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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If a telephone answering service passes through the cost of its dedicated phone lines to customers as part of its bill, does New York sales tax apply to that charge too, on top of the tax already paid when the service bought the lines?
Yes. New York taxed the answering service's purchase of its dedicated phone lines as a taxable expense it consumes in its own business, and separately taxed the full charge it bills customers (includi…
If a delicatessen sells frozen pizzas and made-to-order sandwiches wholesale to bars for resale to their patrons, does it have to charge sales tax on those wholesale sales?
It depends on the item. The delicatessen's uncooked frozen personal-size pizzas are exempt because they're commonly sold unheated, in the same form, by ordinary food stores. But its cold-cut, eggplant…
We're RIOC, developing the Southtown Project on Roosevelt Island. Private developers will borrow from outside lenders to fund construction, and we'll be named mortgagee before assigning our interest to the real lenders. Is that mortgage -- and its later refinancings and modifications -- exempt from mortgage recording tax?
Exempt, if RIOC is named mortgagee and presents the mortgage for recording. The Roosevelt Island Operating Corporation (RIOC), created by the state Legislature in 1984 as successor to the Urban Develo…
A housing development fund company (HDFC) financed a whole subdivision with one exempt construction loan mortgage on its fee interest, then severed it into separate substitute mortgages as individual houses are sold to buyers who assume permanent financing. Are those substitute mortgages, and the later buyer assumption/extension agreements, still exempt from mortgage recording tax?
Exempt at every stage. Housing development fund companies (HDFCs), organized under Private Housing Finance Law Article XI to develop affordable housing on a nonprofit basis, commonly secure project fi…
Are lump-sum distributions from a nonqualified deferred compensation plan to terminated nonresident employees exempt from New York personal income tax, and when must the paying company withhold tax on such distributions?
Yes - because the plan is a nonqualified deferred compensation arrangement under IRC § 3121(v)(2)(C) whose lump-sum payments meet the federal 'retirement income' definition, distributions to terminate…
Is a health and sporting facility's membership fee subject to New York's social/athletic club dues tax, or to New York City's separate tax on gyms and health salons?
No, on both counts. La Palestra's membership charges are not taxable as social/athletic club dues under state law, because members have no control over the club's activities, membership selection, or …
Is a VEBA that receives and invests demutualization proceeds subject to the New York Article 13 tax on unrelated business taxable income?
No. Although a VEBA's demutualization proceeds are federal unrelated business taxable income under section 512(a)(3) and the VEBA is subject to the federal section 511 tax, the VEBA is not regularly c…
Is a motorcycle escort service for funeral processions — where the escort provider supplies both the motorcycle and driver — subject to New York sales tax as a vehicle rental?
No. Because the escort provider keeps full dominion and control over the motorcycle and driver — hiring and firing the driver, choosing the route, and paying all operating costs — the funeral director…
Six unrelated companies formed an LLC to jointly develop a large multi-use condominium project (offices, hotel, residential, retail, garage, plus a donated cultural-facility unit) on a single physically integrated site near Columbus Circle in Manhattan -- with each company always intended to end up owning only its own unit, and a not-for-profit organization set to receive one unit as an outright gift. We have to hold the whole project through one LLC during construction for practical reasons (single construction contracts, single mortgage, and NYC condominium recording rules). Once construction is done and we convert to a condominium, will distributing each finished unit to its intended owner -- and donating the cultural-facility unit -- trigger New York's Real Estate Transfer Tax?
Exempt across the board -- both the unit distributions and the charitable donation. Columbus Centre LLC ('Petitioner'), formed by six members (the TWI, Hotel, Residential, Office, Retail, and Garage M…
Is selling music downloads delivered electronically over the Internet subject to New York sales tax, either as a sale of tangible personal property, a taxable information service, or a taxable entertainment service?
No, on all three theories. Digitized music delivered electronically over the Internet and stored on a customer's own hard drive is a sale of intangible property, not taxable tangible personal property…
Do a provider's sales of telecommunication services to a foreign carrier that resells them qualify for the section 186-e sale-for-resale exclusion?
Yes, if the buyer qualifies as a carrier and resells the service as telecommunications. Under section 186-e.2(b)(1), sales of telecommunication services for resale are excluded from the excise tax whe…
Does New York's sales-tax exemption for manufacturing/production equipment cover the equipment, materials, and supplies bought to build a sewage treatment plant that will be dedicated to a county government once finished?
