Are installation-services payments and computer software acquisitions made through an Industrial Development Agency's disclosed agents exempt from New York sales tax?

Plain-English summary

This ruling supplements an earlier 1995 Advisory Opinion (TSB-A-95(35)S) describing the "TGI Project" -- a New York City Industrial Development Agency (IDA) economic-development arrangement in which the IDA formally becomes the owner, lessor, or lessee of equipment and software used by Travelers Group Inc. and Smith Barney Inc. at their approved business locations, so that purchases made through the IDA's structure can qualify for the same sales-tax exemption the IDA itself enjoys as a public corporation. Travelers and Smith Barney (collectively "Travelers" in the ruling) act as the IDA's disclosed agents -- "Group Agents" -- when buying goods and services for the project.

Two things needed clarifying since the original 1995 opinion. First, "Exempt Installation Services" -- installing equipment with a useful life of one year or more that's part of the project's approved locations -- are exempt when paid for by a Group Agent as the IDA's agent, and that exemption also covers cost-sharing payments between a Group Agent and an "Eligible Affiliate Agent" for the same installation work, as long as the IDA remains the equipment's owner, lessor, or lessee and every invoice discloses that the Group Agent is acting as the IDA's agent. Consumable parts that get replaced during normal operation (the ruling gives a toner cartridge as an example) stay taxable even within an otherwise-exempt installation job, and if a single invoice mixes taxable and exempt charges without separately stating them, the whole thing is taxed.

Second, the original opinion only exempted computer software bought in tangible form (like a diskette) purchased at the same time as a qualifying computer. This ruling extends the exemption to software acquired, leased, licensed, or sublicensed by Travelers as the IDA's agent regardless of the medium (including software delivered electronically) and even when it's used on computers or equipment Travelers already owns rather than equipment newly acquired through the project -- as long as the IDA remains the software's owner, lessor, or lessee. Payments for exempt maintenance or installation services on that software (including upgrades) are exempt on the same terms, and if the term "Equipment" in the project's governing documents is amended to expressly include software, the same holdings apply to it.

The ruling also flags an important geographic limit: under the General Municipal Law, the IDA can't extend its tax-exemption benefit to property or services used outside New York City without getting prior consent from the outside municipality, and any such use elsewhere must be in a municipality contiguous to the City. Software accessed remotely (e.g., dialing in from outside the City) doesn't itself violate this, but downloading and using software on equipment physically located outside the City without that consent would.

What this means for you

Companies participating in an IDA project as a "Group Agent" or disclosed agent

Acting as an Industrial Development Agency's disclosed purchasing agent can extend the IDA's own sales-tax exemption to your equipment installation and software purchases -- but only if every purchase document clearly identifies the IDA (not your company) as the actual purchaser, lessor, or lessee, and only for the specific categories of equipment and software the IDA agreement covers.

Businesses buying or licensing computer software through an IDA arrangement

The delivery medium (physical disk versus electronic transmission) and whether the software runs on newly acquired equipment or equipment you already own don't by themselves defeat the exemption -- what matters is whether the IDA remains the software's owner, lessor, or lessee under the deal's documents.

Accountants and tax professionals structuring IDA/PILOT arrangements

This is a useful precedent for extending an existing IDA sales-tax-exemption structure to software and installation-cost-sharing scenarios not originally contemplated -- but note the ruling's insistence on separately stating consumable-parts charges and non-exempt charges, and its reminder that any use of exempt property or software outside New York City requires the contiguous municipality's prior consent under General Municipal Law § 854(4).

Common questions

Q: Does buying software electronically instead of on a disk change its tax treatment under an IDA project?
A: No -- this ruling confirms the medium doesn't matter, as long as the IDA remains the software's owner, lessor, or lessee and the purchase documents disclose the agency relationship.

Q: Are consumable parts like toner cartridges covered by an IDA installation-services exemption?
A: No -- parts that are consumed in ongoing operation and replaced when used up stay taxable even within an otherwise exempt installation or maintenance contract.

Q: What happens if an invoice combines taxable and IDA-exempt charges without separating them?
A: The entire charge becomes taxable -- the exempt portion must be separately stated or reasonably allocated to keep its exempt treatment.

