For a biotech company, which equipment, utilities, and services are exempt as research-and-development versus production — and does the exemption reach New York City?

Plain-English summary

Enzo Biochem, Inc. does laboratory research (to develop products for disease diagnosis, genetic and prenatal analysis, cancer detection, and more) and manufactures DNA-based diagnostic probe kits for sale. It asked how the research-and-development exemptions (§ 1115(a)(10), § 1115(b)(ii)) and the production exemptions (§ 1105-B, § 1115(a)(12), § 1115(c)) apply to its equipment, utilities, and services. The Department sorted each category — and the crucial theme is whether the exemption reaches New York City.

Research-and-development equipment (§ 1115(a)(10)) — exempt statewide, including New York City.

• Equipment used directly and predominantly to conduct research, and equipment used to store research materials, is exempt — from state and local tax, including New York City.
• Research safety equipment (eye washes, safety showers) is a collateral use and is not exempt.
• Tools, supplies, and parts used directly and predominantly in R&D are also exempt.

Production equipment (§ 1115(a)(12)) — exempt statewide, but NOT New York City.

• Machinery used directly and predominantly to produce the kits for sale is exempt from state and local tax but not New York City (§ 1107(b)) — and only when used in the production phase (acting on material, causal relationship, handling/storage, or packaging).
• Storage equipment qualifies only if it stores raw materials; storing finished goods ready for sale does not qualify.
• Production safety equipment is a collateral use and is not exempt.

Utilities (gas, electricity, refrigeration, steam).

• Used exclusively in R&D (§ 1115(b)(ii)): exempt from state and local tax, including New York City.
• Used exclusively in production (§ 1115(c)): exempt from state and local tax except New York City.
• Because utilities arrive in bulk, the exemption is taken by refund/credit for the exempt portion, or by an ST-121 assuming liability for the taxable portion — with allocation substantiated by an engineering survey or formulae.

Production parts, tools, and supplies (§ 1105-B). Parts with a useful life of one year or less, tools, and supplies used directly and predominantly in production are exempt — statewide except New York City.

Installation and repair services.

• On R&D property: not exempt — fully taxable, state and local, including New York City.
• On production machinery: exempt from state tax (§ 1105-B(b)), but still local, including New York City.

How to claim. Buy exempt items with an Exempt Use Certificate (Form ST-121); the buyer must be a registered vendor (§ 1134); tax already paid can be recovered by credit or refund (§ 1139) within the allowed period.

What this means for you

Which building you use it in changes the tax — especially in New York City. The R&D exemptions reach New York City, but the production exemptions do not. Two nearly identical machines (say, a centrifuge) can be treated differently depending on whether they're used for research or for making product for sale.

"Directly and predominantly" is the gatekeeper, and collateral uses fail. Safety equipment, and anything not actually performing research or the production step, is a collateral use that stays taxable — even in an otherwise exempt lab or production line.

Raw-material storage counts; finished-goods storage doesn't. Storage equipment can be exempt when it holds raw materials, but once goods are finished and packaged for sale, storing them is no longer "production."

Utilities and services need their own analysis and paperwork. Utilities are handled by allocation (refund/credit or ST-121 with an engineering survey), and installation/repair follows special rules — notably, R&D installation/repair is fully taxable while production installation/repair is exempt only from the state tax.

Common questions

Q: Our research equipment — is it exempt even in New York City?
A: Yes. Equipment used directly and predominantly to conduct research (and to store research materials) is exempt under § 1115(a)(10) from state and local tax, including New York City. Research safety equipment is not exempt.

Q: What about our production machinery in New York City?
A: The production exemption (§ 1115(a)(12)) applies statewide but not to New York City (§ 1107(b)). It's exempt from state and local tax elsewhere when used directly and predominantly in the production phase.

Q: How do we handle utilities and installation/repair charges?
A: Utilities used exclusively in R&D are exempt everywhere (including NYC); used exclusively in production, exempt except NYC — claimed by refund/credit or ST-121 with an engineering-survey allocation. Installation/repair of R&D property is fully taxable; of production machinery, exempt from state tax but still local (including NYC).

