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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New York Advisory Opinion TSB-A-85 (4)I: Can a nonresident who works entirely in New York but lives in another state deduct alimony payments to a New York-resident ex-spouse on his New York personal income tax return?
Yes, on a prorated basis. The Department explained that it previously disallowed alimony adjustments for nonresidents because Tax Law § 632(b)(1)(B) requires deductions to be derived from New York sou…
New York Advisory Opinion TSB-A-85 (3)I: If the IRS disallows a taxpayer's federal casualty loss deduction and the taxpayer accepts that disallowance, can the same loss still be deducted on the New York State personal income tax return?
No. The Department ruled that because Mark Lotaj's casualty loss (from an earthquake that damaged his summer house in Yugoslavia) was disallowed for federal income tax purposes - and he consented to t…
New York Advisory Opinion TSB-A-85 (2)I: Do payments from an employer's long-term disability income plan qualify for New York's age-59½ pension/annuity exclusion under section 612(c)(3-a)?
Only as an 'annuity,' and only for payments received on or after December 16, 1982. The Department ruled that Richard J. Alexanderson's disability payments from his former employer's long-term disabil…
New York Advisory Opinion TSB-A-85 (1)I: Can a homeowner claim New York's solar and wind energy system tax credit for a rented solar heating unit, plus the installation, piping, and fixtures paid for separately?
No, on both counts. The Department ruled that a homeowner who rents a domestic solar heating unit (rather than purchasing it) cannot claim the section 606(g) credit for that unit, because the statute …
Can a bank holding company's newly organized futures brokerage subsidiary apportion its income between New York and other states, based on maintaining a genuine office in another state (Chicago), even though the state hasn't written specific apportionment regulations for this kind of Article 32 taxpayer?
Yes, assuming the subsidiary is taxable under Article 32 in the first place (which the Opinion doesn't decide). Even though the Tax Commission has never written apportionment regulations specifically …
Are the services of installing (setting up) and dismantling (breaking down) trade-show exhibits taxable in New York, and does it matter that the setup is temporary?
Installing exhibits is taxable; dismantling them is not taxable, but only if that charge is separately stated. I & D Inc. sets up and breaks down trade-show and convention exhibits — uncrating and bol…
Is energy used to heat 'make-up air' — outside air brought in to replace exhausted contaminated air in a plant ventilation system — exempt from sales tax as used directly in production?
It is taxable — the energy is not used directly in production. Weber-Knapp Company runs a mechanical ventilation system that exhausts toxic, flammable or explosive vapors from the work area and brings…
When equipment is leased under a lease that accounting rules treat as a capital lease, is sales tax based on the full periodic payment, the payment minus interest, or the capitalized asset value?
Sales tax is based on each full lease payment — not the payment minus interest, and not the capitalized asset value. Joy Manufacturing Company leases equipment under an agreement that, for accounting …
Are employer-owned country clubs open only to a company's employees 'social or athletic clubs' whose dues are taxable, even though the members have no ownership stake?
Yes — they are social or athletic clubs, and if any member's dues exceed $10 a year, all members' dues are taxable. IBM owns and operates three New York country clubs with golf courses, tennis/basketb…
Does a CAD/CAM computer used to design machine parts and to experiment with new designs qualify for the sales-tax exemption for production machinery or for research-and-development property?
The CAD/CAM computer is not exempt production machinery, but it qualifies for the research-and-development exemption if over 50% of its use is experimental design testing. Houdaille Industries uses a …
Is a records-storage company's charge a taxable storage service, or a nontaxable lease of real property?
It is a taxable storage service, not a nontaxable real-property lease. Record Retention Center Corporation stores customers' financial records in an open warehouse, assigning each customer an unsecure…
Does temporarily handing artwork or mechanicals to a client's printer for reproduction turn a designer's exempt service into a taxable sale of tangible personal property?
