New York State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in New York, with full citations and the original source on every page.
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When a Canadian company designs, engineers, and fabricates structural steel and sells the finished steel to a New York vendor for use in a NY construction project, is New York use tax based on the whole price, or can the design/engineering portion be carved out?
New York's compensating use tax applies to the entire price paid for steel fabricated outside the state and brought in for a construction project, including the cost of design and engineering — even i…
Is a subcontractor's charge to a general contractor for temporary protective pedestrian walkways at a capital-improvement construction site subject to New York sales tax?
It depends on how the arrangement is structured. If the subcontractor is simply renting the walkway equipment to the general contractor (with installation and dismantling as part of that rental), the …
If a curling club converts from a taxable social/athletic club to a tax-exempt organization, does that change whether its membership dues are subject to New York sales tax?
Yes, the change matters a great deal. Once the club qualifies and is certified as a tax-exempt organization under New York's exemption for charitable/educational/amateur-sports organizations, its memb…
Is a contractor's lease of fuel-distribution equipment from the Port Authority — used to fuel and defuel commercial aircraft it doesn't own — exempt from New York sales tax?
Yes. Fueling and defueling services are activities that keep commercial aircraft in a condition of fitness, efficiency, readiness, or safety, so they qualify as exempt aircraft maintenance services — …
Is a candy manufacturer's wastewater pipeline, metering/sampling equipment, and holding tank exempt as manufacturing waste-treatment equipment, or taxable as building materials?
The pipelines carrying wastewater from the plants to the holding tank, the flow metering and sampling equipment, and the holding tank itself all qualify as exempt manufacturing equipment, because they…
Which of a securities printer's corporate documents — prospectuses, proxy materials, SEC forms, offering circulars — qualify as exempt 'promotional materials' when mailed free to shareholders?
It depends on the specific document type. Prospectuses, red herring prospectuses, offering circulars, tender offer documents, private placement memorandums, and Forms 10-K and 10-Q all qualify as exem…
Is freshly extracted wheat grass juice and vegetable juice sold at a health food store's juice bar exempt from New York sales tax as food, or as a health-preservation product?
The juices are not exempt as a special health-preservation product — that exemption is meant for drug-like items, not nutrient-rich foods and beverages. But they are exempt beverages under the ordinar…
Can a cable manufacturer treat the scrap value of a customer's used cable as a tax-reducing 'trade-in' credit against the price of new cable, where the used cable is shipped straight to a third-party scrap dealer instead of back to the manufacturer?
It depends on how the deal is papered. Crediting a customer for the scrap value of its used cable against the price of new cable can qualify as a tax-reducing 'trade-in,' even though the used cable is…
Are a corporate aircraft division's aircraft purchases and maintenance services exempt from New York sales tax as commercial aircraft, and are its cost-based intercompany flight charges to affiliates exempt air transportation rather than a taxable aircraft rental?
Yes. The Department ruled that Tropicana's aircraft operations division (SoBe) owns aircraft used over 90% for transporting PepsiCo affiliates' employees and customers for cost-based compensation, so …
Are an aircraft-owning subsidiary's purchases of its aircraft and maintenance services exempt from New York sales tax, and are the operating-cost charges it bills to affiliates for flights exempt as air transportation rather than a taxable aircraft rental?
Yes, once the lease ends. The Department ruled the subsidiary's aircraft qualify as tax-exempt 'commercial aircraft' because over 90% of flight time transports affiliates' employees and customers for …
How is an LLC running a telephone business, and its corporate members, taxed in New York -- under Article 9-A, sections 183/184, or section 186-e?
The LLC, treated as a partnership for New York tax purposes, is not subject to Article 9-A or sections 183/184, but as a provider of telecommunication services it owes the section 186-e tax. Its corpo…
How do the transitional depreciation rules apply to a utility's or power producer's depreciable property held under a synthetic lease?
The synthetic lessee (a qualified public utility or qualified power producer) is treated as owning the transition property, so the transitional depreciation rules apply. For Article 9-A it must add ba…
Are a carrier's reciprocal compensation receipts excluded from the section 186-e tax, and are they subject to the section 184 local telephone tax?
Both apply differently. A competitive local exchange carrier's receipts from reciprocal compensation arrangements with other carriers qualify for the sale-for-resale exclusion under section 186-e.2(b)…
Are time-deposit placements by a corporation with an affiliated bank treated as cash on deposit for Article 9-A investment capital purposes?
It depends on the instrument. Time deposits (30 days or more) placed by a corporation with an affiliated bank generally qualify as cash on hand and on deposit under section 208.7(a), so the corporatio…
Are admission fees, shop sales, reproduction charges, and 'Charter Founder'/'Sustaining Member' contributions collected by the Statue of Liberty-Ellis Island Foundation's American Family Immigration History Center subject to New York sales tax?
It depends on the charge. Admission fees to the genealogy research center are exempt as an exempt organization's museum/historic-site admissions, but sales of shop items and reproductions of records (…
If a motor-vehicle leasing company uses a Qualified Intermediary to structure its vehicle sales as an IRC Section 1031 like-kind exchange, does the Qualified Intermediary have to register as a New York sales tax vendor?
No. Because the Qualified Intermediary only manages the escrowed sale proceeds and never takes title to or possession of any vehicle, it isn't a sales tax 'vendor' and doesn't have to register or coll…
Can a mail-order company that used to have traveling sales representatives in New York, but no longer has any physical presence there, stop collecting New York sales tax and surrender its vendor registration?
Yes. Once a mail-order company has no employees, independent sales representatives, or other physical presence in New York, catalog and website solicitation alone doesn't create nexus, so it may surre…
Is a highway contractor's purchase of steel materials to build a temporary traffic-detour crossover for a state expressway interchange exempt from sales and use tax?
Yes. Because the steel crossover becomes the property of the New York State Department of Transportation upon installation and functions as an integral, if temporary, part of the state highway, the co…
Do the fork trucks used to unload raw materials and the storage racking that holds them before production qualify for New York's manufacturing exemption from sales tax?
Yes, both do. Because the manufacturer only visually checks and counts raw materials without weighing, testing, or measuring them, production is considered to begin at unloading -- so equipment used t…
Can interest from cash items other than bank deposits be allocated by a zero investment allocation percentage when cash is treated as investment capital?
Yes for cash items other than bank deposits. When a taxpayer treats its cash on hand and on deposit as investment capital under section 208.7(a), the interest is investment income under section 208.6 …
Is a VEBA subject to New York's Article 13 tax on unrelated business income because it received and invested insurance demutualization proceeds?
No. Although a voluntary employees' beneficiary association (VEBA) has unrelated business taxable income for federal purposes under IRC section 512(a)(3), it is not regularly carrying on an unrelated …
Who is responsible for collecting and remitting New York sales tax when an insurance administrator sells extended service contracts on automobiles through credit unions and dealerships?
Both. When credit unions and dealerships sell extended service contracts on behalf of an out-of-state administrator, they become co-vendors jointly and severally liable, with the administrator, for co…
Is a hotel relieved of its duty to collect sales tax on a New York State employee's room just because the employee pays with a credit card embossed 'tax exempt'?
No. A credit card embossed 'tax exempt' issued to a New York State employee is not, by itself, enough to relieve a hotel of its duty to collect sales tax on the room, because the card's receipt doesn'…
Are Vitoss and Cortoss, two synthetic bone void fillers, exempt from New York sales tax as prosthetic aids when sold to hospitals and physicians?
It depends on the product. Vitoss, which dissolves and is gradually replaced by the patient's own bone, does not qualify as a prosthetic aid and is taxable when sold to a for-profit medical practice (…
Are charges for web site design and development services subject to New York State sales tax?
No. Web site design and development services are not subject to New York sales tax, whether the finished site is delivered by uploading it to a hosted server or by sending the client a CD-ROM, because…
Are the food, beverage, and lane-rental charges for a bowling alley's 'bowling party' packages subject to New York sales tax?
It's split. The lane-rental charge for a bowling party is exempt from sales tax as a participatory-sporting-activity admission charge, but the food and beverage charges (and any gratuities paid over i…
We're a 501(c)(3) nonprofit running four different disability-services programs at one leased building -- only one of which (a Diagnostic and Treatment Center) is a licensed 'hospital' under state law. We took out one leasehold mortgage to renovate the whole building. Does the mortgage recording tax exemption for nonprofit hospital corporations cover the WHOLE mortgage, or only the part used for the hospital program?
Only partially exempt -- apportioned by actual use. Tax Law section 253.3 exempts mortgages executed by a "voluntary nonprofit hospital corporation" from mortgage recording tax, and Petitioner -- a 50…
We're the Battery Park City Authority. We sublease-back a developer's leasehold so we can be named co-mortgagor on their construction financing -- without pledging our own fee interest -- and this mortgage will be split, modified, and refinanced many times over the years as buildings are completed and converted to permanent financing. Is all of that exempt from mortgage recording tax?
Exempt for mortgages naming the Authority as co-mortgagor; later increases in debt remain taxable. The Battery Park City Authority, a public benefit corporation of New York State formed to redevelop t…
Is a company's licensed equity-trading software, along with its customer support, training, and customization charges, subject to New York sales and use tax?
It depends on whether the software is 'prewritten' or truly custom. If the FLEXTRADE software (or its updates) wasn't designed and developed to each specific customer's own specifications, it's taxabl…
Is a court-ordered litigation settlement fund a corporation or trust subject to New York State or City franchise or personal income tax?
No. A court-ordered litigation settlement fund that is a qualified settlement fund under IRC section 468B is not a corporation subject to Article 9-A (its activities are not the conduct of a business)…
Does Public Law 86-272 protect a company whose New York salespeople solicit free-publication subscriptions and sales of advertising space?
No. Public Law 86-272 only protects soliciting orders for sales of tangible personal property. The company gives its publications away free (no sale, no receipts) and earns its money selling advertisi…
Are prospectuses, proxy materials, offering circulars, and SEC forms that a securities printer mails free to shareholders exempt from New York sales tax as promotional materials?
It depends on the document. Prospectuses, red herring prospectuses, offering circulars, tender offer materials, private placement memorandums, and Forms 10-K/10-Q qualify as exempt promotional materia…
Is a hotel's floor-by-floor reconstruction project -- including wall demolition, skimming, painting, wall coverings, and new carpet -- exempt from New York sales tax as a capital improvement?
Mostly yes, with one exception. Hilton's multi-million-dollar floor-by-floor reconstruction -- demolishing and re-plastering walls, painting, and installing wall coverings -- qualifies as an exempt ca…
Can a member-owned private ski club avoid sales tax on members' ski lift passes by billing them separately from annual dues instead of bundling them together?
No. Because the ski club is a member-owned social/athletic club, any charge to members for use of its ski lifts and slopes counts as taxable club 'dues' under New York law regardless of how it's bille…
Is an out-of-state company that hires New York subcontractors to do janitorial work, with no office or employees here, doing business in New York?
No, if the subcontractors are genuine independent contractors. A foreign corporation with no office, employees, representatives, or inventory in New York that merely hires New York subcontractors as i…
Is Subpart F income and section 956 inclusions from a controlled foreign corporation treated as income from subsidiary capital excluded from entire net income?
Yes. A taxpayer's pro rata Subpart F income under IRC section 951(a)(1)(A) and its section 956 investment-in-U.S.-property inclusions under section 951(a)(1)(B) from a wholly owned controlled foreign …
Are a new media company's web site development, design, consulting, and maintenance services subject to New York sales and use tax?
Web site development, design, implementation, consulting, and content maintenance are not subject to sales tax, even when the site is delivered on a CD-ROM. But the company's own purchases of prewritt…
How is a general partner in an independent power producer taxed, and are PSC-mandated contract termination payments taxable utility income?
An IPP general partner is taxed under Article 9-A for years beginning on or after January 1, 2000 (after section 186 was repealed); for earlier years it fell under section 186 only if it was actively,…
How are receipts from internet sales of gift certificates and gift checks sourced for the New York receipts factor?
They are intangible other business receipts sourced to where the customer accesses the website. Selling merchant certificates, gift certificates, and gift checks over the internet is not a sale of tan…
When a contractor installs kitchen appliances for hotels, institutions, and tax-exempt organizations, which appliances are taxable free-standing property and which are tax-exempt capital improvements — and does it matter when title to the appliances transfers or whether the customer is tax-exempt?
Free-standing appliances like dishwashers, refrigerators, ovens, and stoves remain taxable tangible personal property even when installed as part of a larger project, but built-in appliances (cabinets…
Are royalties from licensing patents and other intellectual property to manufacturers sourced to New York based on where the licensee manufactures?
Yes. Royalties from licensing product and process patents are allocated to New York under section 210.3(a)(2)(C) when the licensee uses the patents in New York, and royalties from licensing trade secr…
Is a web-hosting company's purchase of internet 'bandwidth' from telecommunications carriers exempt from New York sales tax as interstate or international telephone service?
No, it's taxable. Even though most of the web site's visitor traffic comes from outside New York, the bandwidth purchase itself is treated as intrastate telephone service delivered to and consumed by …
Are refundable 'land fund' security deposits that a country club requires as a condition of membership subject to New York's social/athletic club dues tax?
Yes. A 'land fund' deposit that a country club requires new members to pay as a condition of joining is an 'initiation fee' subject to sales tax, regardless of the fact that it's kept in a segregated …
Can a bus company get a New York sales tax refund on the portion of its diesel fuel purchase price that corresponds to federal excise tax the IRS later refunds to it?
No. Because the sales tax is computed on the full price the vendor actually received at the time of the sale -- which properly includes the federal excise tax embedded in that price -- a later refund …
Is an elk farmer's purchase of a hydraulic elk squeeze and handling system exempt from New York sales and use tax as farming production equipment?
Yes, as long as it's used more than half the time for that purpose. Because the elk squeeze and its handling pens are used to immobilize elk for artificial insemination, semen collection, antler velve…
Does selling candy and snacks from open, unlocked vending trays for 75 cents or less qualify for New York's coin-operated vending machine sales tax exemption?
No. An open vending tray where customers simply take candy or snacks and drop payment in a nearby coin box is not a 'vending machine' under New York's sales tax law, so sales through it don't qualify …
I'm a 99% limited partner in a partnership that owns one piece of commercial real estate worth $51 million (with $41 million in mortgages). I'm considering transferring my entire limited partnership interest into an irrevocable grantor retained annuity trust (GRAT), which will pay me an annuity for seven years and then pass the remaining trust principal to a discretionary trust for my husband and children. Does either transfer -- into the GRAT, or later out of it -- trigger New York's Real Estate Transfer Tax?
Two different answers for the two transfers -- taxable going IN to the GRAT, exempt coming OUT. Petitioner held a 99% limited partnership interest in a partnership whose only asset was commercial real…
In a section 338(h)(10) stock sale, is a subsidiary's actual distribution of unwanted assets to its parent treated as part of a complete liquidation for Article 9-A?
It follows the federal treatment. Where a target corporation actually distributes unwanted assets to its selling parent in connection with a section 338(h)(10) stock sale, and the distribution is trea…
A state urban-development subsidiary is condemning land in midtown Manhattan and will ground-lease it to our LLC for 99 years (with an option to buy for $10 after 29 years) so we can build an office tower to be converted to condominium units for our two members. (1) Is transfer tax due when the state delivers vacant possession of the land to us and our lease rights actually begin? (2) Is the tax based only on the $85.56 million land price plus limited percentage rent, or does it include reimbursable excess acquisition costs? (3) Does merely signing the ground lease and recording a memorandum of it trigger tax before possession is delivered? (4) Is transferring the finished condominium units from the LLC to its two members, who always beneficially owned their own space, exempt?
Four different answers to four issues, most favorable to the taxpayer. This ruling addresses the New York Times Building project: a state ESDC subsidiary ('42DP') would condemn land at 8th Avenue/40th…
For a $1.3 billion JFK Airport terminal rebuild, is an airline's purchase of construction materials, furniture, computers, and equipment exempt from sales tax through the Port Authority/City of New York's exempt status or through an Industrial Development Agency agency arrangement?