Citations and references

Statutes and regulations:

• Tax Law § 1115(a)(10) — research-and-development exemption (excludes ordinary testing/inspection, quality control, surveys)
• Tax Law § 1115(b)(ii) — utilities used directly and exclusively in R&D
• Tax Law § 1115(a)(12) — production-machinery exemption
• Tax Law § 1115(c) — utilities used directly and exclusively in production
• Tax Law § 1105-B — production parts (≤1-year life), tools, supplies; installation/repair of production machinery
• Tax Law § 1107(b) — production exemptions (§ 1115(a)(12), § 1115(c)) do not apply to New York City sales/use tax
• Tax Law § 1134 (vendor registration); § 1139 (credit/refund)
• 20 NYCRR 528.11 — research-and-development exemption
• 20 NYCRR 528.13 — production exemption; "directly" and "predominantly" use

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a86_45s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-86(45)S
Sales Tax
November 12, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S860620A

On June 20, 1986, a Petition for Advisory Opinion was received from Enzo Biochem, Inc.,
325 Hudson Street, New York 10013.
ISSUES
The issues raised are whether for purposes of the state and local sales and use taxes imposed
under Article 28 of the Tax Law and pursuant to Article 29 of the Tax Law, tangible personal
property and utilities used by Petitioner in its business qualify for the research and development
exemption provided by sections 1115(a)(10) and 1115(b)(ii) of the Tax Law or the production
exemption provided by sections 1105-B, 1115(a)(12) and 1115(c) of the Tax Law.
FACTS
Petitioner is engaged in laboratory research to develop various products for human disease
diagnosis, genetic analysis and prenatal diagnosis, cancer detection and prognosis, plant pathogen
identification and animal disease diagnosis. Petitioner currently manufactures DNA-based human
infectious disease diagnostic probe kits for sale to the health care market.
All of the equipment listed below under the category of "Equipment Used to Conduct
Research" is used by Petitioner to actually perform such laboratory research. All of the equipment
listed below under the category of "Production Equipment" is used by Petitioner predominantly in
the manufacture of its diagnostic kits.
Research and Development Equipment
Petitioner uses the following equipment predominantly in its research laboratory:
Equipment Used to Conduct Research
H2O Baths - Maintains materials at specific temperatures
Centrifuges (Ultra, Low Speed, Micro, Rotors, Table Top) - Separate materials
Shakers (Incubator, Table Top, H2O) - Vibrates liquid materials
Incubators (CO2, Dry Air) - Grows test cells
Sterilizers - Prevents contamination of research materials
Programmable Dispenser - Measures research materials
Ovens (Drying, vacuum) - Drys research materials
Washing Manifolds for Elisa Plates - Monitors materials during testing
Elisa Plates - Monitors materials during testing
Gamma Counter - Monitors materials during testing
Scintillation Counter - Monitors materials during testing
RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

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

-2­
TSB-A-86(45)S
Sales Tax
November 12, 1986
Fermentors - Grows cells for analysis
Spectrophotometers with Accessories - Measures research materials
Darkroom tanks - Monitors materials during research
Darkroom Processor and Accessories - Monitors materials during research
Gel Equipment (Vertical, Horizontal) - Monitors materials during research
Electro Blot Transfer - Monitors materials during research
Gel Dryer - Monitors materials during research
Gene Machine - Separates different size materials
Gene Machine Power Supply - Separates different size materials
Gene Machine Pump - Separates different size materials
Gene Machine Fraction Column - Separates different size materials
Temperature Calculator - Monitors research materials
pH Meters - Monitors research materials
Lyophilizers - Removes water from research material
Balances (Top Loader, Analytical) Weight research material
Microscopes (Light, Fluorescent, Dual Viewer, Phase) - Inspects result of research
Cameras - Inspects results of research
Vacuum Pumps - Filters research materials
Elisa Readers - Monitors materials during research
Fluorimeter - Monitors materials during research
Pipettemen - Measures materials during research
Klett Colorimetric - Measures materials during research
Spec 20 - Measures materials during research
HPLC - Measures materials during research
Trans Illuminator - Measures materials during research
Distillation Apparatus - Measures materials during research
Gene Synthesizer - Measures materials during research
Sequencing Apparatus - Measures materials during research
Col. Chromotography Equipment - Measures materials during research
Gradient Makers - Measures materials during research
Vortexes - Mixes solutions during tests
Hot Plate Stirrers - Mixes solutions during tests
Liquid Nitrogen Tanks - Maintains low temperatures during tests
Microwave Ovens - Heats testing solutions
Seal-a-Meals - Packages research materials
Glove Boxes - Used in manipulation of research materials
Hoods (Tissue, Fume, Bench Top) - Removes contaminants from air in research laboratory
Equipment Used to Store Research Materials
Crushed Ice Machines
Refrigerators
Freezers
Research Safety Equipment
Eye Washes
Safety Showers