Q: Does this ruling apply to my company's IDA project structure?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Your project's own agreements and agency disclosures would need their own analysis.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_70s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(70)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S960116A
PETITION NO. S960116B

On January 16, 1996, the Department of Taxation and Finance received
Petitions for Advisory Opinion from Travelers Group Inc., 388 Greenwich Street,
New York, NY 10013 (S960116A) and Smith Barney Inc., 388 Greenwich Street, New
York, NY 10013 (S960116B).
Petitioners, Smith Barney Inc. and Travelers Group Inc., each state the
issues and facts as follows.
(1) Installation Services. Whether (1) payments made by a Group Agent to
vendors for Exempt Installation Services and (2) payments made to a Group Agent
by an Eligible Affiliate Agent which constitute an allocation of costs for Exempt
Installation Services for purchases of the services of installing tangible
personal property consisting of the Equipment, are exempt from the taxes imposed
under sections 1105, 1107, 1109 and 1110 of the Tax Law.
(2) Computer Software. (a) Whether the acquisition, leasing, subleasing,
licensing or sublicensing of Computer Software by Travelers, on behalf of and as
agent of the IDA, in an intangible medium (e.g., by electronic transmission) is
exempt from the taxes imposed under sections 1105, 1107, 1109 and 1110 of the Tax
Law.
(b) Whether the acquisition, leasing, subleasing, licensing or sublicensing
of Computer Software by Travelers, on behalf of and as agent of the IDA, for use
in computers and other equipment not previously or concurrently acquired by the
IDA (i.e., for use in computers and other equipment owned by Travelers) is exempt
from the taxes imposed under sections 1105, 1107, 1109 and 1110 of the Tax Law.
(c) Whether payments to third parties for Exempt Maintenance Services or
Exempt Installation Services with respect to Computer Software acquired, leased,
subleased, licensed, or sublicensed by Travelers, on behalf of and as agent of
the IDA, (which Exempt Maintenance Services or Exempt Installation Services may
include the providing of upgrades to such Computer Software) will be exempt from
the taxes imposed under sections 1105, 1107, 1109 and 1110 of the Tax Law.
(d) Whether the term Equipment, as used in TSB-A-95(35)S, shall
specifically include Computer Software and all rulings issued with respect to
Equipment in the Advisory Opinion shall be applicable to Computer Software.
The petitions for advisory opinion concern a transaction (the "TGI
Project") between the New York City Industrial Development Agency (the "IDA") and
Travelers Group Inc. ("TGI"), Smith Barney Inc. ("SBI") and certain eligible
affiliates (TGI, SBI and eligible affiliates are collectively referred to as
"Travelers") and are intended to supplement Smith Barney Inc. and Travelers Group
Inc., Adv Op Comm T & F, August 18, 1995, TSB-A-95(35)S ("TSB-A-95(35)S") wherein
the TGI Project is fully described. Except where otherwise indicated, (i) each
capitalized term used but not defined herein shall have the meaning assigned to

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such term in TSB-A-95(35)S and (ii) the statement of facts in TSB-A-95(35)S is
hereby incorporated by reference into this opinion.
One aspect of the
description of the TGI Project in TSB-A-95(35)S requires clarification as a
result of developments subsequent to the date of TSB-A-95(35)S.
a. Installation Services. Currently, the Agreement provides, inter alia,
that purchases of the service of installing the Equipment, which comprises part
of the Approved Locations or is in use at the Approved Locations (the "Exempt
Installation Services") will be exempt from New York State and New York City
sales and use taxes.
b. Computer Software. As currently drafted, the TGI Project documents do
not authorize sales and use tax exemption for certain computer software subject
to sales tax. For example, the Agreement authorizes exemptions for computer
software only if:
such software shall be in a tangible form (i.e., diskettes, magnetic
tape, etc.) . . . and only if such software shall be purchased
concurrently with a computer which is being (or shall previously
have been) acquired or leased by the [IDA] pursuant to this
[Agreement].
At Travelers' request, the IDA has agreed to amend the Agreement as
necessary to authorize an exemption for computer software consistent with the
conclusions of this opinion.
Depending on the terms of the Agreement, as amended to reflect the
conclusions of this opinion, Acquisitions in connection with the TGI Project
could include computer software not limited as to any of the following:
(i) the medium by means of which conveyed (including tangible media,
e.g., computer disk, compact disc, or magnetic tape, as well as
intangible media, e.g., electronic transmission);
(ii) the kind of equipment for which acquired (including computers,
e.g., mainframe computers and peripherals, work stations, personal
computers or networks, as well as related equipment, e.g., modems,
printers, copiers, scanners, facsimile machines, equipment for
video/multimedia teleconferencing or other telecommunications
equipment); and,
(iii) whether such software is used on equipment in which the IDA
has an interest;
(such computer software as not so limited, including any replacements,
enhancements and additions thereto, collectively, "Computer Software"). Such
Computer Software would be acquired for the TGI Project by one or more of the
Group Agents as agents for and on behalf of the IDA.