No. Materials, equipment, and supplies purchased to construct a sewage treatment plant are not exempt under New York's production exemption, because neither the developer building the plant nor the co…
If a vendor separately bills a New York client for reimbursed travel expenses (airfare, hotel, meals) on top of its service fee, does sales tax apply to the travel-expense portion of the bill too?
Yes, if the underlying service itself is taxable. Travel expenses a vendor incurs performing its work — even if reimbursed dollar-for-dollar and separately stated on the invoice — are treated as the v…
Does a personal chef who cooks and freezes meals in a client's home owe New York sales tax, and does the answer change depending on who buys the groceries, or whether the chef splits grocery-buying and cooking into two separate companies?
It depends on who sells the food. If the client already owns the groceries and only pays the chef to cook and package them, the chef's charge is a nontaxable cooking service (though the chef must stil…
Can homeowners' association members avoid New York's parking taxes when an independent company, rather than the association itself, operates the association's garage?
It depends on how the money flows and when. Before a February 6, 2001 law change, the exemption required parking charges to be paid directly to the homeowners' association itself, so members who paid …
We're ESDC, developing the Gateway Center retail project in Brooklyn's Fresh Creek Renewal Area. The developer will sell portions of the site to retail tenants, everyone will lease back to us during construction, and outside lenders will finance the buildout secured by mortgages naming us as mortgagee before we assign our interest to the real lenders. Is that financing -- and its later modifications -- exempt from mortgage recording tax?
Exempt for mortgages naming ESDC as mortgagee; later increases in debt remain taxable. Empire State Development Corp. (ESDC) adopted a General Project Plan for the Gateway Center Land Use Improvement …
Are pet pedicures (nail trims) performed by a veterinarian and staff exempt from New York sales tax as veterinary medicine, or are they taxable grooming?
Taxable. Even though the veterinarian frames pet pedicures as preventive health care, New York's veterinary exemption only covers services that are the actual practice of veterinary medicine — diagnos…
Does New York's under-$110 clothing exemption apply to fabric sold by the yard, when the total purchase costs $110 or more even though each individual yard costs less?
No. New York's clothing exemption for items priced under $110 applies per item as actually sold, not per yard. Five yards of $50-per-yard fabric sold together as a single purchase costs $250 total, so…
We're ESDC, developing the Harlem Center retail/office/hotel project on West 125th Street. A private developer will borrow from outside lenders, and we'll be named mortgagee on the financing before assigning our interest to the real lenders -- with the mortgage likely refinanced and modified over the years as the project moves from construction to permanent financing. Is all of that exempt from mortgage recording tax?
Exempt for mortgages naming ESDC as mortgagee; later increases in debt remain taxable. Empire State Development Corp. (ESDC, formerly the NYS Urban Development Corporation) adopted a General Project P…
Are retirement, thrift, and benefits-equalization plan distributions paid to Federal Reserve System employees exempt from New York personal income tax?
Yes. Because the Federal Reserve System is treated as a federal instrumentality, distributions from its Retirement Plan, its Thrift Plan (other than in-service withdrawals), and the related nonqualifi…
Does an out-of-state manufacturer that sells to New York customers, using only an independent sales representative who visits every few months, have to register as a New York sales tax vendor?
Yes. Even a single independent manufacturer's representative who periodically visits New York customers on the manufacturer's behalf creates enough nexus to require the out-of-state manufacturer to re…
Which local jurisdiction's sales tax rate applies to a telephone answering service — the location where the phone company technically routes the original call, or the customer's own business or home address?
The customer's own business or personal-residence address, not the location where the phone company technically routes the original ring. A telephone answering service isn't the same thing as telephon…
Is a trade acceptance draft purchased by a company investment capital under section 208.5, or business capital, for Article 9-A?
It is investment capital. A trade acceptance draft purchased by company C is a 'qualifying corporate debt instrument' and is not subsidiary capital in C's hands, so it constitutes investment capital u…
When a securities broker-dealer spins off its software-development operations into a separate subsidiary and licenses its trading software back, does that reorganization trigger New York sales or use tax on the software?
