How does New York sales tax apply to an outsourced facilities-management provider's mailroom, printing, copying, fax, filing, delivery, and related services, and to its supplies and equipment?

Plain-English summary

A company offered outsourced "contract management services" — running clients' mailrooms, production-mail operations, fax centers, file rooms, reprographic and offset-printing centers, shipping/receiving, messenger, and related back-office functions, plus a commercial copy center of its own. It might supply personnel only, or personnel plus supplies and equipment. It asked, across eight questions, how New York sales tax applies to each service and to its own supplies and equipment.

The controlling principle: New York taxes retail sales of tangible personal property (§ 1105(a)) and a specific list of services; a service not on the list is not taxable. Sorting the operations that way, the Department held:

• Taxable: printing and affixing address labels; maintaining a customer's mailing list (maintaining tangible personal property, § 1105(c)(3)); printing/coding/forms work in production mail; facsimile service when the provider supplies personnel, equipment, and supplies (telephone/telegraph service, § 1105(b)); reprographic and offset printing/copying — taxed as a § 1105(c)(2) processing/printing service when the client supplies materials, or as a § 1105(a) sale of property when the provider supplies everything; sales of copies at the provider's own copy center; and supplies/packaging the provider transfers to the client.
• Not taxable: affixing postage, bagging/mailing, packing into cartons, internal mail pickup/delivery, and processing packages for express carriers if separately stated ("non-taxable mailing"); operating the client's own fax equipment (personnel only); file management (indexing, filing, retrieval, pickup/delivery); shipping/receiving; messenger/delivery; and related services (AV scheduling, message center, receptionist). (Filing loose-leaf update services is an exception — that is taxable maintenance of tangible property.)

The Department also gave cross-cutting rules. Promotional materials mailed out of state are exempt (§ 1115(n), with Form ST-121), and it laid out the destination-based allocation and the alternate-rate method (Publication 831) for mixed in-/out-of-state mailings. New York has no "inconsequential element" rule — if a service is taxable, the whole receipt is taxed and vendor expenses are not deductible (§ 526.5(e)). Whether the provider separately states labor does not change a service's taxable status, but taxable and exempt charges should be separated so the right tax is collected. The provider may buy supplies for resale tax-free (Form ST-120) when it transfers them to the client. Machinery/equipment it buys, rents, or leases is taxable unless used directly and predominantly (over 50%) to produce property for sale (§ 1115(a)(12), Form ST-121); and buying a client's used equipment gets no casual-sale exemption — it is a taxable retail purchase (a lease the client keeps but the provider merely pays remains taxable to the client).

What this means for you

Outsourced facilities-management and business-services providers

Tax each line of your contract by the actual service, not the umbrella "management services" label. Production, printing, copying, imprinting, mailing-list maintenance, and full-service fax are taxable; pure handling, delivery, filing, and clerical work are not. Because New York has no inconsequential-element rule and does not let you deduct expenses, a taxable service is taxed on the full charge — so separately state your genuinely exempt mailing and delivery components to keep them untaxed.

Printers and mailers

Whether you supply the materials or the client does changes the analysis: providing personnel to work on the client's stock is a § 1105(c)(2) printing service; providing everything is a § 1105(a) sale of property. Out-of-state promotional-material mailings can be exempt under § 1115(n) with Form ST-121, and Publication 831's destination allocation and alternate-rate method govern mixed mailings — keep the substantiating records.

Accountants and tax professionals

This opinion is a compact map of the enumerated-services approach: § 1105(a)/(c)(2)/(c)(3)/(b) for production, printing, maintenance, and fax; the § 1115(n) promotional-material exemption and § 1115(a)(12) production-machinery exemption; the no-inconsequential-element and no-expense-deduction rules (§ 526.5(e)); resale purchasing (ST-120); and the absence of a casual-sale exemption for buying a client's equipment. It is a useful reference across the whole mail/print/copy service line.

Common questions

Q: Which of these services are taxable?
A: Printing and affixing labels, maintaining a mailing list, production-mail printing/coding, full-service facsimile (personnel plus equipment and supplies), reprographic and offset printing/copying, sales of copies, and supplies the provider transfers to the client.