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Applicable Law and Regulations
Section 1101(b)(5) of the Tax Law defines "sale, selling or purchase" as:
Any transfer of title or possession or both, exchange or barter,
rental, lease or license to use or consume (including, with respect
to computer software, merely the right to reproduce), conditional or
otherwise, in any manner or by any means whatsoever for a
consideration, or any agreement therefor, including the rendering of
any service, taxable under this article, for a consideration or any
agreement therefor.
Section 1101(b)(6) of the Tax Law defines "tangible personal property" as:
Corporeal personal property of any nature.... Such term shall also
include pre-written computer software, whether sold as part of a
package, as a separate component, or otherwise, and regardless of
the medium by means of which such software is conveyed to a
purchaser....
Section 1101(b)(14) of the Tax Law defines "prewritten computer software"
as:
Computer software (including prewritten upgrades thereof) which is
not software designed and developed by the author or other creator
to the specifications of a specific purchaser. The combining of two
or more prewritten computer software programs or pre-written
portions thereof does not cause the combination to be other than
prewritten computer software. Pre-written software also includes
software designed and developed by the author or other creator to
the specifications of a specific purchaser when it is sold to a
person other than such purchaser.
Where a person modifies or
enhances computer software of which such person is not the author or
creator such person shall be deemed to be the author or creator only
of such person's modifications or enhancements. Prewritten software
or a prewritten portion thereof that is modified or enhanced to any
degree, where such modification or enhancement is designed and
developed to the specifications of a specific purchaser, remains
prewritten software; provided, however, that where there is a
reasonable, separately stated charge or an invoice or other
statement of the price given to the purchaser for such modification
or enhancement, such modification or enhancement shall not
constitute prewritten computer software.
Section 1105 of the Tax Law provides, in relevant part:
...there is hereby imposed and there shall be paid a tax of four
percent upon:
(a) The receipts from every retail sale of tangible
property, except as otherwise provided in this article.

personal

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(c)
The receipts from every sale, except for resale, of the
following services:
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(3)
Installing tangible personal property ... or maintaining,
servicing or repairing tangible personal property ... not held for
sale in the regular course of business, whether or not the services
are performed directly ... or by any other means, and whether or not
any tangible personal property is transferred in
conjunction
therewith...
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(5) Maintaining, servicing or repairing real property, property or
land, as such terms are defined in the real property tax law,
whether the services are performed in or outside of a building, as
distinguished from adding to or improving such real property,
property or land, by a capital improvement as such term ... is
defined in ... this chapter. ...
Section 1107(a) of the Tax Law provides, in relevant part:
On the first day of the first month following the month in which a
municipal assistance corporation is created under article ten of the
public authorities law for a city of one million or more, in
addition to the taxes imposed by sections eleven hundred five and
eleven hundred ten, there is hereby imposed ... within the
territorial limits of such city, and there shall be paid, additional
taxes, at the rate of four percent, which except as provided in
subdivision (b) of this section, shall be identical to the taxes
imposed by sections eleven hundred five and eleven hundred ten.
Such sections and the other sections of this article, including the
definition and exemption provisions, shall apply for purposes of the
taxes imposed by this section in the same manner and with the same
force and effect as if the language of those sections had been
incorporated in full into this section and had expressly referred to
the taxes imposed by this section.
Section 1109(a) of the Tax Law provides, in relevant part:
In addition to the taxes imposed by sections eleven hundred five and
eleven hundred ten of this article, there is hereby imposed within
... the metropolitan commuter transportation district ... and there
shall be paid, additional taxes, at the rate of one-quarter of one
percent, which shall be identical to the taxes imposed by sections
eleven hundred five and eleven hundred ten of this article....