-3­
TSB-A-86(45)S
Sales Tax
November 12, 1986
Manufacturing Equipment
Petitioner uses the following equipment predominantly in the manufacture of its diagnostic
kits:
Production Equipment
Sonicators - Shatters raw materials
H20 Baths - Maintains materials at specific temperatures
Centrifuges (Ultra, Low Speed, Micro, Rotors, Table Top) - Separates materials
Shakers (Incubator, Table Top, H20) - Vibrates liquid materials
Roller Bottle Apparatus - Vibrates liquid materials
Incubators (CO2, Dry Air) - Grows cells as raw materials
Sterilizers - Prevents contamination of materials
Ovens (Drying, Vacuum) - Drys materials
Washing Manifolds for Elisa Plates - Tests for quality control in production
Elisa Plates - Tests for quality control in production
Scintillation Counter - Monitors production materials
Fermentors - Grows cells for raw materials
Spectrophotometer with Accessories - Measures production materials
Darkroom Tanks - Monitors production materials
Darkroom Processor and Accessories - Monitors production materials
Gel Equipment (Vertical, Horizontal) - Monitors production materials
Electro Blot Transfer - Monitors production materials
Gel Dryer - Monitors production materials
Gene Machines - Separates production materials
Gene Machine Power Supplies - Separates production materials
Gene Machine Pumps - Separates production materials
Gene Machine Fraction Columns - Separates production materials
Temperature Calculators - Monitors production materials
pH Meters - Monitors production materials
Lyophilizers - Removes water from production material
Balances - Weighs production material
Microscopes (Light, Fluorescent) - Checks quality of production material
Camera - Checks quality of production material
Vacuum Pumps - Filters production solutions
Elisa Reader - Monitors materials during production
Fluorimeter - Monitors materials during production
Pipettemen - Measures production material
Seal-a-Meals - Packages raw materials and finished products
Klett Colorimetric - Measures and produces production materials
Spec 20 - Measures and produces production materials
HPLC - Measures and produces production materials
Trans Illuminator - Measures and produces production materials
Distillation Apparatus - Measures and produces production materials
Gene Synthesizer - Measures and produces production materials
Sequencing Apparatus - Measures and produces production materials
Col. Chromotography Equipment - Measures and produces production materials

-4­
TSB-A-86(45)S
Sales Tax
November 12, 1986
Gradient Makers - Measures and produces production material
Vortexes - Mixes production solutions
Hot Plate Stirrers - Mixes production solutions
Liquid Nitrogen Tanks - Freezes materials in production process
Microwave Ovens - Heats materials in production process
UV Box - Monitors production process
Glove Box - Used to manipulate materials
Hoods (Tissue, Fume, Bench Top) - Removes contaminants from air in
production area
Storage Equipment
Crushed Ice Machine
Refrigerator
Freezers
Safety Equipment
Eyewashes
Safety Showers
LAW AND REGULATIONS
Section 1115(a)(10) of the Tax Law provides an exemption from state sales and use taxes
for:
Tangible personal property purchased for use or consumption directly
and predominantly in research and development in the experimental
or laboratory sense. Such research and development shall not be
deemed to include the ordinary testing or inspection of materials or
products for quality control, efficiency surveys, management studies,
consumer surveys, advertising, promotions, or research in connection
with literary, historical or similar projects.
Section 1115(b)(ii) of the Tax Law provides an exemption from state sales and use taxes for:
Gas, electricity, refrigeration and steam service of whatever nature for
use or consumption directly and exclusively in research and
development in the experimental or laboratory sense....
By operation of sections 1210(a)(1) and 1107(a) of the Tax Law, the exemptions provided
by sections 1115(a)(10) and 1115(b)(ii) of the Tax Law also apply to local sales and use taxes,
including the sales and use tax imposed within the City of New York.
Regulation section 528.11 further explains the exemptions provided under sections
1115(a)(10) and 1115(b)(ii) of the Tax Law as follows:

-5­
TSB-A-86(45)S
Sales Tax
November 12, 1986
528.11 Research and development
(a) Exemption. (1) The sale of tangible personal property purchased
for use or consumption directly and predominantly in research and
development in the experimental or laboratory sense is exempt from
the sales and use tax.
(2) The exemption does not extend to installation and repair
services for such property.
(3) An exemption is allowed for the sale of gas, electricity,
refrigeration and steam, and gas, electric, refrigeration and steam
service of whatever nature for use or consumption directly or
exclusively in research and development in the experimental or
laboratory sense.
(4) An Exempt Use Certificate (form ST-121) is used to make
purchases eligible for this exemption without payment of sales tax.
(b) Research and development. (1) Research and development, in
the experimental or laboratory sense, means research which has as its
ultimate goal.
(i)
endeavor;

basic research in a scientific or technical field of

(ii)
advancing the technology in a scientific or technical
field of endeavor;
(iii)

the development of new products;

(iv)

the improvement of existing products; and

(v)

the development of new uses for existing products.

2)
Research and development in the experimental or laboratory
sense does not include:
(i)
testing or inspection of materials or products for
qualify control (for machinery and equipment used for quality control
in the production of products for sale, see section 528.13 of this Part);
(ii) efficiency surveys;
(iii) management studies;
(iv) consumer surveys, advertising and promotions; and

-6­
TSB-A-86(45)S
Sales Tax
November 12, 1986
(v)
research in connection with literary, historical or
similar products.
(c) Directly, predominantly, exclusively. (1) Direct use in research
and development means actual use in the research and development
operation. Tangible personal property for direct use would broadly
include materials worked on, and machinery, equipment and supplies
used to perform the actual research and development work. Usage in
activities collateral to the actual research and development process is
not deemed to be used directly in research and development.
(2) Tangible personal property is used predominantly in research
and development if over 50 percent of the time it is used directly in
such function.
(3) Tangible personal property is exempt only if it meets the tests
of direct and predominant use.
Example 1:

Test tubes, flasks, reagents, microscopes and
slides purchased by a chemical manufacturer
for its research laboratory for developing new
pesticides are exempt from sales tax.

Example 2:

Laboratory tables for use in a research
laboratory are exempt, but desks and chairs
used by clerical personnel are not used directly
in research.

Example 3:

A company constructs apparatus in its
ownmachine shop, for use only in its research
department in experiments on the strength of
different alloys. It purchases the materials
from which the apparatus is constructed, and
special tools and dies needed to construct the
apparatus from its suppliers. The materials
may be purchased without payment of tax, as
directly and predominantly used in research.
The special tools and dies are not exempt, as
they are not used directly and predominantly
in research.

Example 4:

An aircraft manufacturer assembles two
airplanes, which it uses for function and
reliability tests prior to manufacturing this
type of airplane for sale. The parts, equipment,
instrumentation and fuel are used directly and
predominantly in research and development.

-7­
TSB-A-86(45)S
Sales Tax
November 12, 1986
Example 5:

Technical books and journals purchased for a
research and development laboratory, for use
in doing background research are exempt.

Example 6:

Paper on which research and development test
results are recorded is exempt, but paper for
in-house printing of summary of research and
development findings so that decisions may be
made as to the marketability of the new
products is taxable as the decision making
activity is administrative.

