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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Can the distortion requirement for filing a New York combined report be met when one of the corporations is a Subchapter T cooperative that generally reports no federal taxable income?
It is not precluded. The distortion requirement for a New York combined report (20 NYCRR 6-2.3) is presumed when there are substantial intercorporate transactions, and the fact that one member is a Su…
Is an out-of-state wine wholesaler exempt from the New York Article 9-A franchise tax under Public Law 86-272 when its only New York presence is a home-based sales manager who solicits orders?
Yes. Public Law 86-272 (and 20 NYCRR 1-3.4(b)(9)) exempts an out-of-state seller of tangible personal property from the Article 9-A franchise tax if its New York activities are limited to soliciting o…
When a corporation sells products to an LLC it owns that is taxed as a partnership, how are those sales treated in the receipts factor of the corporate member?
The corporate member must exclude, from both the numerator and denominator of its receipts factor, the portion of its sales to the LLC that is in effect also reflected in its distributive share of the…
Does a tax-exempt historical society have to collect sales tax on items it sells through a local store, a card table, and word-of-mouth from members' homes?
It splits by sales channel -- a tax-exempt organization's regular, ongoing sales of merchandise through a fixed "candy store" and thrift shop display are taxable because those count as a "shop or stor…
Is an early Internet "presence provider"'s web page development service subject to New York sales tax?
No -- receipts from an Internet "presence provider"'s Web page development services, including passed-through hosting fees, aren't subject to New York sales tax, both because web page development isn'…
Does a New Jersey company owe New York compensating use tax on free advertising cash-register tapes it manufactures in New Jersey and gives away to New York supermarkets?
Yes -- Cadett Register Tapes owes New York compensating use tax on the free, advertising-printed cash register tapes it distributes to New York supermarkets, because giving away promotional materials …
Can a waste-transfer-station operator buy a competitor's trash-hauling service tax-free for resale when that competitor also uses the same transfer station for its own customers' trash?
No -- the charge Paper Fibres pays Browning Ferris Industries (B.F.I.) to haul all the consolidated waste from Paper Fibres' own transfer station to a Pennsylvania landfill is a separate taxable trash…
Can a foreign diplomatic mission use its U.S. State Department tax exemption card to book a hotel room tax-free in New York if payment is made by the mission's check, the mission's credit card, or a credit card in the name of the mission's home government?
Yes -- a foreign mission holding a valid U.S. Department of State Mission Tax Exemption Card covering hotel room taxes can rent hotel rooms exempt from New York sales tax when payment is made by the m…
Are the flat monthly fees an internet service provider charges customers for internet access subject to New York state and local sales tax?
Starting February 1, 1997, flat monthly fees an internet service provider charges for internet access are not subject to New York state and local sales tax, including bundled amenities like navigation…
Can a New York City Industrial Development Agency sale-leaseback structure let PaineWebber buy and lease office build-out improvements and equipment sales-tax-free by having its agents purchase everything on the IDA's behalf?
Yes, with conditions -- the New York City Industrial Development Agency's proposed sale-leaseback structure for PaineWebber's office build-out ("Tenant Improvements") and equipment/software ("Project …
We're a not-for-profit educational organization leasing 23% of a Manhattan office building. To help us qualify for a real property tax exemption on our space -- which requires the space's OWNER (not just its user) to be tax-exempt -- our landlord has agreed to convey us bare legal title to just the air envelope enclosing our leased space, as a fee simple determinable that automatically reverts to the landlord when our lease ends. The landlord keeps every economic benefit: all our rent, all mortgage financing rights and proceeds, condemnation proceeds, and tax ownership treatment; we get no rights to encumber the space, no condemnation claim, and no relief from our lease obligations. No money changes hands. Does this 'raw title' transfer trigger New York's Real Estate Transfer Tax?
Exempt -- the landlord keeps every economic incident of ownership, so there's no real change in beneficial ownership. American Management Association ('Petitioner'), a not-for-profit educational entit…
Does sales tax apply to a convention center's charges for additional electrical, telephone, and plumbing hookups ordered by trade show exhibitors and managers on top of its basic license fee?
No -- the Javits Convention Center's charges for additional electrical, telephone, and plumbing services ordered by show managers and exhibitors on top of its basic utilities aren't subject to sales t…
Is a court-ordered liquidation fund taxed like a qualified settlement fund subject to New York franchise tax, State income tax, or New York City income tax?