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Section 1110 of the Tax Law provides, in relevant part:
(a) Except to the extent that property or services have already
been or will be subject to the sales tax under this article, there
is hereby imposed on every person a use tax for the use within this
state ... (A) of any tangible personal property purchased at retail,
(B) of any tangible personal property (other than computer software
used by the author or other creator) manufactured, processed or
assembled by the user, (i) if items of the same kind of tangible
personal property are offered for sale by him in the regular course
of business or (ii) if items are used as such or incorporated into
a structure, building or real property by a contractor,
subcontractor, or repairman in erecting structures or buildings, or
building on, or otherwise adding to, altering, improving,
maintaining, servicing
or repairing real property, property or
land, as the terms real property, property or land are defined in
the real property tax law, if items of the same kind are not offered
for sale as such by such contractor, subcontractor or repairman or
other user in the regular course of business, (C) of any of the
services described in paragraphs (1), (7) and (8) of subdivision (c)
of section eleven hundred five, (D) of any tangible personal
property ... not acquired for purposes of resale, upon which any of
the services described in paragraphs (2), (3) and (7) of subdivision
(c) of section eleven hundred five have been performed ....
Section 1115(a)(28) of the Tax Law provides:
Computer software designed and developed by the author or creator to
the specifications of a specific purchaser which is transferred
directly or indirectly to a corporation which is a member of an
affiliated group of corporations within the meaning of subparagraph
six of paragraph (b) of subdivision seventeen of section two hundred
eight of this chapter except for clauses (ii) and (iii) of such
subparagraph that includes such purchaser, or to a partnership in
which such purchaser and other members of such affiliated group have
at least a fifty percent capital or profits interest (but only if
the transfer is not in pursuance of a plan having as its principal
purpose the avoidance or evasion of tax under this article), but in
no case including computer software which is pre-written, as defined
in paragraph six of subdivision (b) of section eleven hundred one of
this article and available to be sold to customers in the ordinary
course of the seller’s business.
Section 1115(o) of the Tax Law provides:

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Services otherwise taxable under subdivision (c) of section eleven
hundred five or under section eleven hundred ten shall be exempt
from tax under this article where performed on computer software of
any nature; provided, however, that where
such services are
provided to a customer in conjunction with the sale of tangible
personal property any charge for such services shall be exempt only
when such charge is reasonable and separately stated on an invoice
or other statement of the price given to the purchaser.
Section 1116(a) of the Tax Law provides, in relevant part:
... any sale ... by or to any of the following or any use ... by any
of the following shall not be subject to the sales and compensating
use taxes imposed under this article:
(1)
The state of New York, or any of its agencies,
instrumentalities, public corporations ... or political subdivisions
where it is the purchaser, user or consumer, or where it is a vendor
of services or property of a kind not ordinarily sold by private
persons; ...
Section 526.7(a) of the New York State Sales and Use Tax Regulations
provides, in relevant part:
(1) The words sale, selling or purchase mean any transaction in
which there is a transfer of title or possession, or both, of
tangible personal property for a consideration.
(2) Among the transactions included in the words sale, selling, or
purchase are exchanges, barters, rentals, leases or licenses to use
or consume tangible personal property.
Section 526.8(c) of the New York State Sales and Use Tax Regulations
provides, in relevant part:
Tangible personal property does not include:
(1)

real property; ....

Section 529.2(a) of the New York State Sales and Use Tax Regulations
provides, in relevant part:
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(2)
A public corporation as used in this section means any
corporation created by an act of the Legislature for a public
purpose ...
Example: ... Industrial Development Agencies are public corporations
and may purchase tangible personal property exempt from the sales
and use taxes.

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Section 541.3(a) of the New York State Sales and Use Tax Regulations
provides, in relevant part:
When a contractor's customer is a governmental entity described in
section 1116(a)(1) ... of the Tax Law, the contract signed by the
government representative and the prime contractor is sufficient
proof of the exempt status of purchases made for such contract.
(1)

Such governmental entities include:

(i) Pursuant to section 1116(a)(1) of the Tax Law the State of New
York, or any of its agencies, instrumentalities, public corporations
(including a public corporation created pursuant to agreement or
compact with another state or Canada), or political subdivisions.
This group includes, but is not limited to:
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(c) industrial development authorities.
Section 854 of the General Municipal Law provides, in relevant part:
Definitions.
As used in this act, unless the context otherwise requires:
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(4)
"Project" - shall mean any land, any building or other
improvement, and all real and personal properties located within the
state of New York and within or outside or partially within and
partially outside the municipality for whose benefit the agency was
created, . . . provided, however, no agency shall provide financial
assistance in respect of any project partially outside the
municipality for whose benefit the agency was created without the
prior consent thereto by the governing body or bodies of all the
other municipalities in which any part of the project is, or is to
be, located.
Where a project is located partially within and
partially outside the municipality for whose benefit the agency was
created, the portion of the project outside the municipality must be
contiguous with the portion of the project inside the municipality.
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(14)
"Financial assistance" - shall mean the proceeds of bonds
issued by an agency, straight-leases, or exemptions from taxation
claimed by a project occupant as a result of an agency taking title,
possession or control (by lease, license or otherwise) to the
property or equipment of such project occupant or of such project
occupant acting as an agent of an agency.

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Section 858 of the General Municipal Law provides, in relevant part:
... [E]ach agency shall have the following powers:
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(3)
To acquire, hold and dispose of personal property for its
corporate purposes;
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(10) To acquire, construct, reconstruct, lease, improve, maintain,
equip or furnish one or more projects; ...
Section 862(2) of the General Municipal Law provides as follows:
(2)(a) Except as provided in paragraph (b) of this subdivision, no
financial assistance of the agency shall be provided in respect of
any project where facilities or property that are primarily used in
making retail sales to customers who personally visit such
facilities constitute more than one-third of the total project cost.
For the purposes of this article, retail sales shall mean: (i) sales
by a registered vendor under article twenty-eight of the tax law
primarily engaged in the retail sale of tangible personal property,
as defined in subparagraph (i) of paragraph four of subdivision (b)
of section eleven hundred one of the tax law; or (ii) sales of a
service to such customers.
Except, however, that tourism
destination projects and projects operated by not-for-profit
corporations shall not be prohibited by this subdivision. For the
purpose of this paragraph, "tourism destination" shall mean a
location or facility which is likely to attract a significant number
of visitors from outside the economic development region as
established by section two hundred thirty of the economic
development law, in which the project is located.
(b)
Notwithstanding the provisions of paragraph (a) of this
subdivision, financial assistance may, however, be provided to a
project where facilities or property that are primarily used in
making retail sales of goods or services to customers who personally
visit such facilities to obtain such goods or services constitute
more than one-third of the total project cost, where (i) the project
occupant would, but for the assistance provided by the agency,
locate the related jobs outside the state, or (ii) the predominant
purpose of the project would be to make available goods or services
which would not, but for the project, be reasonably accessible to
the residents of the city, town, or village within which the
proposed project would be located because of a lack of reasonably
accessible retail trade facilities offering such goods or services,
or (iii) the project is located in a highly distressed area.

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(c) With respect to projects authorized pursuant to paragraph (b)
of this subdivision, no project shall be approved unless the agency
shall find after the public hearing required by section eight
hundred fifty-nine of this chapter that undertaking the project will
serve the public purposes of this article by preserving permanent,
private sector jobs or increasing the overall number of permanent,
private sector jobs in the state. Where the agency makes such a
finding, prior to providing financial assistance to the project by
the agency, the chief executive officer of the municipality for
whose benefit the agency was created shall confirm the proposed
action of the agency.
Section 874(1) and (2) of the General Municipal Law provides as follows:
(1) It is hereby determined that the creation of the agency and the
carrying out of its corporate purposes is in all respects for the
benefit of the people of the state of New York and is a public
purpose, and the agency shall be regarded as performing a
governmental function in the exercise of the powers conferred upon
it by this title and shall be required to pay no taxes or
assessments upon any of the property acquired by it or under its
jurisdiction or control or supervision or upon its activities.
(2) Any bonds or notes issued pursuant to this title, together with
the income therefrom, as well as the property of the agency, shall
be exempt from taxation, except for transfer and estate taxes.
Section 917-a of the General Municipal Law establishes the New York City
Industrial Development Agency as an industrial development agency in general
having the powers of industrial development agencies under Article 18-A of the
General Municipal Law.
CS First Boston Corporation, Adv Op Comm T & F, December 21, 1995, TSB-A­
95(43)S concluded that certain rent payments made by certain Group Agents, on
behalf of and as agents of the IDA, with respect to Computer Software would be
exempt from sales and use taxes provided that the IDA is the lessee of such
Computer Software.
Opinion
Based on the structures, as described in TSB-A-95(35)S, under which the IDA
proposes to make sales and compensating use tax benefits available to Travelers
with respect to Exempt Installation Services and Computer Software, and based on
the other facts, as described by each Petitioner in its petition, and in
accordance with the sections of law and regulations cited above and the decisions
in Wegmans Food Markets v. Department of Taxation and Finance (126 Misc. 2d 144,