No — the temporary transfer for reproduction only does not turn the exempt design service into a taxable sale. Chermayeff and Geismar Associates, a New York design partnership, develops design concept…
Is a marina's charge for off-season land storage of boats a taxable storage service or a nontaxable lease of real property?
It is a taxable storage service. Genesee Marina, doing business as Riverview Yacht Basin, rents land space for off-season storage of boats. Its space-rental agreement puts the boat at the owner's risk…
For New York's alternative minimum-tax computation (which adds officer salaries back to income), does an employee's honorary or prestige job title -- like 'Managing Director' or 'Principal' -- make them an 'officer' whose salary must be added back, even if they don't actually perform officer functions?
It depends on which title. Employees with the specific titles listed in Tax Law Section 208.12 -- Chairman, President, Vice-President, Secretary, Assistant Secretary, Treasurer, Assistant Treasurer, o…
Is a computer system used partly for medical research and education, and partly for billing and other tasks, exempt from sales tax as research-and-development property?
The computer is exempt only if over 50% of its use is directly in qualifying research and development. Doctors Aquavella and Jackson bought a large computer system they said was used predominantly for…
Is a utility's payment to relocate underground gas mains and repave the street — forced by city construction — a taxable repair of real property or a nontaxable capital improvement?
It is a nontaxable capital improvement, not a taxable repair. Brooklyn Union Gas relocates its underground mains when New York City construction projects would interfere with them, excavating and layi…
Are a building designer's services and the illustrations he sells taxable, and can he buy the underlying materials tax-free for resale?
It depends on the end result: design work that culminates in completed, engineer-sealed working drawings under one contract is a nontaxable service, but selling a standalone drawing or illustration is…
Which items in a contractor's construction jobs are nontaxable capital improvements, and how is tax handled when one job mixes capital improvement work with a taxable installation?
Work that permanently improves the building is a nontaxable capital improvement, but a job that mixes capital-improvement work with a taxable installation is taxable in full unless the taxable part is…
Is a vending operator's purchase of a video game machine a nontaxable purchase for resale because he later 'contributes' it to a partnership with the location owner?
The purchase is taxable — it is a purchase for use, not a purchase for resale, and later contributing the machine to a partnership doesn't change that. Folz Amusement & Game Co. buys a video game mach…
When a New York corporation with unused investment tax credit and employment incentive credit is statutorily merged into an out-of-state parent, can the surviving out-of-state corporation carry those unused credits forward, and does the merger trigger recapture of credits already claimed?
Yes, the unused credits carry forward, and no recapture is triggered by the merger itself. Because a statutory merger under IRC section 368(a)(1)(A) is a transaction described in IRC section 381(a), t…
Does a video post-production company's studio equipment and building qualify for New York's investment tax credit as property used in the production of goods by 'processing'?
Yes, for the equipment, and conditionally for the building. Unitel Video Services' activities -- recording, editing, and duplicating television commercials and programs, transferring film to videotape…
Is a private ambulance company that also provides emergency medical care en route taxed as a New York transportation corporation (barred from electing S corporation status), or as an ordinary Article 9-A business corporation (eligible to elect S status)?
The ambulance company is a transportation corporation under Sections 183-184, not an Article 9-A business corporation, and therefore cannot elect S corporation status. Even though it provides emergenc…
Is a corporation that owns trucks and leases them to a related transportation company taxed as a transportation corporation itself, or as an ordinary Article 9-A business corporation -- when the petitioner's own factual statements about who controls and drives the equipment contradict each other?
It depends on facts the Department could not resolve from a contradictory petition. If Petitioner truly relinquished supervision and control of its tractors and trailers to Sheehan Carriers, Inc. and …
Does New York's franchise tax exemption for 'limited-profit housing companies' organized under Article 2 of the Private Housing Finance Law also cover nonprofit 'housing development fund companies' organized under Article 11 of that same law -- and if not, can an Article 11 company still be exempt some other way?
