Can a trade-show installer subtract its supervisors' costs and other expenses from the amount of a taxable service charge?

Plain-English summary

I & D Inc. assembles and disassembles trade-show exhibits — uncrating the parts, bolting them together, putting the display in place, then taking it apart and re-crating it for the next show. In an earlier opinion (TSB-A-85(16)S), the Department told I & D that this work is a taxable service, except that separately stated dismantling charges are not taxable. Now I & D said it uses full-time supervisory personnel who handle arranging delivery, hiring laborers, securing equipment and parts, monitoring the exhibit, and arranging return shipment — and argued that those supervisors don't "set up" or "put property in place," so their cost should be excluded from tax.

The Department said no — the whole charge is taxable, with no deduction for expenses.

• Installing an exhibit is a taxable service. Under Tax Law § 1105(c)(3), installing tangible personal property is taxable, and "installing means setting up tangible personal property or putting it in place for use" (20 NYCRR § 527.5(a)(2)).
• A "receipt" is the full price — expenses can't be subtracted. Under Tax Law § 1101(b)(3) and 20 NYCRR § 526.5(e), a receipt is the total sale price and charge for a taxable service without any deduction for expenses, whatever their own tax status and whether or not they're billed to the customer.
• Itemizing doesn't help. Expenses that would be nontaxable if the customer bought them directly are still components of the taxable service charge; they cannot be made exempt by listing them separately. The Department relied on Rochester Gas and Electric v. Tax Commission (70 N.Y.2d 613), Cecos International (70 N.Y.2d 606), and Penfold (114 A.D.2d 696).
• The one exception stays. As in the earlier opinion, separately stated charges for dismantling the exhibits are not taxable.

So I & D must collect sales and use tax on its total charge without any reduction for expenses, no matter how it structures the bill — except for separately stated dismantling.

What this means for you

You can't shrink a taxable service charge by unbundling expenses. In New York, the taxable "receipt" is the whole price. Travel, meals, wages, parts, supplies, supervisory overhead — even items that would be tax-free if the customer bought them directly — stay in the tax base when they're part of what you're charging for a taxable service.

Itemizing on the invoice changes nothing. Breaking out "supervision," "labor," or "expenses" on separate lines does not make those lines exempt. The Rochester Gas and Electric line of cases forecloses that.

The narrow win: separately state your dismantling (teardown) charge. For exhibit work, a clearly separated dismantling charge is not taxable. Keep that line distinct from the taxable setup/installation charge — but don't try to stretch the same idea to your other expenses.

Common questions

Q: My supervisors don't physically bolt the booth together — can I exclude their cost from tax?
A: No. Their cost is part of the charge for the taxable installation service. The taxable receipt is your full price with no deduction for expenses (Tax Law § 1101(b)(3); 20 NYCRR § 526.5(e)).

Q: If I list travel, parts, and labor as separate expense lines, are those lines tax-free?
A: No. Separately itemizing components of a taxable service charge doesn't make them exempt (Rochester Gas and Electric; Cecos; Penfold). The whole charge is taxable.

Q: Is anything I do not taxable?
A: Yes — a separately stated charge for dismantling the exhibit is not taxable, as the Department held in your earlier opinion TSB-A-85(16)S. Setup/installation and its expense components remain taxable.

Citations and references

Statute, regulation, and cases:

• Tax Law § 1105(c)(3) — imposes tax on installing tangible personal property (not held for sale in the regular course of business)
• 20 NYCRR § 527.5(a)(2) — "installing means setting up tangible personal property or putting it in place for use"
• Tax Law § 1101(b)(3) — defines "receipt" as the sale price of property and the charge for any taxable service, without deduction for expenses
• 20 NYCRR § 526.5(e) — all expenses incurred by a vendor in making a sale, regardless of their taxable status and whether billed to the customer, are not deductible from receipts
• Rochester Gas and Electric Corp. v. New York State Tax Commission, 70 N.Y.2d 613; Cecos International, Inc. v. State Tax Commission, 70 N.Y.2d 606; Penfold v. New York State Tax Commission, 114 A.D.2d 696 (1985) — a taxable charge cannot be made exempt, in whole or part, by separately itemizing its components
• TSB-A-85(16)S — I & D's earlier advisory opinion holding its services taxable except separately stated dismantling charges

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_45s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88 (45)S
Sales Tax
September 13, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S880426A