Q: Which services are not taxable?
A: Separately stated postage, bagging, mailing, packing, and internal or express-carrier delivery ("non-taxable mailing"); operating the client's own fax equipment; file management; shipping/receiving; messenger/delivery; and related services like AV scheduling and message-center operation.

Q: How are promotional mailings that go out of state handled?
A: Promotional materials shipped to out-of-state addressees are exempt under § 1115(n) with a properly completed Form ST-121, and mixed in-/out-of-state mailings are apportioned using the destination records or the alternate-rate method in Publication 831.

Q: Does making the supplies "inconsequential" or separately stating labor avoid the tax?
A: No. New York has no inconsequential-element rule, and vendor expenses are not deductible (§ 526.5(e)). Separately stating labor does not change a service's taxable status, though taxable and exempt charges should be separated so the correct tax is collected.

Q: Can the provider buy its supplies and equipment tax-free?
A: Supplies transferred to the client can be bought for resale with Form ST-120. Machinery or equipment is taxable unless used directly and predominantly (over 50%) to produce property for sale (§ 1115(a)(12), Form ST-121); buying a client's used equipment is a taxable retail purchase with no casual-sale exemption.

Q: Can another company rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described. It illustrates the Department's reasoning across these service types, but your facts may differ.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(b) (tax on telephone and telegraph service; facsimile)
• Tax Law § 1105(c)(2) (producing, printing, or imprinting tangible personal property)
• Tax Law § 1105(c)(3) (maintaining, servicing, or repairing tangible personal property; mailing lists, loose-leaf filing)
• Tax Law § 1115(a)(12) (exemption for machinery used predominantly to produce property for sale)
• Tax Law § 1115(n) (exemption for promotional materials shipped out of state)
• 20 NYCRR § 526.5(e) (vendor expenses not deductible from receipts)
• 20 NYCRR § 523.3(g) (casual-sale reporting)
• Publication 831, Collection and Reporting Instructions for Printers and Mailers; TSB-M-92(4)S (promotional materials); TSB-M-87(13)S (temporary service contractors)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_10s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (10)S
Sales Tax
January 25, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920218A

On February 18, 1992 a Petition for Advisory Opinion was received from Pitney Bowes
Management Services, Inc., World Headquarters, Stamford, CT 06926-0700.
Petitioner, Pitney Bowes Management Services, Inc. has or proposes to expand its businesses
by offering clients the various services described as follows:
1.

Contract Management Services. Petitioner will provide services to manage various
operations for companies at their location or at other locations within the State.
Petitioner may provide personnel only, personnel and supplies, and/or personnel,
supplies and equipment.
The Contract Management Services provided may include any one or a combination
of the following:
a.

.Mailroom: Printing of address labels, affixing of labels to material to be
mailed, affixing of postage to mail, bagging and mailing of envelopes and
packages, packing materials into cartons for shipment by common carrier,
internal mail pickup and delivery, maintaining mailing lists, and processing
and delivery of packages to express carriers.

b.

Production Mail: In addition to the above operations performed in the
Mailroom, Production Mail operations include printing, folding, sorting, and
inserting documents for mailing, zip or bar coding of mail, automated mail
processing including forms design, and laser or other printing.
In Mailroom and Production Mail operations, the mailings are made to points
within and without the State. With the exception of certain packing and
shipping materials, printed matter (paper, envelopes, labels etc.) may be
provided by either Petitioner or by the client. Equipment for these operations
may be provided by Petitioner or by the client.

c.

Facsimile Services: Operation of facsimile equipment for incoming and
outgoing messages and delivery of messages. In a facsimile operation,
personnel are provided by Petitioner but equipment and supplies may be
provided by either Petitioner or the client.

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2.

d.

File Management Centers: Indexing, filing, retrieval, pickup and delivery of
documents. In a small file management operation, Petitioner provides only
personnel while in a larger more sophisticated operation supplies and
equipment (computer system and bar coding equipment) will generally also
be provided by Petitioner.

e.

