When an ad agency buys a jingle, which parts of the demo, creative, and production fees are taxable, given that an original written score is an intangible manuscript?

Plain-English summary

This opinion modifies TSB-A-90(30)S, the Department's earlier ruling for the jingle house Crushing Enterprises, Inc. The original opinion had listed "a finished written score" as an example of the tangible personal property whose transfer would make a completed jingle deal taxable. This modification deletes that phrase and adds an important distinction:

• An original handwritten or typewritten lead sheet or musical score is a "manuscript," and a manuscript is intangible personal property under § 526.8(c) — it is not tangible personal property.

With that fix, the Department set out how the demo fee, creative fee, and any production fee are taxed when a customer accepts the jingle, depending on the contract:

• No choice of tape producer → all taxable. If the customer exercises its option by receiving an original manuscript and takes a broadcast-quality tape under a contract that does not let the customer choose whether to produce its own tape or use Crushing or a third party, the demo, creative, and production fees are a single taxable transaction under § 1105(a). Under § 1101(b)(3) and Penfold v. State Tax Commission, components that cannot be bought separately are treated as one sale.
• Customer can choose the producer → split the charges. If the customer may choose who produces the broadcast tape, and the sale of the manuscript is not contingent on the sale of the tape (or vice versa), then the separately stated charges tied to the tape (the demo fee, production fee, and the portion of the creative fee applicable to the tape) are taxable as a sale of tangible personal property — but the portion of the creative fee applicable to the intangible manuscript is not taxable.
• Separate contracts → demo and creative fees not taxable. If the demo fee and creative fee are paid under a contract separate from the tape-production contract, the demo fee and creative fee are not subject to state or local sales tax.

What this means for you

An original manuscript is intangible — even if it's on paper

The key correction here is conceptual: an original handwritten or typewritten score or lead sheet is treated as an intangible manuscript, not as taxable tangible property. So a fee for the creative work embodied in that manuscript can stay nontaxable, unlike a fee for a physical broadcast tape.

Whether you control the tape production decides how much is taxed

If the deal forces the customer to take the broadcast tape from you as an inseparable part of buying the jingle, the single-sale rule taxes everything. If the customer is free to have the tape produced elsewhere, and the manuscript sale stands on its own, you can carve the intangible manuscript portion out of the tax. The contract terms — not just the invoice — drive the result.

Separate contracts keep the creative work nontaxable

The cleanest outcome: pay the demo and creative fees under a contract separate from the tape-production contract. Structured that way, those fees aren't taxed at all, and only the physical tape production is.

This refines, and should be read with, TSB-A-90(30)S

This is a modification, not a standalone rule. The base opinion, TSB-A-90(30)S, established that the demo fee is an intangible option (nontaxable if the jingle is rejected). This modification fixes how the closed-deal fees split between taxable tape and nontaxable manuscript. Apply them together.

Common questions

Q: Is a fee for an original musical score or lead sheet taxable?
A: No. An original handwritten or typewritten lead sheet or musical score is an intangible manuscript under § 526.8(c), so the fee for it is not a taxable sale of tangible personal property.

Q: When is the whole jingle deal taxable?
A: When the customer must take the broadcast tape from you as an inseparable part of buying the jingle — then the single-sale rule (§ 1101(b)(3); Penfold) taxes the demo, creative, and production fees together.

Q: How can the creative work stay nontaxable?
A: If the customer can choose who produces the tape and the manuscript sale isn't contingent on the tape sale, the manuscript portion of the creative fee isn't taxed. Separate contracts for the demo/creative fees keep them fully nontaxable.