(4)(i) Gas, electricity, refrigeration and steam and gas,
electric, refrigeration and steam service is used exclusively in
research and development if 100 percent of its use in such
function.
(ii) Because gas, electricity, refrigeration and steam when
purchased by the user is normally received in bulk or in a
continuous flow and a portion thereof is used for purposes
which would make the exemption inapplicable to such
purchases, the user may claim a refund or credit for the tax
paid on the portion used or consumed directly and exclusively
in research and development.
(iii) The user must maintain adequate records with respect to
the allocation of gas, electricity, refrigeration and steam used
directly and exclusively in research and development from
that used for nonexempt purposes, the user must when
claiming a refund or credit, submit an engineering survey or
the formulae used in arriving at the amounts used in an
exempt manner.
Example 7:

A biological laboratory that develops new
vaccines has an autoclave to sterilize
instruments and a refrigerator for storage of
the vaccine, both run by electricity. It receives
one electric bill, which covers general lighting
and the electricity required for the autoclave
and refrigerator. It may obtain a refund of the
portion of the tax applicable to the charge for
electricity required to run the autoclave and
refrigerator. 20 NYCRR 528.11.

-8­
TSB-A-86(45)S
Sales Tax
November 12, 1986
Section 1115(a)(12) of the Tax Law provides an exemption from state sales and use tax for:
Machinery or equipment for use or consumption directly and predominantly in the
production of tangible personal property. . . for sale by manufacturing. . . .
Regulation section 528.13 further explains the exemption provided under section 1115(a)(12)
of the Tax Law. Paragraphs (1) and (2) of subdivision (c) of section 528.13 provide, in part:
(1) Directly means the machinery or equipment must, during the production phase
of a process:
(i) act upon or effect a charge in material to form the product to be sold, or
(ii) have an actual causal relationship in the production of the product to be sold, or
(iii) be used in the handling, storage, or conveyance of materials or the product to be
sold, or
(iv) be used to place the product to be sold in the package in which it will enter the
stream of commerce.
(2) Usage in activities collateral to the actual production process is not deemed to be
used directly in production.
Paragraph (4) of subdivision (c) of section 528.13 provides, in part:
(4) Machinery or equipment is used predominantly in production, if over 50 percent
of its use is directly in the production phase of a process.
Section 528.13(b)(l)(ii) provides:
(ii) Production includes the production line of the plant starting with the handling and
storage of new materials at the plant site and continuing through the last step of
production where the product is finished and packaged for sale.
Section 1105-B(a) of the Tax Law provides that:
Notwithstanding any other provisions of this article, but not for purposes of . . . (the
sales and use taxes imposed in New York City and in other localities), receipts from
the retail sales of parts with a useful life of one year or less, tools and supplies for use
or consumption directly and predominantly in the production of tangible personal
property . . . for sale by manufacturing . . . shall be exempt from such tax on and after
March first, nineteen hundred eighty-one.
Section 1105-B(b) of the Tax Law provides that:

-9­
TSB-A-86(45)S
Sales Tax
November 12, 1986
Notwithstanding any other provisions of this article, but not for purposes of . . . (the
sales and use taxes imposed in New York City and in other localities), the taxes
imposed by subdivision (c) of section 1105 from every sale of the services of
installing, repairing, maintaining or servicing . . .(production machinery and
equipment). . . shall be exempt from the tax . . . on and after March first, nineteen
hundred eighty-one.
Section 1115(c) of the Tax Law provides that:
Fuel, gas, electricity, refrigeration and steam and gas, electric, refrigeration and steam
service of whatever nature for use or consumption directly and exclusively in the
production of tangible personal property. . . for sale, by manufacturing . . . shall be
exempt from . . . (the state sales and use taxes).
Regulation section 528.22 further explains the exemption provided under section 1115(c)
of the Tax Law. Paragraph (3) of subdivision (b) of section 528.22 provides, in part:
(3)(i) Exclusively means that the fuel, gas, electricity, refrigeration and steam
and like services are used in total (100%) in the production process.
(ii) Because fuel, gas, electricity, refrigeration and steam when
purchased by the user are normally received in bulk or in a continuous flow and
a portion thereof is used for purposes which would make the exemption
inapplicable to such purchases, the user may claim a refund or credit for the tax
paid only on that portion used or consumed directly and exclusively in
production.
(iii) In the alternative, an exempt use certificate (Form ST-121) may be
used, providing full liability is assumed for any State and local tax due on
subdivision (a) of this section. The taxable portion of these purchases is to be
reported as a "purchase subject to use tax" on a sales and use tax return required
to be filed with the Tax Commission.
(iv) The user must maintain adequate records with respect to the
allocation of fuel, gas, electricity, refrigeration and steam used directly and
exclusively in production and for nonexempt purposes.
(v) For the purpose of substantiating the allocation of fuel, gas,
electricity, refrigeration and steam and like services used directly and
exclusively in production from that used for nonexempt purposes, the user must,
when claiming a refund or credit, submit an engineering survey or the formulae
used in arriving at the amounts used in an exempt manner.