No, the Section 209(4) exemption itself does NOT extend to Article 11 housing development fund companies -- it's narrowly construed to cover only limited-profit housing companies organized under Artic…
Are a bottle-bill container handler's charges for collecting, transporting, processing, and accounting for empty deposit containers, and its sale of the processed materials, subject to sales tax?
None of the charges are taxable. Western New York Beverage Industry Collection and Sorting picks up empty non-refillable deposit containers from dealers, transports them, sorts and processes them into…
Is the lease of a relocatable modular office building subject to sales tax, even though it is classified as real property for real-property-tax purposes?
The lease is taxable as a rental of tangible personal property; the modular building is not a capital improvement even though it is taxed as real property for real-property-tax purposes. Hudson River …
Can a charter fishing boat operator buy its boats, fuel, and supplies exempt as commercial fishing, and are its charter fees taxable admissions?
The operator's boats, fuel, and supplies are taxable because charter sport fishing does not qualify for any commercial-fishing exemption; but the charter fees it charges customers are exempt as partic…
When a petroleum business passes its Article 13-A gross receipts tax through to customers in the price they charge, does that passed-through tax amount itself get folded back into the company's own taxable gross receipts, creating an additional tax liability?
Yes -- passing the tax through creates additional tax liability. The Article 13-A gross receipts tax applies to ALL receipts from petroleum sales without any deduction for cost or expense, and is trea…
When a corporation sells the stock of its foreign subsidiaries to a sibling company (an affiliate under common ownership, but not a direct parent-subsidiary relationship) as part of an internal reorganization, is the amount received includible in its New York entire net income?
No, the amount is excluded from New York entire net income. Petitioner planned to sell the stock of its U.K. subsidiaries to CIF, a sibling corporation under the same ultimate parent, as the first ste…
New York Advisory Opinion TSB-A-84 (4)I: If a New Jersey resident wins a New Jersey lottery prize and later moves to New York, will the remaining prize installments be subject to New York personal income tax?
No. The Department ruled that a New Jersey lottery winner's remaining prize payments are accrued - and therefore excluded from New York tax going forward - once he becomes a New York resident, because…
If a company claimed the investment tax credit for several years on property that was also eligible for the (larger) eligible business facility credit, can it go back and amend its returns to switch to the eligible business facility credit instead?
Yes, within the normal refund statute of limitations. Flexovit USA, Inc. held Job Incentive Board certificates of eligibility for an eligible business facility for 1978-1981, but claimed only the inve…
Two affiliated companies share one office and split their combined operating expenses based on relative sales, with the company that overpaid its share reimbursed by the other. Does that reimbursement count as a 'business receipt' in the receipts factor used to calculate New York's business allocation percentage?
No. Mr. Daneli, Ltd. and its affiliate Pateli Fashions, Inc. -- both clothing manufacturers sharing one office, employees, and space -- apportion their combined operating expenses based on each corpor…
When a waterproofing contractor repoints mortar, recaulks joints, and reroofs a building, which parts are taxable repairs and which are tax-exempt capital improvements?
Most waterproofing work — repointing mortar, recaulking joints, and rebuilding masonry — is a taxable repair of real property, but re-covering and insulating a complete roof is a tax-exempt capital im…
Is the electricity a manufacturer uses to light its production facility exempt from sales tax under the production exemption?
Electricity used to light a manufacturing plant is taxable — it is not used 'directly and exclusively' in production, so it fails the § 1115(c) exemption that covers power running the production machi…
How does a registered motor-fuel distributor that sells gasoline through its own stations compute the sales tax, and when is the tax due?
A registered motor-fuel distributor that sells gasoline through its own retail outlets must compute sales tax on the statutory selling-price base — not on its own purchase price — and the tax becomes …
Which pieces of a computer system that produces NC control tapes for exempt factory machines qualify for New York's production-machinery exemption?