Reprographic Copy Centers: Original documents are sent to the center by
the client for purposes of having copies made. In addition, copies may be
punched and bound. In litigation cases, documents must be unstapled,
numbered, copied, restapled, refiled in the original box and in some cases
indexed. In a reprographic operations, Petitioner provides personnel, but
supplies and equipment may be provided by Petitioner or the client.

f.

Offset Printing Services: Masters are made of the original documents
delivered to the center by the client and required copies are made including
finishing (punching, and binding where required). Petitioner provides
personnel, but supplies and equipment may be provided by Petitioner or the
client.

g.

Shipping and Receiving Operations: Petitioner provides personnel to receive,
ship and deliver materials. No supplies or equipment are provided by
Petitioner.

h.

Messenger or Delivery Services: Personnel provided by Petitioner pick up
and deliver documents to various locations within a geographic area.
Petitioner provides personnel, but at times may also be required to provide
vehicles.

i.

Related Services: In the area of related services, Petitioner provides personnel
who perform any one or more of the following services: scheduling the use
of audio visual equipment and facilities, operation of the telephone message
center, receptionist, stationery and supply ordering and stocking, conference
room scheduling, etc.

Commercial Reprographics Center. At Petitioner's facility, Petitioner will make
copies of original documents submitted by customers and provide related copy
services (binding, stapling, numbering, etc.). Petitioner provides the personnel,
supplies and equipment required to produce copies. The customer is generally
charged a price for each copy made.
When providing Contract Management Services, all direct costs, administrative
expenses and overhead are paid directly by Petitioner. All personnel provided by
Petitioner will be part-time or full-time permanent emptoyees of Petitioner, paid by
Petitioner, and entitled to benefits under Petitioner's employee benefit plans.
Recruitment and training will take place at Petitioner's offices. Generally, it is

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expected that personnel involved in these operations will work primarily at the
client's facility, but occasionally separate facilities are established.
In most situations, the machinery and equipment used by Petitioner is owned by
Petitioner. On occasion the client will sell its equipment to Petitioner who will then
use the equipment to perform the services.
Generally, clients are billed for services under a one to five year contract term at a
monthly minimum fee for a defined level of services plus a fixed price per piece in
excess of the minimum. Included in the price will be charges for personnel, supplies
and equipment where applicable, travel, staff support and other overhead costs.
Generally, postage and express mail charges are paid for by the client.
Petitioner has set forth various issues concerning the application of New York State and local
sales and use tax to its new or proposed business activities. The following are the issues presented
by Petitioner and the appropriate responses:
Q.I: Are Petitioner's services as enumerated in 1.a. thru 1.i. and in 2. above exempt from
sales and use tax?
A.I(1)(a) Mailroom. With regard to services performed by mailers the Department of
Taxation and Finance announced in New York State Tax Bulletin No. 1965-3 its election to follow
the provisions of Article 78 of the New York City Rules and Regulations for City sales and
compensating use taxes, which state in part that "when performed upon the property of an ultimate
customer, the receipts from the services of folding written or printed matter for insertion into
envelopes, sealing, affixing stamps, metering and mailing, and the cost of postage, are not subject
to the tax if the charges therefor are separately stated on any evidence of sale rendered to the
customer. Receipts from addressing envelopes, manually or mechanically are subject to the tax
whether or not a separate charge is made therefor." Accordingly, receipts from charges for printing
address labels and affixing labels to material to be mailed are considered to be receipts from either
sales of tangible personal property or from sales of the services of processing, printing or imprinting
tangible personal property. Petitioner's receipts from such charges will be subject to the tax imposed
under either Section 1105(a) of the Tax Law or Section 1105(c)(2) of the Tax law, whichever is
applicable, based upon the percentage of mailing recipients in New York State.
Petitioner will be liable for collecting the statewide and appropriate local sales tax in effect
at the point from which the actual mailing service occurs. Maintaining a customer's mailing list is
considered to be maintaining tangible personal property. Receipts from charges for maintaining a
customer's mailing list are subject to the tax imposed under Section 1105(c)(3) of the Tax Law.
However, charges for the portion of a mailing list used in conjunction with the distribution of exempt
promotional materials will be exempt to the extent the promotional materials are shipped to
addressees outside New York State.