No. A court-ordered liquidation fund that only holds proceeds, pays creditors, distributes to beneficiaries, and makes short-term investments is not conducting a business, so it is not a corporation u…
Does a non-bank Article 9-A taxpayer keep its Article 9-A status when it contributes its assets to a partnership, and how do tiered-partnership items flow to it?
It keeps its Article 9-A status. Because the SBIC was never a banking corporation under section 1452(a)(9), it is simply an Article 9-A taxpayer and the section 1452(d) grandfather election does not e…
When a customer pays for an equipment maintenance contract in monthly or quarterly installments instead of all at once, does the seller collect sales tax on each installment or on the full contract price up front?
The full sales tax is due on the entire contract price at the time the maintenance agreement is signed, regardless of whether the customer is allowed to pay in installments over the contract term, bec…
Must a qualified retirement plan or an IRA file a New York return or pay New York tax under Article 13 on unrelated business taxable income?
As originally issued: a qualified section 401(a) retirement plan covered by ERISA owed no New York Article 13 tax on unrelated business taxable income because the tax was preempted by ERISA under Morg…
Are anti-theft sensor labels sold to manufacturers and retailers exempt from New York sales tax as sales for resale or as packaging material?
It depends who buys them -- loss-prevention labels sold to manufacturers, who place them inside a product's packaging and resell the labeled product, qualify for the resale exemption with a resale cer…
Is a kitchen and bathroom renovation company that controls the whole job but has its customers separately sign contracts with the installing tradespeople a retailer of the cabinets it sells, or a contractor performing a capital improvement?
The renovation firm is a contractor, not a retailer -- because it controls every aspect of the renovation (design, pricing, and which tradespeople the customer must use), it must pay sales tax itself …
Can a lawn care company buy the mixer drums, pumps, pulleys, chains and engine parts it uses to blend its own fertilizer tax-free as production machinery and equipment?
No -- a lawn care company's mixer drums, pumps, pulleys, chains and vehicle engine parts used to blend fertilizer are subject to sales and use tax (and so are repairs to them), because the fertilizer …
How does New York sales tax apply to a company that thermally treats and recycles contaminated soil -- on the processing charge, on transportation, on the treatment equipment and fuel, and on any reclaimed soil it later sells?
A company that thermally treats and recycles contaminated soil is performing a taxable processing service under Tax Law § 1105(c)(2) (not exempt waste removal), taxed on the full contract price includ…
We're the state agency redeveloping Times Square/West 42nd Street. Private developers are leasing sites from us and financing construction through commercial lenders, with us named as mortgagee or co-mortgagee even though we have no beneficial interest in the loan. Is recording those mortgages -- and later assignments or modifications of them -- exempt from mortgage recording tax?
Exempt, while UDC remains the named mortgagee or co-mortgagee. The New York State Urban Development Corporation (UDC, doing business as Empire State Development Corporation) has been redeveloping the …
Are membership dues taxable as club dues when a golf and country club sells memberships to the general public on a first-come, first-served basis with no proprietary rights or membership control?
No -- dues paid by members of a golf and country club are not subject to New York sales tax as club dues, because nonequity members hold no proprietary interest in the club, have no vote or control ov…
Is a company's telephone verification of a mortgage applicant's job, income and landlord references a taxable investigation service under New York sales tax?
No -- a company's mortgage loan verification service, which consists of telephone interviews confirming a specific applicant's employment, income and other facts at the time of the loan application, i…
Does a weekly investment research subscription that mixes stock ratings data with analytical articles qualify as an exempt periodical under New York sales tax?
Yes -- The Value Line Investment Survey, a weekly subscription publication combining stock ratings data with analytical articles by different authors, qualifies as an exempt periodical under Tax Law §…
Can a textile manufacturer buy the artwork and design mechanicals it uses to silkscreen or weave patterns into its products tax-free under the production exemption?
Yes -- artwork and design mechanicals a textile manufacturer buys and uses directly to silkscreen or weave patterns into products it manufactures for sale qualify for the production machinery and equi…
Does a tax-free restructuring of the corporate partners of a partnership that owns investment-tax-credit property trigger recapture of the credit?
