the parent and the FSC?
No. Using the IRC's administrative pricing safe harbor for FSC commissions doesn't by itself prevent the Commissioner from requiring a combined report — the administrative pricing rules only cover the…
Can a warranty-repair company buy its equipment tax-exempt as production machinery, when it reconditions defective units and ships them back to the manufacturer for resale?
No. A company that reconditions defective or damaged units and parts and ships them back to the manufacturer for resale is performing repair — not production — so its equipment does NOT qualify for th…
When a bank reorganizes into a savings-and-loan holding-company structure by having shareholders exchange their bank shares for holding-company shares — a transaction treated as tax-free under federal IRC section 351 — does the bank, the new holding company, or the shareholders owe New York corporate or personal income tax on the exchange?
No. Because the share exchange qualifies as a tax-free transaction under IRC § 351(a) for federal purposes, it is tax-free for both the bank and the new holding company under Article 32 (no entire net…
Our partnership's founding families disputed a 1977 agreement to divide up jointly-owned properties, litigated for years, and finally settled in 1988 with a different split than the 1977 agreement's terms implied. Can the 1988 settlement's property distribution still qualify as exempt from New York's Real Property Transfer Gains Tax as a transfer made pursuant to a written contract signed before the tax existed in 1983?
No -- the distribution is taxable, because the 1977 agreement never manifested the kind of binding commitment the grandfather exemption requires, and the eventual 1988 settlement changed the property …
Is a construction management company liable for sales tax on purchases it makes as agent for the project owner, or is only the owner liable?
Ordinarily the owner, not the agent, is liable — but the agent's protection is not absolute. A construction management company that genuinely acts as agent for a disclosed principal (the project owner…
As a developer, I acquired and re-subdivided an entire tract of land into a plaza, and I've been selling off individual parcels to different buyers over several years, with each sale under $1 million on its own. I'm willing to swear that I'm not selling this way to dodge the gains tax. Does my sworn no-avoidance-intent statement let me avoid aggregating all these sales together for New York's Real Property Transfer Gains Tax's $1 million threshold?
No -- the sworn statement doesn't save the taxpayer here, because the facts themselves (a developer acquiring, re-subdividing, and progressively selling off a single tract) show a plan or agreement to…
Nine months after getting an advisory opinion on our proposed NBC/Rockefeller Center restructuring based on a preliminary term sheet, we've now finalized and signed all thirteen actual transaction documents (leases, purchase option agreement, condominium declaration, IDA deeds, overlease, and more). Does the Department's earlier gains-tax analysis still hold now that we're submitting the final, executed paperwork?
Yes -- reviewing the complete, finalized set of thirteen signed transaction documents, the Department reached the identical conclusions it gave nine months earlier on the preliminary term sheet: only …
If a beverage distributor gets IRS approval to switch its accounting method for container-deposit income (from a reserve method to the cash method required by Rev. Rul. 78-273), must it use that same new method for New York franchise tax purposes?
Yes. New York's Article 9-A entire net income must always be computed using the same accounting method approved for federal income tax purposes — so once the IRS approves the switch to the cash method…
Are reports from searching computerized databases — like trademark or legal research — taxable as an information service, or exempt like a professional service?
They are taxable. Reports produced by searching computerized databases are a taxable information service under Tax Law § 1105(c)(1), because the information is drawn from common databases available to…
Does income from interest rate swaps and financial futures contracts that a bank's New York International Banking Facility (IBF) uses to hedge against interest rate risk count as tax-exempt IBF income, and can the related expenses still be deducted?
No. Interest rate exchange agreements and financial futures contracts used to hedge against interest rate fluctuations are not "foreign exchange trading or hedging transactions" under the IBF regulati…
Are a creative advertising firm's services taxable, and does it owe tax on the materials and production work it buys to make ads and commercials?
A creative advertising firm's services — developing and placing advertisements — are not taxable, but the firm generally must pay sales tax on the materials and production services it buys to create t…
Can a business that brought an out-of-state yacht into New York for chartering pay use tax on the yacht's fair rental value instead of its full purchase price?
No. A company that brought an out-of-state yacht into New York to operate an ongoing charter business owes compensating use tax on the yacht's full purchase price plus renovations — not on its fair re…
When is a limousine hire an exempt transportation service, and when is it a taxable rental of the vehicle?
It depends on who has dominion and control of the vehicle. When a limousine operator retains dominion and control — providing the car and driver, directing the operation, choosing the routes, keeping …
Can an accrual-basis water utility deduct a reasonable amount for bad debts (uncollectible customer accounts) when computing its gross-earnings franchise tax under section 186 of the Tax Law, the way it can under the separate section 186-a utility gross-receipts tax?
No. Section 186's gross earnings tax defines gross earnings as "all receipts from the employment of capital without any deduction," and unlike section 186-a (which has a regulation specifically allowi…
Is a license to use prepackaged, off-the-shelf software — and its technical support — subject to New York sales tax?
Yes. A license to use prepackaged software that does not require an analysis of the customer's requirements or adaptation by the vendor is taxable as tangible personal property under Tax Law § 1105(a)…
Are home drinking-water lead-test kits and a faucet-mounted water filtration system exempt from sales tax as medical equipment?
No. Home drinking-water lead-test kits and a faucet-mounted water filtration system are both subject to New York sales and use tax; neither qualifies for the exemption for medical equipment under Tax …
Can a parent company take over its wholly owned subsidiary's assets without owing sales tax on the transfer?
Yes — if the assets come up to the parent as a liquidating dividend. The distribution of property by a corporation to its stockholder as a liquidating dividend is excluded from the definition of 'reta…
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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.