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Generally, receipts received by Petitioner for affixing postage to mail, bagging and mailing
envelopes and packages, packing materials into cartons for shipment by common carrier, internal
mail pickup and delivery, and processing of packages prior to delivery to express carriers are not
subject to State or local sales tax provided such charges are separately stated on the billing rendered
to the customer. These exempt services may be combined in a single amount under the designation
"non-taxable mailing". (See: Department of Taxation and Finance, Collection and Reporting
Instructions for Printers and Mailers, Publication 831 (8/92)). However, it is noted that the sales
tax status of receipts for delivering packages to express carriers will be the same as the sales tax
status of Petitioner's receipts from the sale of the items of tangible personal property being delivered.
When Petitioner provides packaging and shipping materials for use by Petitioner in providing
its mailroom service, Petitioner's receipts from charges for such materials will be considered as
receipts from the sale of tangible personal property and will be subject to the tax imposed under
Section 1105(a) of the Tax Law.
(b) Production mail: Where production mail operations are the same as the mailroom
operations described above, the sales tax status of the receipts from the production mail operations
will be the same as the tax status of the receipts from the mailroom operations.
The receipts from the production mail operations of printing documents for mailing, zip or
bar coding of mail, designing and printing of forms such as client's billing statements, and laser or
other printing are considered to be receipts from the sale of services subject to the tax imposed under
Section 1105(c)(2) of the Tax Law or receipts from the sale of tangible personal property subject to
tax under Section 1105(a) of the Tax Law, whichever is applicable.
When performing the mailroom operations and the production mail operations Petitioner is
considered to be acting as a printer/mailer. Accordingly, if Petitioner delivers printed or other
duplicated promotional materials to a customer in New York State Petitioner must collect the
statewide and local sales tax in effect at the locality where possession of the property is transferred
to the customer. However, if the customer will subsequently send some or all of the matter to persons
outside of the State, the customer's purchase of the promotional material which will be distributed
to persons outside the state will be eligible for the exemption from sales tax under Section 1115(n)
of the Tax Law provided the customer gives Petitioner a properly completed form ST-121, Exempt
Use Certificate. The customer must indicate directly on the exempt use certificate what percentage
of the purchase is exempt from tax. See, The Sales and Use Tax and Promotional Materials, TSB-M­
92(4)S.
If Petitioner dispatches printed or other duplicated promotional materials from within New
York State directly to recipients designated by its customer, Petitioner will be liable to collect, on
its entire printing charge, the sales tax in effect at the point from which the mailing service occurs,
unless Petitioner can substantiate the percentage of out-of-state destinations on the mailing list and

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the addresses of all in-state recipients. Customer purchase orders, shipping instructions, sales
contracts, and similar documents giving mailing directions are acceptable as proof of the
destinations.
Where records establishing the number of addresses in each New York State taxing
jurisdiction are not available, the alternative method described below may be substituted to
determine State and local sales and use taxes, provided the following conditions are met:
(1)

The mailing must include points throughout New York State.

(2)

If the mailing list includes out-of-state mailing and is compiled by geographic
location, an actual count of out-of-state mailing should be made. If the list is not
compiled by geographic location, a sampling technique, utilizing the lesser of 10%
of the list or 5000 mailing pieces, may be employed.

(3)

The actual number of pieces mailed to New York City must be determined.
Sampling under the conditions in Item 2, may be used.

