A company builds window and floor displays of liquor products inside retail liquor stores and bills the distributor. Does it have to charge New York sales tax on that service?

Plain-English summary

Starlite Display, Inc. builds window and floor displays of liquor distributors' products inside retail liquor stores. The work involves arranging liquor bottles owned by the retailer into various forms and designs, and may include signs and paper goods supplied by the distributor — or Starlite's own paper goods. When a display is done, Starlite bills the distributor for the service and any supplies used. It asked whether it must collect sales tax on those charges.

The Department held the display service is taxable.

• Building a display is a taxable installation. Tax Law § 1105(c)(3) taxes installing tangible personal property. The Department's long-standing policy is that creating window displays is installation of tangible personal property within that statute.
• "Mostly merchandise" doesn't change it. The statute does not distinguish a display made mostly of goods held for sale in the regular course of business from one made of other property. So the fact that the display is built largely out of the retailer's for-sale liquor bottles does not alter the result.
• Supplies Starlite resells to the customer. If Starlite buys its own supplies that will be sold to the customer as part of the job, it may buy them tax-free with a Resale Certificate (Form ST-120) — but only if those supplies are actually transferred to the customer. If instead the customer furnishes the supplies, the customer pays tax when buying them.
• Result. Starlite must collect New York sales tax on the amount it bills for creating the window and floor displays.

What this means for you

Charging to build or set up a display of goods is generally a taxable installation service in New York. If your business assembles, arranges, or installs product displays for a fee, § 1105(c)(3) can reach that charge as installation of tangible personal property.

It doesn't matter that the display is made of the store's own merchandise. The taxability turns on the installation service, not on who owns the bottles or boxes or whether they are inventory held for sale.

Handle your supplies correctly. Supplies you buy and then actually transfer to the customer as part of the job can be purchased tax-free with a Resale Certificate (Form ST-120). But supplies the customer buys and hands to you are taxable to the customer at the time of purchase — the resale treatment doesn't apply to them.

Common questions

Q: We charge to design and set up product displays in stores. Is that taxable?
A: Yes. The Department treats creating window (and floor) displays as a taxable installation of tangible personal property under § 1105(c)(3).

Q: The display is built almost entirely from the store's own for-sale merchandise. Does that make it exempt?
A: No. The statute does not distinguish displays made mostly of goods held for sale from displays made of other property, so it is still taxable.

Q: Can we buy our display supplies without tax?
A: Only the supplies you actually resell — that is, transfer to the customer — as part of the job. Those you can buy tax-free with a Resale Certificate (Form ST-120). Supplies the customer provides are taxable to the customer.

Citations and references

Statute and authority:

• Tax Law § 1105(c)(3) — imposes sales tax on installing tangible personal property; Department policy treats creating window displays as such installation
• Form ST-120 (Resale Certificate) — lets the display company buy tax-free the supplies it actually transfers (resells) to the customer as part of the service

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a88_3s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-88(3)S
Sales Tax
December 3, 1987

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S870728B

On July 28, 1987, a Petition for Advisory Opinion was received from Starlite Display, Inc.,
1 Fairchild Court, Plainview, New York, 11803-1701.
The Petitioner creates window and floor displays of the products of liquor distributors at
retail liquor stores. This service includes the placement in various forms and designs of liquor bottles
owned by the retailer and may include certain materials such as signs and other paper goods provided
by the distributor. The Petitioner may also use its own paper goods in the displays. Upon completion
of the display, the Petitioner bills the distributor for the service and any supplies used.
The issue raised is whether the Petitioner is required to collect New York sales tax on the
amount billed to a customer for the creation of the displays.
Section 1105(c)(3) of the Tax Law imposes a tax on installing tangible personal property. It
has been the policy of the Department of Taxation and Finance that the service of creating window
displays is taxable because this service constitutes the installation of tangible personal property
within the meaning of the statute. The statute does not distinguish between a display comprised
mostly of goods held for sale in the regular course of business and other tangible personal property.
Accordingly, the fact that the display installed is comprised mostly of goods held for sale in the
regular course of business does not alter the result.
If the Petitioner purchases its own supplies which are to be sold to its customer in
conjunction with the performance of its service, it may purchase those supplies tax free by using a
Resale Certificate (Form ST-120). The supplies purchased must actually be transferred to the
customer. If the customer furnishes the Petitioner with the supplies, the customer must pay a tax at
the time of purchase.
Accordingly, the Petitioner is required to collect New York sales tax on the amount billed
to a customer for the creation of window and floor displays.

DATED: December 3, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.
RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)