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aff'd 115 AD2d 962, lv to app den 67 NY2d 606) and Wegmans Food Markets v. The
Department of Taxation and Finance of the State of N.Y., (Sup. Ct., Monroe
County, Jan. 10, 1992, Galloway, J.), and provided that all the terms and
conditions of the relevant documents, as amended or proposed to be amended, are
complied with, and that these terms and conditions as amended or proposed to be
amended, are consistent with Petitioners' description of them as set forth above
and as incorporated by reference from TSB-A-95(35)S, in the instant matter:
(1) Payments made by a Group Agent, on behalf of and as agent of the IDA,
to vendors for Exempt Installation Services and payments made to a Group Agent
by an Eligible Affiliate Agent, on behalf of and as agent of the IDA, which
constitute an allocation of costs for Exempt Installation Services for purchases
of the services of installing tangible personal property, consisting of the
Equipment, with a useful life of one year or more, and which comprises part of
the Approved Locations or is in use at the Approved Locations, including
replacement of parts, but not including parts (e.g., a toner cartridge) that
contain materials or substances consumed in operating the property and that are
replaced when the part, material or substance is consumed, but not including
contracts for general services (e.g., janitorial services), will be exempt from
sales and use taxes, to the extent that the Exempt Installation Services,
services and parts, with respect to Equipment, are necessary to install such
Equipment used as part of the TGI Project, and provided that the IDA is the
owner, lessor or lessee of such Equipment, and also provided that the purchase
invoices, statements and contracts with vendors and suppliers for services
described in this paragraph provide that the IDA is the purchaser, lessor or
lessee with respect to such Exempt Installation Services and such Equipment, and
that the Group Agent is the disclosed agent of the IDA. In any instance where
an installation service results in the replacement of parts, materials or
supplies that are consumed in the ongoing operation of such Equipment, where such
parts, materials or supplies must be replaced when consumed, the portion of the
charges applicable to such parts, materials or supplies will be subject to sales
and use taxes, as indicated in Wegmans Food Markets v. The Department of Taxation
and Finance of the State of N.Y. (Sup. Ct., Monroe County, Jan.10, 1992,
Galloway, J.) supra.
However, it is noted that in a transaction where the charge is for both
taxable installation services and qualifying exempt services, the total charge
will be subject to sales and use taxes, unless the portion of the charge
applicable to the qualifying exempt services is separately stated from the other
charges or otherwise reasonably allocated.
(2)(a) and (b)
Travelers' acquisition, leasing, subleasing, licensing or
sublicensing of Computer Software, on behalf of and as agent of the IDA, pursuant
to the Agreement, as proposed to be amended, in an intangible medium (e.g., by
electronic transmission), or for use in computers and other equipment not
previously or concurrently acquired by the IDA (i.e., for use in computers and
other equipment owned by Travelers), will be exempt from the taxes imposed under
sections 1105, 1107, 1109 and 1110 of the Tax Law, provided that the IDA is the
owner, lessor or lessee of such software and also provided that the purchase
invoices, statements and contracts with vendors and suppliers for such Computer
Software provide that the IDA is the purchaser, lessor or lessee with respect to
the Computer Software and that Travelers is the disclosed agent of the IDA.