Q: Does this replace TSB-A-90(30)S?
A: No — it modifies it. Read them together: 30S covers the intangible-option demo fee; 30.1S refines the closed-deal split and the manuscript rule.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(b)(3) — "receipt" and the single-sale rule (components that can't be bought separately are one sale)
• 20 NYCRR § 526.8 — definition of tangible personal property; intangible personal property excluded
• 20 NYCRR § 526.5(e) — expenses not deductible from the receipt

Cited authority:

• Penfold v. State Tax Commission, 114 AD2d 696 (1985)

Related Department opinion:

• TSB-A-90(30)S (May 31, 1990) — the opinion this one modifies

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a90_30_1s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-90 (30.1)S
Sales Tax
October 10, 1990

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S890914A

This modifies an Advisory Opinion issued on May 31, 1990 to Crushing Enterprises, Inc.,
157 West 57th Street, New York, New York 10019.
The purpose of this modification is to revise a statement in the final paragraph of the original
advisory opinion wherein it was stated in part "...tangible personal property may be in the form of
... a finished written score...", by deleting the words "a finished written score" from such statement.
The original advisory opinion is to also be modified to reflect that an original handwritten
or original typewritten lead sheet or musical score constitutes a manuscript and as such is
considered to be intangible personal property.
In this context, the original advisory opinion is expanded as follows:
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 deduction for expenses. . . . "
Section 526.5(e) of the Sales and Use Tax Regulations explains the above section of law as
follows:
(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

Example 2:
TP-9 (9/88)

$100
60
10
25
5
$200

An appliance repairman charges $10 per hour plus expenses when on
a service call. The customer is billed as follows:

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TSB-A-90 (30.1)S
Sales Tax
October 10, 1990
3 hrs. at $10
Travel
Parts
Meals
Total Due
Receipt subject to tax is $70

$ 30
15
20
5
$ 70

Section 526.8 of the Sales and Use Tax Regulations states, in part:
Tangible Personal Property (Tax Law, §1101[b][6])
(a)
Definition .... tangible personal property means corporeal personal property of any
nature having a material existence and perceptibility to the human senses...
(c)

Tangible personal property does not include:
(2) intangible personal property ....

The effect of Section 1101(b)(3) is to treat as a single sale any sale in which any of the
components cannot be singly purchased. Thus, even though the components of a particular sale can
be separately stated, calculated or estimated, if they cannot be separately purchased, the combination
of the items listed must be considered as one. Penfold v. State Tax Commission, 114 AD 2d 696
(1985).
In a transaction where the customer accepts Petitioner's jingle, and exercises an option to
purchase the copyright rights to the jingle by receipt of an original manuscript in the form of a lead
sheet, musical score or arrangement, the demo fee, creative fee and production fee, if any, will be
considered as receipts from a single transaction in which the transfer of title to and possession of
tangible personal property occurs, if such tangible personal property transferred to the customer is
in the form of a broadcast quality tape and is transferred pursuant to a contract or agreement whereby
the customer does not have an option of electing whether to produce its own broadcast quality tape
or to have the broadcast quality tape produced by Petitioner or by an unrelated third party.
Accordingly, the total receipts in such transaction will be subject to the tax imposed under Section
1105(a) of the Tax Law.
In a transaction where the customer accepts Petitioner's jingle, exercises an option to
purchase the copyright rights to the jingle through receipt of an original manuscript in the form of
a lead sheet, musical score or arrangement and takes delivery of a broadcast quality tape pursuant
to a contract or agreement whereby the customer has the option of electing whether to produce its
own broadcast quality tape or to have the broadcast quality tape produced by Petitioner or by a third
party and whereby the sale of the lead sheet, musical score or arrangement is not contingent upon
the sale of the broadcast quality tape or vice versa, the portion of the separately stated receipts from
the charges for the demo fee, production fee and any portion of the creative fee which is applicable
to the broadcast quality tape will be considered receipts from the sale of tangible personal property

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TSB-A-90 (30.1)S
Sales Tax
October 10, 1990
and subject to the tax imposed under Section 1105(a) of the Tax Law. However, as the original
handwritten or typewritten lead sheet, musical score or arrangement is a manuscript and considered
to be intangible personal property and therefore not considered to be tangible personal property
under the provision of Section 526.8(c) of the Sales and Use Tax Regulations, the portion of the
separately stated receipts from the creative fee applicable thereto will not be subject to the tax
imposed on the sale of tangible personal property under Section 1105(a) of the Tax Law.
It is noted that if the demo fee and creative fee are paid pursuant to a contract which is
separate from the contract for the production of a broadcast quality tape, the demo fee and the
creative fee will not be subject to state or local sales tax.

DATED: October 10, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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