Under this method an alternative rate, based on the population of New York State (excluding
New York City) and the combined tax rates imposed thereon, is applied to the New York State
(excluding New York City) mailings and the currently imposed rate is applied to New York City
mailings. Each invoice rendered for mailing services under the alternate method must state the total
pieces dispatched, the number of pieces taxable at the New York City tax rate, and the number of
pieces mailed to other New York State destinations at the currently effective alternative rate. This
rate and the statewide locality distribution percentage may be obtained from Department of Taxation
and Finance Publication 831, Collection and Reporting Instructions for Printers and Mailers, which
is amended periodically to reflect rate changes. To receive each updated issue, a printer or mailer
may request to be placed on the mailing list maintained by the Tax Department for that purpose.
Publication 831 also provides detailed instructions for the application of the alternate rate method.
The alternative tax rate formula may be applied only to sales of promotional material, such
as free gifts and samples, advertising literature, catalogs, sales and ordering forms, business reply
envelopes, displays, brochures, corporate annual reports and outside mailing envelopes and address
labels which are used for the exclusive purpose of mailing promotional material only.
Printed matter upon which clerical, office typing or computer printing operations must be
performed to complete it for the senders use and to prepare it for the individual recipient, is subject
to tax at the location where the actual mailing service occurs. This category of mailings would
comprise invoices, statement forms, payment notices, letterheads, (except letterheads intended for
use as promotional materials) and like items which by their contents are not interchangeable with
other addressees on a mailing list.
Promotional material mailed by Petitioner to its customer's designees is considered to be used
at the point to which it is mailed. Therefore, no tax is due when promotional material is mailed out
of the State. Likewise, charges for clerical functions performed on promotional materials being

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mailed out of the state are not subject to sales tax. (See, Collection and Reporting Instructions for
Printers and Mailers, New York State Department of Taxation and Finance Publication 831 (8/92)).
When the mailing contains items, each of which is treated differently for sales tax purposes,
the appropriate sales tax treatment may be applied to each component of the mailing provided
adequate records of substantiation of the charges for each component are maintained. For example,
the alternate method of computing sales tax may be applied to advertising brochures enclosed with
monthly invoices, even though the alternate method cannot be used for the invoice portion.
(c) Facsimile Services: When Petitioner provides personnel, equipment and supplies,
Petitioner is considered to be providing facsimile services. Petitioner's receipts from providing
facsimile services are considered to be receipts from telephone and telegraph service and are subject
to the tax imposed under Section 1105(b) of the Tax Law.
When Petitioner only provides personnel to operate the client's facsimile equipment
Petitioner is not considered to be performing any of the taxable services enumerated under Section
1105(c) of the Tax Law. Accordingly, Petitioner's receipts from charges for only operating the
client's facsimile equipment will not be subject to the tax imposed under Section 1105(c) of the Tax
Law, provided the charges are separately stated on the billing rendered to the client.
(d) File Management Centers: In an operation where Petitioner only provides personnel for
the purpose of indexing, filing, retrieval, pickup and delivery of documents, Petitioner is not
considered to be performing any of the services enumerated under Section 1105(c) of the Tax Law.
Accordingly, Petitioner's receipts from such services are not subject to the tax imposed under Section
1105(c) of the Tax Law. However, it is noted that if Petitioner's filing service or a portion thereof
consists of filing various loose-leaf update services which may be provided to Petitioner's customers
by the publisher/printer thereof (e.g., Commerce Clearing House, Prentice Hall) Petitioner will be
considered to be maintaining, servicing or repairing tangible personal property and the charge by
Petitioner to the customer for such service or portion thereof will be subject to the tax imposed under
Section 1105(c)(3) of the Tax Law.
In certain instances, Petitioner also provides a computer system, bar coding equipment and
supplies. Petitioner uses these items for purposes of maintaining a record of the client's files and for
identifying by whom a file has been charged out. Petitioner's receipts from charges to the client for
this expanded service are not subject to tax as such service is not among the services enumerated
under Section 1105(c) of the Tax Law.
(e) Reprographic Copy Centers: When Petitioner provides only personnel with supplies and
equipment provided by the client, Petitioner will be considered to be performing the service of
processing, printing or imprinting tangible personal property. Petitioner's receipts from charges to
the client for performing this service will be subject to the tax imposed under Section 1105(c)(2) of

