Are a printer's plates and negatives exempt from New York sales tax, and does the exemption reach New York City's tax?

Plain-English summary

D.L. Terwilliger Co. Inc., a New York City printer, was under audit for December 1975 through May 1980 and asked whether it owes sales tax on the plates and negatives it buys to fill customers' printed-matter orders. The plates and negatives are bought at the customer's direction, the printer marks up their cost into the job's price, and (per the printer) they remain the customer's property.

The Department ruled the plates and negatives are exempt production equipment — but the exemption does not reach New York City's tax.

• Exempt as production equipment (State and local, except NYC). Tax Law § 1115(a)(12) exempts machinery or equipment used directly and predominantly in producing tangible personal property for sale. Plates and negatives are such equipment, so their purchase is exempt from the State sales tax and — under § 1210(a)(1) — from local sales taxes as well, except New York City's. To claim this, the printer must give its suppliers an Exempt Use Certificate (Form ST-121).
• The resale argument fails, so NYC tax applies. The printer argued the plates were bought for resale to the customer, which (under § 1101(b)(4)) would also take them out of New York City's tax. But for a printer, plates and negatives are a purchase for resale only where a written agreement has the printer buy them for resale to the customer before any use, with title passing to the customer on delivery at the printer's place of business (Commissioner's opinion of Dec. 15, 1969, in TSB-M-79(7)S). Here title passed "at time of completion and billing," not on delivery, and the customers' purchase orders never called for a purchase of plates — some refer to plates made by the printer. The resale test was not met, so the receipts are subject to New York City's sales tax.

What this means for you

Printing plates and negatives are generally exempt equipment — outside New York City. Because they are used directly and predominantly to produce printed matter for sale, plates and negatives qualify for the § 1115(a)(12) production exemption. That exemption flows to local sales taxes too, with one big exception: New York City's tax has no production exemption.

To beat the NYC tax, you need a true resale, documented precisely. The only way plates and negatives escape New York City's tax is to genuinely resell them to the customer. The Department applies a strict test: a written agreement to buy the plates for resale before any use, and title passing to the customer on delivery at your shop. If title instead passes at billing (or the paperwork shows you make the plates rather than buy them), it isn't a resale and NYC tax applies.

Match your contracts to the treatment you want. How your purchase orders describe the plates — and exactly when title passes — decides the result. Loose language that has the printer "making" plates, or title vesting at completion, defeats the resale position.

Common questions

Q: Are my printing plates and negatives taxable to buy?
A: Outside New York City, no — they're exempt production equipment under § 1115(a)(12) (give suppliers Form ST-121). In New York City, they're taxable unless you can show a genuine purchase for resale.

Q: Why does New York City tax them when the rest of the state doesn't?
A: The production exemption extends to local sales taxes under § 1210(a)(1) except New York City's, which has no equivalent production exemption. Only the resale exclusion (§ 1101(b)(4)) can remove NYC tax.

Q: What does it take to treat the plates as a purchase for resale?
A: A written agreement to buy them for resale to the customer before any use, with title passing to the customer on delivery at the printer's place of business (TSB-M-79(7)S). Title passing at completion/billing — as here — doesn't qualify.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(a) — imposes the State sales tax on receipts from every retail sale of tangible personal property
• Tax Law § 1107 — imposes the New York City sales tax
• Tax Law § 1115(a)(12) — exempts machinery/equipment used directly and predominantly in producing tangible personal property for sale
• Tax Law § 1210(a)(1) — extends the production exemption to locally imposed sales taxes, except New York City's
• Tax Law § 1101(b)(4) — excludes purchases for resale (including as a physical component part) from taxable retail sales
• TSB-M-79(7)S (Commissioner's opinion of Dec. 15, 1969) — a printer's plates/negatives are a purchase for resale only under a written pre-use agreement with title passing to the customer on delivery at the printer's shop

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h81_51s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-H-81(51)S
Sales Tax
April 14, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S801125A