Generally no, as long as the software stays custom-built for one purchaser's own specifications and isn't resold to third parties. A joint venture's custom-built trading algorithm licensed to the brok…
Are ventilators and related breathing equipment exempt from New York sales tax as prosthetic devices, or only as ordinary medical equipment and supplies?
It depends on function, not the equipment's name. Ventilators and related parts (circuits, filters, oxygen concentrators, suction units) qualify as exempt prosthetic aids when they completely or parti…
Is a large Manhattan health club's membership and initiation fee subject to New York's social/athletic club dues tax, or to New York City's separate tax on gyms and health salons?
No, on both counts. Manhattan Plaza Health Club's membership and initiation fees are not taxable as social/athletic club dues under state law, because members have no control over the club's activitie…
Is an out-of-state manufacturer that keeps inventory at an unaffiliated New York firm which modifies the goods subject to Article 9-A franchise tax and required to register as a sales-tax vendor?
Yes to both. Company A, an out-of-state blower manufacturer, keeps inventory at unaffiliated Company B in New York, which attaches motors and pulleys to order before shipping to customers. Because tha…
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
When a bank sells its auto-finance business to another bank before a custom software project is finished, does transferring the unfinished software contract trigger New York sales or use tax?
No. Because the custom software Citibank had contracted for was never completed, delivered, or paid in full before the business sale, it never lost its identity as exempt custom software — so Citibank…
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
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…
May a newly registered bank holding company that elects financial-holding-company status file a combined Article 32 return without the Commissioner's permission, and can the Commissioner force separate filing?
It may file combined, and the Commissioner cannot force it apart. A bank holding company that during a taxable year beginning on/after Jan. 1, 2000 and before Jan. 1, 2001 (1) does business in New Yor…
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
If a customer's business name contains the word 'Contracting' or 'Contractor,' does that alone bar a supplier from accepting a resale certificate from that customer in good faith?
No, not by itself. A business name containing 'Contracting' or 'Contractor' doesn't automatically make a resale certificate invalid, and the supplier isn't required to investigate further or demand ex…
May a corporate member of an LLC taxed as a partnership claim the investment tax credit (or empire-zone ITC) on the LLC's property, and qualify as a new business eligible for a refund?
Yes. A corporate member of an LLC treated as a partnership may claim the investment tax credit (or the empire-zone ITC) on its allocable share of qualifying property the LLC places in service, just as…
Do a home-improvement retailer's cardboard baler and its in-store lumber, pipe, and flooring cutting machines qualify for New York's manufacturing/production sales tax exemption?
No, none of them. Lowe's cardboard baler/compactor doesn't qualify because Lowe's isn't producing anything for sale with it — it just compacts scrap for a hauler to remove and later resell. The saws a…
If a utility spins off its retail gas and electricity supply business into a separate company while keeping its transmission and distribution operations, does the phased-out reduced sales tax rate on transmission and distribution charges still apply?
Yes. Once a utility's transmission-and-distribution (T&D) charges are billed separately from a different company's sale of the actual gas or electricity, those T&D charges qualify for the phased-down,…
In a motor-vehicle leasing like-kind exchange under IRC § 1031, does the Qualified Intermediary that holds the escrow funds have to register as a New York sales tax vendor?
No. A Qualified Intermediary that only receives, holds, and disburses escrow funds in a like-kind exchange — without ever taking title to or possession of the vehicles — isn't a 'vendor' under New Yor…
When an auto-leasing finance company sells 60% of its vehicle lease portfolio (with the leases already assigned and the leased vehicles already taxed) to a related finance company, is that bulk transfer of vehicles a tax-exempt resale, and who owes tax going forward?
Yes, the bulk transfer of the leased vehicles is a tax-exempt sale for resale, since the buyer will exclusively re-lease them to the existing lessees rather than use them itself — but the buyer must g…
Are materials and supplies a federal government contractor purchases in its own name, for use in performing a cost-reimbursement services contract, excluded from sales tax as purchases for resale even though the government takes title to them?
No, they're not resale-exempt. Even though the U.S. government eventually takes title to the materials and reimburses the contractor for their cost, the contractor is buying them to use in performing …
We're the Habitat for Humanity NYC affiliate's housing development fund company. We give 20-30 year interest-free mortgage loans to low-income homebuyers to finance construction, and take back a mortgage from each homeowner as security. Are those mortgages -- where WE are the lender/mortgagee, not the borrower -- exempt from mortgage recording tax?
Exempt. Habitat for Humanity Housing Development Fund Company, Inc. is the contracting entity for Habitat for Humanity - New York City (HFH-NY), a 1984-founded affiliate of Habitat for Humanity Intern…
Are FCC-licensed personal communications services a local telephone business under section 184, and does section 184 reach such a business conducted through a partnership with corporate partners?
Yes, PCS is a local telephone business, and section 184 reaches the corporate partners. Personal communications services provided under FCC licenses are 'telecommunication services' constituting a loc…
Does a tax-exempt nonprofit hospital have to collect sales tax when it leases radiology equipment to a for-profit joint venture it forms with a group of radiologists?
No. A Section 501(c)(3) nonprofit hospital's sales and leases are generally exempt from New York sales tax, and leasing radiology equipment to a single for-profit joint venture on the hospital's own p…
Does an out-of-state manufacturer that only makes wholesale sales for resale, and whose sole New York presence is two traveling sales representatives, have to register as a New York sales tax vendor?
Yes. Having even just two traveling sales representatives soliciting business in New York is enough of a physical presence to satisfy the constitutional nexus requirement, so the out-of-state manufact…
Is the lane-rental portion of a bowling alley's private 'bowling party' package subject to sales tax, and does bundling it with taxable food and beverage charges change the answer?
No sales tax on the lane-rental charge. Bowling is a participant sporting activity, so admission charges for the use of a bowling lane are specifically excluded from New York sales tax, even when sold…
Does an out-of-state reed manufacturer have to register for New York sales tax just because it employs three New York residents, working from their own homes, to test and pack its products before shipping them back out of state?
Yes. Simply having three New York-resident employees performing work for the company -- even work as limited as testing and packing product that gets shipped right back out of state, with no in-state …
Does an out-of-state mail-order computer company create New York sales tax nexus just by hiring an independent New York repair company to make on-site warranty repair visits to its New York customers?
Yes. Even though the mail-order computer company has no office, sales force, or sales representatives of its own in New York, hiring an independent New York-based repair company to perform on-site war…
Is dialysate, the chemical solution used inside an artificial kidney during hemodialysis, an exempt prosthetic aid, or a taxable medical supply?
Dialysate qualifies as an exempt prosthetic aid, not a taxable medical supply. Because it performs an essential part of the kidney's lost filtering function inside the artificial kidney during dialysi…
Can a Manhattan co-op buy garage spaces at nearby third-party garages and resell the garaging rights to its own tenant-shareholders tax-free, either through the resale certificate or the homeowner's-association parking exclusion?
The co-op itself can buy the garaging rights from the third-party garages tax-free, using a properly completed resale certificate, since it's buying them exclusively to resell to its tenant-shareholde…
When a car dealer pays the up-front sales tax on a long-term lease on the customer's behalf and rolls that cost into higher monthly payments, how is the tax recalculated so the customer's after-tax payments come out to the intended amount?
There's no option to simply add the sales tax to each monthly payment as it comes due — New York taxes a long-term motor vehicle lease all at once, up front, on the total amount of all lease payments …
Is a corporate aviation subsidiary's purchase of a new $30 million jet exempt from sales tax as a 'commercial aircraft,' when the plane is used mainly to fly employees and guests of affiliated companies who are charged an intercompany fee for using it?
Yes, exempt -- as long as more than 50% of the new aircraft's use is devoted to transporting employees, customers, and other business contacts of related companies for a fee that reasonably reflects t…
Is a managing corporate partner of an electricity/steam generating partnership subject to section 186/186-a, and are IPP contract termination payments part of gross earnings or gross operating income?
The managing partner is taxed; the termination payments are not. A corporate partner deeply involved in running an electricity/steam generating partnership (more than 50% of its receipts from the part…
When a car dealership signs a long-term lease with a customer and immediately assigns it to a separate leasing company, who is the 'original lessor' responsible for collecting the up-front sales tax, and is a trade-in credit applied to the lease taxable?
The dealer -- not the leasing company the lease gets assigned to -- is the original lessor and is responsible for collecting and remitting the sales tax due at the inception of the lease, since the de…
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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.