-10­
TSB-A-86(45)S
Sales Tax
November 12, 1986
Section 1107(b) of the Tax Law specifically provides the exemptions provided by sections
1115(a)(12) and 1115(c) shall not apply to the sales and use taxes imposed within the City of New
York. However, it should be noted that the City of New York does provide certain incentives with
respect to machinery and equipment and electricity used in production. Since such incentives are
outside of the scope of an advisory opinion, Petitioner should consult the City of New York,
Department of Finance for further information.
Section 1210(a)(1) of the Tax Law provides for the exemption from sales and use taxes
imposed by localities (other than New York City) of "all sales of tangible personal property for use
or consumption directly and predominantly in the production of tangible personal property. . . for
sale by manufacturing . . . ." Additionally, by operation of section 1210(a)(1) of the Tax Law, the
exemption provided by section 1115(c) of the Tax Law for fuel, gas, electricity, refrigeration and
steam and gas, electric, refrigeration and steam service for use or consumption directly and
exclusively in the production of tangible personal property for sale, by manufacturing applies to sales
and use taxes imposed by localities (other than New York City).
Conclusions
Research and Development Equipment
All of the tangible personal property listed above as "Equipment Used to Conduct Research"
is used directly and predominantly in research and development in the experimental or laboratory
sense within the meaning of section 1115(a)(10) of the Tax Law inasmuch as all such tangible
personal property is actually used for experimentation to advance technology in the field of DNA­
based disease diagnosis and to develop new products. Additionally, the tangible personal property
listed above as "Equipment Used to Store Research Materials" is similarly deemed to be used
directly and predominantly in research and development in the experimental or laboratory sense.
However, the tangible personal property listed above as "Research Safety Equipment" is not deemed
to be used directly and predominantly in research and development since it is not used to perform
the actual research and development work but, rather, is used in collateral activities.
Accordingly the purchase of all such tangible personal property used directly and
predominantly in research and development by Petitioner is exempt from both state and local
(including New York City) sales and use tax. However, "Research Safety Equipment" is not exempt
from tax. It should also be noted that other tangible personal property, such as tools, supplies and
parts, when used directly and predominantly in research and development in the experimental or
laboratory sense is also exempt from tax.
To purchase such exempt tangible personal property without payment of sales tax, Petitioner
must be registered as a vendor for sales tax purposes as provided under section 1134 of the Tax Law.
Petitioner may then purchase such tangible personal property tax free by presenting to its vendor a
properly completed Exempt Use Certificate (Form ST-121). If Petitioner has purchased exempt
tangible personal property and paid sales tax thereon, it may file for a credit or refund of such sales
tax pursuant to the provisions of section 1139 of the Tax Law if such request for credit or refund is
made within the applicable period as provided by section 1139.