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the Tax Law. When Petitioner provides personnel, supplies and equipment for use in operating the
clients reprographic copy center, Petitioner will be considered to be making sales of tangible
personal property to the client and the total receipts from such sales will be subject to the tax
imposed under Section l105(a) of the Tax Law.
(f) Offset Printing Services: When Petitioner provides only personnel with supplies and
equipment being provided by the client, Petitioner will be considered to be performing a service of
processing, printing or imprinting tangible personal property. Petitioner's receipts from charges to
the client for performing this service will be subject to the tax imposed under Section 1105(c)(2) of
the Tax Law. When Petitioner provides personnel, supplies and equipment Petitioner will be
considered to be making sales of tangible personal property to the client and the total receipts from
such sales will be subject to the tax imposed under Section 1105(a) of the Tax Law.
(g) Shipping and Receiving Operations: Petitioner's personnel, when performing shipping
and receiving services, are not considered to be performing any of the services enumerated under
Section 1105(c) of the Tax Law. Accordingly, Petitioner's receipts from shipping and receiving
services are not subject to State or local sales tax.
(h) Messenger or Delivery Services: Messenger or delivery services do not fall within any
of the services enumerated under Section 1105(c) of the Tax Law. Accordingly, Petitioner's receipts
from performing such services are not subject to state or local sales tax.
(i) Related Services: When Petitioner's personnel perform the service of audio visual
equipment and facilities management which merely consists of scheduling use of the equipment and
supplies and does not entail the actual operation of such equipment, or the service of operation of
the telephone message center which is similar to a switchboard or any of the other related services,
Petitioner's personnel are not considered to be performing any of the services enumerated under
section 1105(c) of the Tax Law nor are they considered to be performing a Section 1105(b) telephone
or telegraph service. Accordingly, the receipts from charges to the client for related services are not
subject to state or local sales tax.
(2) Commercial Reprographic Center: Petitioner's receipts from sales of copies to customers
are considered to be receipts from sales of tangible personal property and are subject to the tax
imposed under Section 1105(a) of the Tax Law.
Q.II: Would the answers to Question I be different if Petitioner provided personnel only,
similar to a temporary service contractor, and did not provide supplies or equipment?
A.II: Technical Services Bureau Memorandum TSB-M-87(13)S, Taxability of Services
Provided try Temporary Service Contractors states, in part:
"Temporary service contractors can be distinguished from employment agencies in
that the temporary service contractor, unlike the employment agency, is the employer
of its own staff and is directly responsible for the salaries, withholding of taxes, and

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the hiring and firing of the individuals who are rendering services to its clients. In
addition, the temporary service contractor controls to which of its clients the
individual will be assigned.
An employment agency, on the other hand, provides individuals who become the
employees of the agency's client and who maintain no further relationship with the
agency. The individual does not report, directly or indirectly, to the agency after
being hired by the client, nor may the agency terminate the services of the individual
or otherwise affect the relationship between the individual and the client. Since an
employment agency merely refers personnel, its charges to its clients are not subject
to sales or use tax.
Section 1105(c) of the Tax Law imposes a tax on certain services . ...
When a temporary service contractor provides personnel to perform such taxable
services for its client, the fee paid by the client for these services constitutes a receipt
subject to tax. Accordingly, the temporary service contractor is required to collect
sales tax on the fee charged to the client for such taxable services, regardless of how
the charge is arrived at or how much the contractor is required to pay its personnel."
In the instant matter if Petitioner provides personnel only, similar to a temporary service
contractor, Petitioner's liability for collecting sales tax on the receipts from contract management
services will be unchanged from Petitioner's liability as stated in those portions of answers (1)(a)
through (1)(i) which pertained to situations wherein Petitioner also provided personnel only.
Where Petitioner provides personnel only at a Commercial Reprographic Center, Petitioner
will be considered to be performing the service of processing, printing or imprinting tangible
personal property and the receipts from charges to the clients for performing such service will be
subject to the tax imposed under Section 1105(c)(2) of the Tax Law.
Q.III: Would the answers to Q.I. differ if the services were performed at Petitioner's facility
within New York State versus the client's facility within New York State?
A.III: Answers (1)(a) through (1)(i) and (2) will be unchanged as the location where the
services are performed, whether at Petitioner's facility or at the client's facility, will not alter the
taxable status of the performed services.
Q.IV: Would the answers to Q.I. be different if the supplies and materials consumed in
providing the service were "inconsequential"?
A.IV: Neither the New York State Tax Law nor the Sales and Use Tax Regulations make
any reference to the term "inconsequential" or "inconsequential element", even though certain taxing
jurisdictions outside New York State may do so. When performing a taxable service within New