On April 26, 1988, a Petition for Advisory Opinion was received from I & D Inc. 1492
Kelton Drive, Stone Mountain, Georgia 30083.
The issue raised is whether the portion of Petitioner's fee to its customers for the services of
supervising personnel is subject to the New York State sales and use tax and, if so, whether the
portion of the supervisor's costs which relate to hiring laborers, arranging for shipment and return
of exhibits, purchasing additional parts and equipment and arranging disassembly of exhibits is
excluded from the amount subject to tax.
Petitioner previously requested and received an advisory opinion (TSB-A- 85(16)S)
concerning substantially the same situation. There, as here, the description of Petitioner's services
indicated that:
Petitioner's business consists of assembling and disassembling
exhibits for persons and businesses that wish to advertise products
and services at trade shows and conventions throughout the United
States, including New York. The exhibits are generally constructed
by exhibit shops or by the exhibitors themselves and may be used at
several shows in different parts of the country. The exhibits which
Petitioner assembles and disassembles are shipped to the point of use
by interstate carriers in crates and disassembled parts. Once the
shipment arrives at the show floor, Petitioner uncrates the exhibit,
bolts it together and puts it in place. When the convention is over,
Petitioner takes the exhibit apart and packs the parts into crates for
shipment to the next destination. Petitioner does not alter or modify
the parts of the exhibit, but simply provides labor for the assembly
and subsequent disassembly of the exhibit. In the course of providing
this service, Petitioner consumes miscellaneous items such as tape,
nuts and bolts, the cost of which is billed to customers along with
sales tax paid by Petitioner on these items. (TSB-A-85(16)S)
The previous Advisory Opinion held that Petitioner's services were subject to sales tax except
that if he separately stated his charge for dismantling the displays, such dismantling charges would
not be taxable.
Petitioner now states that it conducts its business by employing a number of supervisory
personnel in various cities on a full-time basis. These supervisors are responsible for retaining
contract laborers to assemble and disassemble the exhibits.
TP-9 (9/88)

-2­
TSB-A-88 (45)S
Sales Tax
September 13, 1988

Petitioner states that its supervisory employees have a number of duties, including arranging
delivery of the trade show exhibit, hiring the necessary skilled and unskilled laborers to assemble
the exhibit, securing necessary equipment and parts, monitoring the status of the exhibit during the
trade show, supervising the dismantling of the exhibit, and arranging the return shipment of the
exhibit. Petitioner maintains that these duties do not involve "setting up" or "putting personal
property in place for use." This function is the responsibility of the skilled and unskilled laborers
retained by the supervisory personnel.
Petitioner is sometimes hired and paid directly by the exhibitor and in other instances is hired
and paid by an exhibit shop which takes care of the arrangements for assembly and disassembly of
an exhibit that it has built as a service to its customers.
Section 1105(c)(3) of the Tax Law imposes a tax on "Installing tangible personal property...
not held for sale in the regular course of business, whether or not the services are performed directly
or by means of coin operated equipment or by any other means, and whether or not any tangible
personal property is transferred in conjunction therewith..." The sales tax regulations indicate that
"installing means setting up tangible personal property or putting it in place for use." (20 NYCRR
527.5(a)(2)).
Section 1101(b)(3) of the Tax Law defines receipt as "[T]he amount of the sale price of any
property and the charge for any service taxable...without any deductions for expenses...."
Section 526.5 (e) of the regulations explain the above section of law.
(e) Expenses. All expenses, including telephone and telegraph and other service charges,
incurred by a vendor in making a sale, regardless of their taxable status and regardless of whether
they are billed to a customer are not deductible from the receipts.
Example 1:

A photographer contracts with a customer to furnish
photographs at $50 each in addition to expenses.
The customer is billed as follows:
Photographs (2)
Model fees
Meals
Travel
Props (Flowers)
Total due
Receipt subject to tax is $200

$100
60
10
25
5
$200

-3­
TSB-A-88 (45)S
Sales Tax
September 13, 1988

Example 2:

An appliance repairman charges $10 per hour plus
expenses when on a service call. The customer is
billed as follows:
3 hrs. at $10
Travel
Parts
Meals
Total due
Receipt subject to tax is $70

$ 30
15
20
5
$70

The essence of these examples is that the customer is purchasing photographs and a repair
service both of which are subject to tax on the total price even though some of the expenses
attributable to the sale are not subject to tax.
Petitioner provides the services of installation and dismantling of trade show exhibits.
During the course of providing these services, Petitioner may incur expenses which may not be
subject to tax if purchased directly by Petitioner's customers. Nevertheless, such expenses are
components of a charge for taxable services whether or not separately stated by Petitioner on its bills
to its customers. The taxable charge cannot be rendered exempt from tax in whole or in part merely
by separately itemizing the components. Rochester Gas and Electric Corporation v. New York State
Tax Commission, 70 N.Y.2d 613; Cecos International, Inc. v. The State Tax Commission of the
State of New York, 70 N.Y.2d 606; Penfold v. New York State Tax Commission, 114 A.D.2d 696
(1985).
Accordingly, Petitioner is required to collect sales and use tax on its total charge without any
reduction for expenses regardless of Petitioner's method of billing. As previously noted, separately
stated charges for dismantling services are not subject to tax.

DATED: September 13, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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