On November 25, 1980 a Petition for Advisory Opinion was received from D.L.
Terwilliger Co. Inc., 215 E. 22nd Street, New York, New York 10010.
The issue raised is whether Petitioner is liable for sales tax on the
purchase of plates and negatives for use in filling orders for printed matter.
The period involved is December, 1975 through May 1980, with respect to which
period Petitioner is presently under audit.
According to Petitioner's statement of facts, the items in question are
purchased at the direction of the customer and remain the property of the
customer at all times. The cost of the plates and negatives is incorporated into
the selling price of the order and sales tax is charged wherever applicable. The
sales tax charged to customers reflects the selling price of the plates and
negatives to the customer. A mark-up on cost is added just as in the case of any
of the integral components of the completed order. Petitioner goes on to state
that "In many cases, the plates, negatives, etc. are shipped to the customer with
the job or separately. At other times the customer instructs us to hold the
plates, negatives, etc. in our shop for his convenience in order to facilitate
the reprinting of any job. The Petitioner has at all times resold the plates,
negatives, etc. by computing their cost and mark-up into the charge billed to our
customer and everything changes title and ownership at time of completion and
billing." Attached to the petition are "samples of purchase orders by our major
customers."
Section 1105(a) of the Tax Law, contained in Article 28, imposes the State
sales tax on "The receipts from every retail sale of tangible personal property,
except as otherwise provided in this article." A tax identical to this is imposed
with respect to New York City under section 1107 of the Tax Law, and with respect
to many localities, pursuant to Article 29 of the Tax Law. Section 1115(a)(12)
of the Tax Law, also contained in Article 28, exempts from the operation of the
State sales tax receipts from the sale of "Machinery or equipment for use or
consumption directly and predominantly in the production of tangible personal
property...for sale, by manufacturing...." An exemption with respect to tangible
personal property so used in production is also applicable to locally imposed
sales taxes, except for New York City's. Tax Law, §1210(a)(1). The plates and
negatives purchased by Petitioner come within this exemption, inasmuch as they
constitute "equtpment" put to the described use, and the receipts from such sales
are therefore exempt from State and local sales taxes, except for New York
City's. In order to enjoy this exemption Petitioner must furnish its suppliers
with a completed Exempt Use Certificate (Form ST-121).
Petitioner contends that its purchases constitute purchases for resale. If
so, the receipts from such sales would not be subject to New York City's sales
tax (or, for that matter, State & local sales taxes). This consequence arises
from the definition of "retail sales" (the receipts from which are subject to the
New York City sales tax imposed under section 1107 of the Tax Law) as "A sale of
tangible personal property to any person for any purpose, other than (A) for
resale as such or as a physical component part of tangible personal property...."
Tax Law, §1101(b)(4). The purchase of negatives and plates by a printer for a job
would be considered to be a purchase for resale, the receipts from which would
thus be exempt from the New York City sales tax, only where the printer and the

TP-8 (4/80)

JAMES H. TULLY, JR., COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

2
TSB-H-81(51)S
Sales Tax
April 14, 1981

customer enter into a written agreement whereby the printer is to purchase the
plates and negatives to be resold to the customer prior to any use by the
printer, and where title to the plates and negatives is to vest in the customer
on delivery at the place of business of the printer. See in this regard
Commissioner's opinion of December 15, 1969, incorporated in Technical Services
Bureau Memorandum TSB-M-79(7)S. Petitioner's statement of facts indicates that
title to the plates and negatives vests in the customer not "on delivery at the
place of business of the printer", but "at time of completion and billing." This
is not contradicted by the provisions of the various purchase orders submitted
by Petitioner. Indeed, nowhere do these provisions call for a purchase of plates
and negatives by Petitioner, whether for resale to its customer or otherwise.
Rather, the applicable provisions, in several instances at least, refer explicity
to plates made or prepared, and not purchased, by Petitioner. In addition, the
provisions in question do no specify the time of passage of title. Accordingly,
inasmuch as the conditions set forth above have not been met, Petitioner's
purchases do not constitute purchases for resale within the meaning and intent
of section 1101(b)(4) of the Tax Law. Hence, the receipts from such sales are
subject to New York City's sales tax.

DATED: February 24, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau