Is a design change to a printing press taxable, and does it matter whether the change happens before or after the press is delivered to the customer?

Plain-English summary

William R. Barlow sells printing presses and asked how sales tax applies to a design change made to a press.

The Department's answer turns on when the change is made:

• The press itself is exempt production machinery. A printing press used directly and predominantly in production is exempt from state sales tax and all local sales tax except New York City tax under Tax Law § 1115(a)(12), provided the customer gives Barlow a Form ST-121 (Exempt Use Certificate) (20 NYCRR § 528.13).
• A design change before delivery is exempt too. If Barlow makes a design change before the press is delivered to the customer, the charge for that change is treated the same as the press — exempt, again if the customer furnishes an ST-121.
• A design change after delivery is a taxable repair. If the customer, after taking delivery, finds the press as originally built is not what it needs and has Barlow change it (for example, an electrical-control change), that later work is maintaining, servicing, or repairing tangible personal property under § 1105(c)(3).
• But state tax doesn't apply to that repair. Because the press is production machinery, § 1105-B(6) exempts the servicing charge from state tax on and after March 1, 1981. So the after-delivery design change is subject to local sales tax only, not state tax.

What this means for you

If you make or sell production machinery: Work done to the machine before you deliver it to the buyer is part of the exempt sale (collect an ST-121). Work done after delivery is a service, and it's taxed differently.

If you service production machinery: Repairs and modifications to qualifying production equipment are exempt from state sales tax (§ 1105-B(6)), but you still must charge the local portion of the tax outside the state-only exemption. Don't assume "production machinery" means the repair is fully tax-free.

Keep your exemption certificates. The exemption on the machine and on any pre-delivery change both depend on getting a properly completed Form ST-121 from the customer. Without it, charge tax.

Common questions

Q: Is a printing press taxable in New York?
A: A press used directly and predominantly in production is exempt from state tax and local tax outside New York City under § 1115(a)(12), if the buyer gives you a Form ST-121. The separate New York City tax is not covered by this exemption.

Q: I modified the press before shipping it. Is that taxable?
A: No. A design change made before delivery is treated like the sale of the machine — exempt with an ST-121.

Q: The customer asked for a change after we delivered the press. How is that taxed?
A: That's a taxable repair/service under § 1105(c)(3), but § 1105-B(6) exempts it from state tax. You charge the local tax only.

Citations and references

Statutes and regulations:

• Tax Law § 1115(a)(12) — exemption for machinery/equipment used directly and predominantly in production (state and local, except New York City)
• Tax Law § 1105(c)(3) — tax on installing, maintaining, servicing, or repairing tangible personal property not held for sale
• Tax Law § 1105-B(6) — exempts from state tax the installing/repairing/servicing of § 1115(a)(12) production machinery on and after March 1, 1981
• 20 NYCRR § 528.13 — Exempt Use Certificate (Form ST-121)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1989.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a89_23s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-89 (23)S
Sales Tax
July 25, 1989

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S890104D

On January 4, 1989, a Petition for Advisory Opinion was received from William R. Barlow,
96 Martha Street, Spencerport, New York 14559.
The issue raised is the taxability of a design change made on a printing press that takes place
prior to the sale of the printing press to the customer.
Section 1115(a)(12) of the Tax Law exempts from tax the sale of "[m]achinery or equipment
for use or consumption directly and predominantly in the production of tangible personal property
... by manufacturing, processing, generating, assembling, refining, mining or extracting." Section
528.13 of the Sales and Use Tax Regulations states: "[a]n Exempt Use Certificate (form ST-121) is
used to make purchases eligible for this exemption without payment of sales tax."
Section 1105(c)(3) imposes tax upon the receipts from "[i]nstalling tangible personal
property, excluding a mobile home, or maintaining, servicing or repairing tangible personal property,
including a mobile home, not held for sale in the regular course of business,...."
Section 1105-B(6) provides: [n]otwithstanding any other provisions of this article, but not
for the purposes of the taxes imposed by section eleven hundred seven or eleven hundred eight or
authorized pursuant to the authority of article twenty-nine of this chapter, the taxes imposed by
subdivision (c) of section eleven hundred five on receipts from every sale of the services of
installing, repairing, maintaining or servicing the tangible personal property described in paragraph
twelve of subdivision (a) of section eleven hundred fifteen,...to the extent subject to such tax,...such
receipts shall be exempt from the tax on sales imposed under subdivision (c) of section eleven
hundred five on and after March first, nineteen hundred eighty-one."
Accordingly, the sale of the printing press is exempt from the State tax pursuant to Section
1115(a)(12) of the Tax Law and all local tax except for the local tax imposed by New York City
provided that Petitioner obtains an Exempt Use Certificate from its customers. If Petitioner makes
a design change prior to the delivery of the property to the customer, the charge for the design change
is treated the same as above. Therefore, the charge for the design change would be exempt from tax
provided that Petitioner obtains an Exempt Use Certificate from its customers.
However, where Petitioner's customer finds that printing press produced according to its
original specifications is not what is needed, and accordingly has Petitioner make design changes
to such equipment, such as a design change in an electrical control, subsequent to the delivery of the
equipment to the customer by the Petitioner, then Petitioner's service constitutes the maintaining,
TP-9 (9/88)

-2­
TSB-A-89 (23)S
Sales Tax
July 25, 1989

servicing or repairing of tangible personal property within the meaning and intent of Section
1105(c)(3) of the Tax Law. The receipts from such service are subject to local tax but not to State
tax after March 1, 1981 pursuant to Section 1105-B(6).

DATED: July 25, 1989

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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