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York State or selling tangible personal property within New York State, the total receipts are subject
to state and local sales tax imposed under Section 1105(a) or(c) of the Tax Law, whichever is
applicable. Section 526.5(e) of the Sales andUse Tax Regulations states, in part:
Expenses. All expenses ... 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.
Q.V: Would the answers to Q.I. differ if charges for labor or other services were separately
stated on the invoice?
A.V: Answers (1)(a) through (1)(i) and 2 will be unchanged regardless of whether Petitioner
separately states charges for labor or other services. However, it is noted that in any instance where
Petitioner is billing the client for both taxable and exempt services Petitioner should separately state
the charges to the client and any management fees, overhead salaries and other expenses should be
allocated to the applicable service and the appropriate tax collected.
Q.VI: Would supplies and materials purchased by Petitioner and used in the various
operations be exempt from sales tax?
A.VI: Petitioner's purchases of supplies and materials will be subject to State and local sales
tax unless Petitioner can substantiate that the supplies or materials are used in an exempt manner.
Where the supplies or materials purchased by Petitioner are actually transferred to the customer as
a sale of tangible personal property or are transferred to the customer in conjunction with taxable
services being performed by Petitioner, Petitioner will be considered to be reselling such items.
Petitioner may purchase such items tax exempt by giving the supplier a properly Form ST-120,
Resale Certificate.
Q.VII: Would machinery or equipment purchased, rented or leased by Petitioner in
connection with providing the services qualify for a sales and use tax exemption?
A.VII: Petitioner's purchases, rentals or leases of machinery or equipment will be subject to
State or local sales tax except in instances where Petitioner directly and predominantly (more than
50% of use) uses the machinery or equipment to produce tangible personal property for sale to the
client. In such instances, Petitioner's purchases, rentals or leases will qualify for the exemption
provided under Section 1115(a)(12) of the Tax Law. When making such purchases, rental or leases,
Petitioner should give the seller a properly completed form ST-121, Exempt Use Certificate, for
purposes of substantiating that the transaction was not subject to State or local sales tax.
Q.VIII: Would the purchase of machinery or equipment qualify for a casual sale exemption
in instances where Petitioner purchases equipment from a client or assumes the client's rental or lease
payments?

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A.VIII: The New York State Tax Law does not provide an exemption from tax for casual
sales other than for certain casual sales at a person's residence during a calendar year.
Section 523.3(g)(1)(i) of the Sales and Use Regulations states that "any person in New York
State making a taxable sale of tangible personal property or services in New York State, and who
is not required to file periodic returns under subdivision (a) of this section, must collect the tax on
such sale and file a report of casual sale."
Petitioner's purchase of a client's machinery or equipment would be considered a retail
purchase of tangible personal property subject to the tax imposed under Section 1105(a) of the Tax
Law and Petitioner's client would be liable for collecting sales tax and submitting it with the sales
tax return for the period in which the transaction occurred if the client is required to be registered
as a sales tax vendor or with a report of casual sale, whichever is applicable.
If the machinery or equipment purchased by Petitioner will be used directly and
predominantly (more than 50%) to produce tangible personal property for sale to the client,
Petitioner's purchases would qualify for the exemption from sales tax provided under Section
1115(a)(12) of the Tax Law. Petitioner's rental or lease of the machinery or equipment would also
qualify for the exemption provided by Section 1115(a)(12) of the Tax Law provided the client
assigned the rental or lease to Petitioner. If Petitioner is entitled to the exemption Petitioner must
provide the seller, renter or lessor with a properly completed form ST-121, Exempt Use Certificate,
for purposes of substantiating that the transaction was not subject to sales tax.
However, if the client is the lessee of the machinery and equipment and is not using the
equipment to produce tangible personal property for sale the lease payments to the lessor are subject
to State and local sales tax. The fact that Petitioner has agreed to make the lease payments on the
client's behalf does not change the tax status of the lease payments as the client has not assigned the
lease to the Petitioner and the client continues to be the lessee of the machinery and equipment.
Under these circumstances Petitioner's payments to the lessor will be subject to State and local sales
tax.

DATED: January 25, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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