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(c) Travelers’ payments, on behalf of and as agent of the IDA, for Exempt
Maintenance Services or Exempt Installation Services with respect to Computer
Software acquired, leased, subleased, licensed, or sublicensed by Travelers, on
behalf of and as agent of the IDA (which Exempt Maintenance Services or Exempt
Installation Services may include the providing of upgrades to such Computer
Software), which Computer Software is in use at the Approved Locations, will be
exempt from the taxes imposed under sections 1105, 1107, 1109 and 1110 of the Tax
Law to the extent that such payments are for the purchase of Exempt Maintenance
Services or Exempt Installation Services, with respect to the Computer Software,
which are necessary to install, maintain, repair or service such Computer
Software, or are for the purchase of other services to such software described
in section 1115(o) of the Tax Law, provided that where such services are provided
to Travelers, on behalf of and as agent of the IDA, or to the IDA, in conjunction
with the sale of tangible personal property, any charge for such services shall
be exempt only when such charge is reasonable and separately stated on an invoice
or other statement of price given to Travelers or the IDA (see, section 1115(o)
of the Tax Law).
Notwithstanding the limitation regarding reasonable and
separately stated charges in the prior sentence, where Travelers, on behalf of
and as agent of the IDA, purchases tangible personal property in conjunction with
such Exempt Maintenance Services or Exempt Installation Services with respect to
Computer Software acquired, leased, subleased, licensed or sublicensed by the
IDA, the purchase of such tangible personal property under such circumstances
will be exempt from sales and use taxes where it is used as part of the Project,
and provided that the IDA is the owner, lessor or lessee of such Computer
Software and also provided that the purchase invoices, statements and contracts
with vendors and suppliers for services described in this paragraph provide that
the IDA is the purchaser, lessor or lessee with respect to the Computer Software,
and that Travelers is the disclosed agent of the IDA. In any instance where the
installation, maintenance, servicing or repair service results in the replacement
of parts, materials or supplies that are consumed in the ongoing operation of the
Computer Software, where such parts, materials or supplies must be replaced when
consumed, the portion of the charges applicable to such parts, materials or
supplies will be subject to sales and use taxes, as indicated in Wegmans Food
Markets v. The Department of Taxation and Finance of the State of N.Y. (Sup. Ct.,
Monroe County, Jan. 10, 1992, Galloway, J.) supra.
As indicated, enhancements, modifications and upgrades to computer software
which constitute services described in section 1105(c) of the Tax Law are exempt
from the taxes imposed by sections 1105, 1107, 1109 and 1110 of the Tax Law
pursuant to section 1115(o) of the Tax Law, provided that, however, where such
services are provided to a customer in conjunction with the sale of tangible
personal property, any charge for such services shall be exempt only when such
charge is reasonable and separately stated on an invoice or other statement of
the price given to the purchaser.
It is noted that in a transaction where the charge is for both taxable
services and qualifying exempt services, the total charge will be subject to
sales and use taxes, unless the portion of the charge applicable to the
qualifying exempt services is separately stated from the other charges or
otherwise reasonably allocated.

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TSB-A-97(70)S
Sales Tax

It is also noted that, pursuant to section 854(4) and (14) of the General
Municipal Law, the IDA may not offer financial assistance in the form of sales
and compensating use tax exemptions with respect to property, including software,
and services which are used outside the City of New York, without prior consent
to such use of such property and services from the jurisdiction in which the
property and services are to be used; and, in any case, any such project outside
the City of New York must be contiguous to the portion of the project inside the
City of New York. Thus, if property, including software, and services are used
outside the City of New York without such prior permission, such use would be
outside the scope of the IDA's authority and the property and services would be
subject to New York State and local sales and use taxes. However, any additional
access of software by remote means (telephone lines/modem, for example) from a
location outside such jurisdiction should not lead to the conclusion that such
software loaded and used at the IDA project is used impermissibly. This does not
mean that the software can be downloaded to a computer located outside such
jurisdiction for use outside such jurisdiction. Likewise, software could not be
purchased as part of an IDA project exempt from tax and removed from such
jurisdiction without violating section 854(4) of the General Municipal Law,
unless the IDA obtains prior consent from any other contiguous New York
municipality in which it will be used.
(d) To the extent that the term Equipment under the Project documents
specifically includes Computer Software, then holdings in this advisory opinion
with respect to Equipment would also be applicable to such Computer Software,
with such modifications as may be necessary to reflect the law relating to
computer software and services to computer software and to reflect differences
in the nature of software as compared to such equipment, provided that such
software is acquired in the manner that such equipment is acquired.
All of the forgoing conclusions depend on compliance with the terms and
conditions of all of the relevant Project documents, as amended, subject to any
limitations set forth in such documents.

DATED: November 19, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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