Yes, through two separate paths. Construction materials that become part of the new terminal are exempt because title to each improvement passes immediately to the City of New York (an exempt governme…
Was a New York-domiciled Foreign Service officer taxable as a New York resident during a stateside stint in New Jersey and Washington, D.C. that fell between two overseas assignments otherwise covered by the 548-day nonresident rule?
Yes, for part of the gap period. Because the petitioner was not present in a foreign country and did not maintain a permanent place of abode outside New York during the September 23, 1998 through May …
If someone becomes a statutory resident of New York City, is income they receive that year - like restricted stock, bonuses, and deferred compensation - taxable to the city even though it was earned in earlier years while they lived elsewhere?
Yes. Because Kenneth Freeman was treated as a statutory New York City resident for all of 1996 rather than someone who changed from nonresident to resident mid-year, the special accrual rules that let…
Are the annual membership fees a marine towing and assistance membership organization charges recreational boaters subject to New York sales tax as club dues or a taxable service?
No. Sea Tow's $95 annual membership fee is not subject to New York sales tax, because Sea Tow is not a 'social or athletic club' subject to the club-dues tax, and the fee is not a charge for an enumer…
Does a retailer have to collect New York sales tax on the commission a distributor or cellular phone carrier pays it for selling cellular telephones and prepaid calling cards?
No. The commission a distributor or cellular phone carrier pays a retail establishment for selling cellular phones or prepaid calling cards is not itself a taxable receipt, so the retailer doesn't col…
Is a Web site development company's charge for consulting on, designing, and building a client's Web site subject to New York sales tax, and does the developer owe tax on the software it buys or writes in-house to do that work?
Web site development services — consulting, design, and building the site, plus any future hosting fees passed through from an ISP — are not a taxable service in New York and stay untaxed no matter wh…
Must a large bank recapture part of its New York bad debt reserve under Article 32 when current-year loans or the experience ratio fall below base-year levels?
No recapture is required. When a large bank's current-year loans outstanding or experience ratio fall below base-year levels, it simply gets no section 1453(i) deduction for that year. Section 1453 co…
Our company is financing its new world headquarters condominium unit through a 'synthetic lease' -- an off-balance-sheet structure where a bank trustee will take legal title to our unit and lease it back to us, even though for tax and financial-risk purposes we remain the true owner and the arrangement is really just a loan secured by the property. The building is being constructed by a multi-member LLC that will convert to condominium ownership, with each member beneficially owning only its own unit from day one. (1) Is the trustee's taking title, and our unit's eventual reversion to us, subject to real estate transfer tax? (2-4) Are the lease itself and the various loan-related conveyances exempt as financing? (5-6) Does recording the trustee's deed, and the various related mortgage documents, trigger mortgage recording tax, and if so on what amount?
The RETT analysis favors the taxpayer across the board; the mortgage recording tax analysis is more nuanced. Time Warner Inc. (post-merger, AOL Time Warner) was financing its new world headquarters --…
I'm buying a cooperative apartment unit for over $1 million that has been used exclusively as doctors' offices for at least 40 years, is configured with exam rooms instead of a kitchen or residential bathroom, and whose certificate of occupancy only permits professional-office use -- even though I plan to convert it to a residence after closing. Do I owe New York's 1% 'mansion tax' (the additional residential conveyance tax) on this purchase?
No mansion tax due -- what matters is the property's actual use and legal occupancy status at the moment of conveyance, not the buyer's future plans. Petitioner purchased a cooperative unit for over $…
May a New York-chartered trust company allocate its entire net income within and without New York based on custodial services performed outside the state through agents and sub-custodians, and how are the custody fees sourced?
It may allocate within and without New York, and may use sub-custodian costs to source the out-of-state fees. If Sumitomo performs custodial services outside New York through agents or sub-custodians,…
Is a separate annual vehicle registration fee that a SUNY college charges students, faculty, and staff subject to New York sales tax as a parking charge?
No. SUNY College at Oneonta's separate $5 annual vehicle registration fee is not subject to sales tax as a parking, garaging, or storing charge, because it is legally and financially distinct from the…
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These are official tax letter rulings and advisory opinions issued by New York's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.