Are a building designer's services and the illustrations he sells taxable, and can he buy the underlying materials tax-free for resale?

Plain-English summary

Edward B. Rusin designs new buildings and building renovations (he is not a licensed architect). His designs go to the client's financial backers, lessees, and town boards for approval; on approval, a full set of working drawings (blueprints) is prepared — by Rusin or by an engineering firm — and if Rusin prepares them, they are reviewed and sealed by a licensed engineering firm for a fee. Separately, he prepares perspective graphic illustrations of existing structures, with no design service involved. He asked whether (1) his design services, (2) his illustrations, and (3) his material purchases are taxable.

The answer turns on the end result of what he delivers.

• Design service ending in sealed working drawings — not taxable. Section 1105(c) taxes only enumerated services. When Rusin's design work is an integral part of an architectural design service that culminates in his completed working drawings, it is not taxable, provided (1) his design and his working drawings are part of the same contract, and (2) the working drawings are reviewed and sealed by a licensed engineering firm.
• A standalone drawing or illustration — a taxable sale of goods. Tangible personal property includes artistic items such as sketches and drawings (20 NYCRR 526.8(a)). When Rusin's work culminates in a drawing, sketch, or illustration without his preparing working drawings, the transaction is a taxable sale of tangible personal property under § 1105(a) (Fred Gardner Co., TSB-H-80(200)S; Glushak v. City of New York).
• Materials — depends on what the work is. Property used to perform a nontaxable service is not purchased for resale, so Rusin's supplies for the exempt design services are taxable to him (20 NYCRR 526.6(c)(7)). But materials that become a physical component part of a taxable graphic illustration are exempt for resale if he gives his supplier a properly completed Resale Certificate (Form ST-120) (526.6(c)(2)).

What this means for you

Whether design work is taxable turns on the deliverable, not the label. If your service produces sealed working drawings under a single design contract, it's a nontaxable service. If you hand the client a drawing or rendering as the finished product, you've sold tangible personal property — and that's taxable.

Your material purchases follow the taxability of your output. Supplies you consume performing a nontaxable service are taxable to you. Materials that physically become part of a taxable item you sell can be bought tax-free with a resale certificate. Don't use a resale certificate for supplies consumed in exempt service work.

Being unlicensed doesn't change the analysis here. The opinion treats the work as architectural design work based on what it produces and the engineer's seal, not on the designer's license status.

Common questions

Q: I design buildings and deliver sealed blueprints. Do I charge sales tax?
A: No, if your design and the working drawings are one contract and the drawings are reviewed and sealed by a licensed engineering firm — that's a nontaxable service.

Q: I sold a client a perspective illustration, no blueprints. Taxable?
A: Yes. A standalone drawing or illustration is a taxable sale of tangible personal property.

Q: Can I buy my materials tax-free?
A: Only the materials that become a physical part of a taxable item you sell (use Form ST-120). Supplies you consume performing a nontaxable design service are taxable to you.

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property (including artistic items like sketches and drawings)
• Tax Law § 1105(c) — taxes only specifically enumerated services
• Tax Law § 1101(b)(4)(i) — retail sale; excludes property purchased for resale or as a physical component part

Regulations:

• 20 NYCRR 526.6(c)(2) — resale certificate (Form ST-120) for materials becoming a physical component part of a taxable item
• 20 NYCRR 526.6(c)(7) — property used to perform a nontaxable service is not purchased for resale
• 20 NYCRR 526.8(a) — tangible personal property includes artistic items such as sketches and paintings

Authorities cited:

• Matter of Fred Gardner Co., Inc., State Tax Commission, TSB-H-80(200)S (Oct. 3, 1980)
• Glushak v. City of New York, 6 A.D.2d 381 — sketches/illustrations as tangible personal property

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_6s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(6)S
Sales Tax
May 15, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S831014A

On October 14, 1983 a Petition for Advisory Opinion was received from Edward B. Rusin,
141 Scamridge Curve, Williamsville, New York 14221.
The issues raised are 1) whether the design services performed by Petitioner are subject to
sales tax, 2) whether graphic illustrations prepared and sold by Petitioner are subject to sales tax, and
3) whether sales tax should be charged to clients on items on which Petitioner has already paid sales
tax to his suppliers.
Petitioner performs the service of designing new buildings and designing the renovation of
existing buildings. Petitioner is not a licensed architect.
The design prepared is presented by Petitioner's client to potential financial backers and
lessees, town board members, commissions etc. for review and approval. Upon approval, a full set
of working drawings (blueprints) is prepared. These drawings may be prepared by Petitioner or by
an engineering firm. If prepared by Petitioner, the drawings are reviewed and sealed by a licensed
engineering firm for a fee.
In addition to performing the design services, Petitioner prepares graphic illustrations of
existing structures. These illustrations are done in perspective from whatever viewing angle the client
selects. No design service is performed.
The taxability of Petitioner's service is determined by the end result of the service rendered.
Section 1105(c) of the Tax Law imposes a tax on specifically enumerated services.
When Petitioner's design service is performed as an integral part of an architectural design
service and culminates in the preparation by Petitioner of completed working drawings (blueprints),
Petitioner's design service will not be subject to tax provided that:
1) the preparation of the design by Petitioner and the preparation of the working drawings
(blueprints) by Petitioner are part of the same contract; and
2) the working drawings prepared by Petitioner are reviewed and sealed by a licensed
engineering firm.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85(6)S
Sales Tax
May 15, 1985

The Sales and Use Tax Regulations provide that tangible personal property purchased for use
in performing a service not subject to tax is not purchased for resale. (20 NYCRR 526.6(c)(7)).
Accordingly, Petitioner's purchases of any supplies or materials used or consumed in performing
architectural type design services are subject to State and local sales and use tax.
Section 1105(a) of the Tax Law imposes a tax on retail sales of tangible personal property.
The Sales and Use Tax Regulations define tangible personal property as corporeal personal property
of any nature having a material existence and perceptibility to human senses. Tangible personal
property includes artistic items such as sketches and paintings. (20 NYCRR 526.8(a)).
When Petitioner's service culminates in the preparation of a drawing, sketch or illustration
without the preparation by Petitioner of completed working drawings (blueprints), the transaction
is subject to tax under Tax Law section 1105(a) as the sale of tangible personal property. Matter of
Fred Gardner Co., Inc. State Tax Commission, October 3, 1980, TSB-H-80(200)S; Glushak v City
of New York, 6 A.D. 2d381, 178 N.Y.S. 2d33.
Section 1101(b)(4)(i) defines a retail sale to be a sale of tangible personal property to any
person for any purpose, other than for resale as such or as a physical component part of tangible
personal property. Accordingly, Petitioner's purchases of materials which will be transferred to the
client as a physical component part of a graphic illustration are exempt from tax provided Petitioner
furnishes his supplier with a properly completed Resale Certificate (Form ST-120). (20 NYCRR
526.6(c)(2)).

DATED: April 22, 1985

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth herein.