Of a five-machine computer system that produces NC control tapes, only the tape punch unit — used exclusively to punch the tapes — is exempt production machinery; the computer, disc drive, plotter, an…
When an advertising supplement is inserted into a shopping paper, is the supplement's area counted in the percentage of the publication devoted to advertising?
When an advertising supplement is included as part of a shopping paper, the area of that supplement is not counted in computing the percentage of the publication's printed area devoted to advertising …
Is reconditioning already-installed kitchen cabinets — new doors, drawer fronts, hinges, pulls, and veneers — a taxable repair service or a tax-exempt capital improvement?
Reconditioning already-installed kitchen cabinets is a taxable repair/servicing of real property, not a tax-exempt capital improvement, so the contractor must charge sales tax on the whole job. Nu*Loo…
Are charges to pick up containers of chemical waste from a plant and deliver them to a treatment/disposal company subject to sales tax?
Charges to pick up filled chemical-waste containers from a plant and haul them away are taxable trash removal — a service to real property under § 1105(c)(5) — even though the separate treatment and d…
Is a common carrier's satellite up-linking and down-linking of television signals taxable telephony/telegraphy, and is its transmission equipment exempt?
A common carrier's satellite up-linking and down-linking of television signals is taxable 'telephony and telegraphy' under § 1105(b) — not exempt cable-TV entertainment — but the receipts are exempt w…
Are a telephone company's charges for installing and repairing telephone systems subject to sales tax, and does it matter whether repair equipment is used?
Charges for installing and repairing telephone equipment are taxable, and repair charges are taxable whether or not repair equipment is used; the only relief is where equipment is sold installed as a …
Is a general contractor's payment to an excavation subcontractor a taxable equipment rental, or an exempt service that's part of a capital improvement?
A general contractor's payment to an excavation subcontractor is a nontaxable service, not a taxable equipment rental, because the contractor has no right to direct and control the equipment or operat…
In a car lease where the customer trades in a vehicle, is the trade-in allowance included in the sales tax base or excluded?
A trade-in vehicle accepted in part payment and intended for resale is excluded from the sales tax base even in a lease, so tax is measured only by the cash portion — here $14,000, not the full $18,00…
New York Advisory Opinion TSB-A-84 (3)I: How is a nonresident employee's sick leave and vacation pay allocated to New York if she worked entirely within New York during the year, and can a nonresident couple claim the federal marriage penalty deduction based on the lower-earning spouse's out-of-state income?
Sick leave and vacation pay are allocated using the same working-days method used when a nonresident works partly in and partly out of New York - and since the wife here had no non-New-York working da…
New York Advisory Opinion TSB-A-84 (2)I: If someone sells New York real property in exchange for a private life annuity and then moves out of New York, must the future annuity payments be accrued and taxed all at once under New York's change-of-residency rule?
No. The Department ruled that a private life annuity's future payments are not accruable under Tax Law § 654(c)(1) when the taxpayer changes from resident to nonresident, because the amount ultimately…
New York Advisory Opinion TSB-A-84 (1)I: If an IRA's funds are invested entirely in tax-exempt New York and Puerto Rico municipal bonds, is the IRA distribution still tax-exempt when withdrawn?
No. The Department ruled that even though interest on New York and Puerto Rico municipal bonds is normally excluded from federal gross income under Internal Revenue Code § 103, that exemption doesn't …
Does an advertising agency's purchase order disclose principal-agent status clearly enough to buy materials as its client's agent for sales tax purposes?
An advertising agency's purchase order that says it is 'an accredited advertising agency and as such' acting as agent for its client does not clearly disclose principal-agent status, so the agency is …
An out-of-state typesetting company's New York salesmen solicit orders, pick up customer manuscripts for delivery to the out-of-state plant, and deliver the finished typeset negatives back to New York customers. Does that combination of activities stay within Public Law 86-272's protected 'solicitation' safe harbor, or does it create New York franchise tax nexus?