-11­
TSB-A-86(45)S
Sales Tax
November 12, 1986
Production Equipment
All of the machinery and equipment listed above as "Production Equipment" is used directly
and predominantly in the production for sale of tangible personal property by manufacturing or
processing within the meaning of sections 1115(a)(12) and 1210(a)(1) of the Tax Law but only if
such machinery and equipment is used in the production phase and either acts upon material to form
the product to be sold, has an active causal relationship in the production of the product to be sold,
is used in the handling or storage of the product to be sold or is used to place the product to be sold
in the package in which it will enter the stream of commerce. Additionally, the machinery and
equipment listed above as "Storage Equipment" is similarly deemed to be used directly and
predominantly in the production for sale of tangible personal property by manufacturing or
processing if it is used predominantly to store raw materials. The storage of finished goods which
have been packaged and are ready for sale does not qualify as production. The machinery and
equipment listed above as "Safety Equipment" is not deemed to be used directly and predominantly
in production but, rather, is deemed to be used in collateral activities.
Accordingly, the purchase of all such machinery and equipment used directly and
predominantly in the production for sale of tangible personal property by manufacturing by Petitioner
is exempt from both state and local (but not New York City) sales and use tax. However, "Safety
Equipment" is not exempt from tax.
To purchase such exempt machinery and equipment without payment of sales tax, Petitioner
must be registered as a vendor for sales tax purposes as provided under section 1134 of the Tax Law.
Petitioner may then purchase such machinery and equipment tax free by presenting to its vendor a
properly completed Exempt Use Certificate (Form ST-121). If Petitioner has purchased exempt
machinery and equipment and paid sales thereon, it may file for a credit or refund of such sales tax
pursuant to the provisions of section 1139 of the Tax Law if such request for credit or refund is made
within the applicable period as provided by section 1139.
Gas, Electricity, Refrigeration and Steam
Gas, electricity, refrigeration and steam and gas, electric, refrigeration and steam service used
exclusively in research and development experiments or used to operate research and development
equipment is used exclusively in research and development within the meaning of sections
1115(b)(ii), 1210(a)(1) and 1107(a) of the Tax Law. Similarly, gas, electricity, refrigeration and
steam and gas, electric, refrigeration and steam service used exclusively in the production process
or used to operate production machinery is used exclusively in production within the meaning of

-12­
TSB-A-86(45)S
Sales Tax
November 12, 1986
sections 1115(c) and 1210(a)(1) of the Tax Law. Accordingly, the purchase of all such gas,
electricity, refrigeration and steam and gas, electric, refrigeration and steam service is exempt from
state and local (including New York City) sales and use taxes when used in research and
development and is exempt from state and local (other than New York City) sales and use taxes
when used in production. Petitioner may claim a credit or refund for sales taxes paid on that portion
of gas, electricity, refrigeration and steam and gas, electricity, refrigeration and steam services used
in an exempt manner. All such claims must be made within the period prescribed by section 1139
of the Tax Law.
In the alternative, an Exempt Use Certificate (Form ST-121) may be used to purchase such
utilities tax free providing full liability for the taxable portion of such utilities is assumed and paid
on Petitioner's sales tax returns. The allocation of such utilities between exempt and nonexempt
purposes must be substantiated by an engineering survey or by the formulae used to arrive at each
respective amount which must be made available for review upon request by the Department of
Taxation.
Production Parts, Tools and Supplies
Effective March 1, 1981, parts with a useful life of one year or less, tools and supplies for
use or consumption directly and predominantly in the production for sale of tangible personal
property by manufacturing are exempt from the state sales and use tax. Such parts, tools and
supplies are similarly exempt from local sales tax (other than New York City's) and, in fact, were
exempt even before March 1, 1981. The procedure for tax free purchase of such tools, parts and
supplies and for credit or refund of tax already paid is the same as described above under
"Production Equipment".
Installation and Repair Services
Any charges for the installation, repair, maintenance or servicing of exempt research and
development property do not qualify for the research and development exemption. Any such charge
is subject to both state and local (including New York City) sales and use tax.
However, charges for the installation, repair, maintenance or servicing of exempt production
machinery or equipment qualify for exemption from State sales and use tax by operation of section
1105-B(b) of the Tax Law. Such charges continue to be subject to local (including New York City)
sales and use tax.

Dated: November 12, 1986

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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