The corporation remains exempt from New York's Article 9-A franchise tax -- its New York activities fall entirely within Public Law 86-272's protected safe harbor. The out-of-state typesetting company…
Is installing new linoleum over an entire room's floor a tax-exempt capital improvement, no matter what surface it's glued over?
Installing new linoleum over the floor of an entire room by cementing it down is a tax-exempt capital improvement, regardless of what surface it's glued over — so the homeowner was wrongly charged tax…
Before it opened a formal New York sales office, a Florida homebuilder advertised in New York papers using an officer's home telephone number, and that officer met with prospective customers at his Long Island home. Did that activity amount to 'maintaining an office' in New York, subjecting the company to New York franchise tax even before the formal office opened?
Yes -- Gulf Homes, Inc. was subject to New York's Article 9-A franchise tax even before it opened its formal Massapequa sales office in August 1980. Starting in 1978, Petitioner (a Florida real estate…
Are computer-generated financial reports, like loan amortization printouts made from a client's figures, a taxable information service or exempt personal information?
Computer-generated financial reports, such as loan amortization printouts produced from a client's figures, are a taxable information service, because the exemption for personal information requires t…
A holding company borrows money from its own wholly owned subsidiaries and re-lends those exact funds to its parent corporation at the same interest rate. Must the holding company add back the interest it pays to its subsidiaries as interest 'attributable to subsidiary capital,' even though the borrowed funds never funded an investment in the subsidiaries themselves?
No add-back is required. A Delaware holding company planned to borrow funds from its own wholly owned subsidiaries and immediately re-lend those same funds to its parent corporation at the identical i…
I sold my property and took back a promissory note from the buyer for part of the price, with an option-to-purchase document that mentions the note but was never called a 'mortgage.' Years later, when that instrument was finally recorded, the county clerk demanded mortgage recording tax. Was that tax actually due?
Yes, the tax was due. George and Alberta Smith sold real property to F. H. Simpson Enterprises, Inc. in December 1977 for a price that was partly cash and partly a $31,000 promissory note from the buy…
Is a company-owned country club a taxable 'social or athletic club,' and are its storage and restaurant charges taxable?
A company-owned country club whose members have no proprietary interest, no control over management or activities, and open first-come-first-served membership is not a taxable 'social or athletic club…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays directly to its corporate 'grandparent'?
No. McCullagh Leasing, Inc. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, itself a wholly owned subsidiary of Commercial Credit Company -- its corporate 'grandparent.' Commercial Cre…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays directly to its corporate 'grandparent'?
No. Relocation Realty Service Corp. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, itself a wholly owned subsidiary of Commercial Credit Company -- its corporate 'grandparent.' Commer…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays directly to its corporate 'grandparent'?
No. C C Leasing Corp. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, itself a wholly owned subsidiary of Commercial Credit Company -- its corporate 'grandparent.' Commercial Credit Co…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays directly to its corporate 'grandparent'?
No. Commercial Credit Equipment Corp. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, itself a wholly owned subsidiary of Commercial Credit Company -- its corporate 'grandparent.' Comm…
If a second-tier subsidiary borrows from its corporate 'grandparent' -- its direct parent's own parent -- rather than from its direct parent or a more-than-5% stockholder, does New York's related-party interest add-back rule reach that interest?
No. Commercial Credit Development Corp. is a wholly owned subsidiary of Auto Fleet Leasing Corporation, which is itself a wholly owned subsidiary of Commercial Credit Company -- making Commercial Cred…
Does New York's related-party interest add-back rule reach interest a second-tier subsidiary pays, at an arm's-length rate, directly to its corporate 'grandparent' holding company?
No. Fleet Factors Corporation, a Rhode Island corporation, is wholly owned by Fleet Commercial Finance Corporation, which is itself wholly owned by Fleet Financial Corporation, a holding company -- ma…
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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.