No. Investment tax credit is recaptured under Tax Law section 210.12(g) only if the qualified property is disposed of or ceases to be in qualified use. A tax-free section 351 contribution and tax-free…
Our public authorities are financing a rail-yard sale-leaseback and sublease transaction with private lenders, using a leasehold mortgage, a fee mortgage, a collateral assignment, and an eventual assignment of everything to a private trustee. Which of these mortgage recordings, assignments, subleases, and options trigger New York's mortgage recording tax or real estate transfer tax?
Almost none of it is taxable. Every mortgage recording in this multi-party rail-yard financing is exempt from New York's mortgage recording tax because a state public authority (the MTA or the TBTA) i…
I was set to close on the sale of my mother's residence, but the buyer refused to close, claiming we needed a full gains-tax pre-transfer audit and tentative assessment instead of the simple exemption affidavit we offered. Was the affidavit actually enough?
Yes -- the affidavit would have been enough, given the facts presented. Bonnie Lee Smith had lived in her New Rochelle residence for decades (with a brief period living elsewhere after the town wrongf…
When a membership warehouse club sells to a nonprofit or government member, what exemption paperwork does it need, and is it responsible for policing whether the member stays a valid exempt organization?
A membership warehouse club can make tax-exempt sales to its Business members that are exempt organizations if it accepts a properly completed exemption certification in good faith and the purchase is…
Does a Canadian mail-order company have to collect New York sales tax when it uses a New York mailing address for orders and drives its own trucks across the border to mail products to New York customers?
Yes -- a Canadian mail-order company that advertises a New York mailing address for customer orders and payments, and uses its own trucks to bring products across the border into New York for mailing …
Does a manufacturer's backhauling -- using its delivery trucks to pick up products and unrelated goods in New York for return to its home state -- exceed Public Law 86-272 and create franchise-tax nexus?
Yes. Delivering products into New York by the company's own trucks is protected solicitation, but using those trucks to pick up nonconforming products, trim, and scrap (post-delivery backhauling) exce…
Is a state-certified inspector's fee for testing medical and dental x-ray equipment for mandatory safety-code compliance subject to New York sales tax?
No -- a certified radiation equipment safety officer's fees for inspecting medical and dental x-ray equipment are not subject to sales tax when the inspections are performed solely to demonstrate comp…
Are stair lifts, patient lifts, home elevators and dumbwaiters sold to help disabled people exempt from New York sales tax as medical equipment or prosthetic aids?
Portable stair lifts, evacuation devices, and patient lifts sold to help disabled people are exempt from New York sales tax as medical equipment or prosthetic aids; residential elevators installed for…
Which of a multi-level marketer's nutritional powders, bars and drink mixes are exempt food or health supplements versus taxable beverages under New York sales tax?
Eight of a multi-level marketer's nine dietary and nutritional products (weight-management supplements, protein/vitamin powders, fruit bars, and joint-support and antioxidant powders) are exempt from …
Is a background-check company's resume-verification service, which digs into a job applicant's education, employment, credit and government records, a taxable detective service under New York sales tax?
Yes -- a company's resume verification service, which investigates a job applicant's educational records, employment history, government records, credit history, and personal references (including int…
Does a manufacturer otherwise protected by Public Law 86-272 lose its exemption by conducting three small one-day product-fitting training seminars a year in New York?
No. A manufacturer whose New York sales reps stay within solicitation is protected by Public Law 86-272. Conducting three one-day seminars a year to train retailers on fitting its products is technica…
Is Rogaine exempt from New York sales tax now that it's sold over-the-counter without a prescription?
Yes -- receipts from the sale of Rogaine remain exempt from New York sales tax as a product for the preservation of health, even after the FDA's 1996 approval of its over-the-counter sale, because New…
Does a foreign corporation that only displays goods at two five-day trade shows a year in New York, without taking orders or selling, become subject to the Article 9-A franchise tax?
No. Coming into New York only to display goods at two five-day trade shows a year (10 days total), without taking orders or making sales and without otherwise doing business, owning property, or maint…
Is a large multi-task garage waterproofing and restoration project a nontaxable capital improvement, or a taxable repair, when some individual tasks look like ordinary maintenance?
A large garage waterproofing and restoration project -- covering roof deck waterproofing, structural steel and concrete work, asphalt paving, walkway replacement, railings and other tasks across nine …
If a family moves their domicile out of New York mid-year and empties out their only New York home, are they still taxed as full-year statutory residents just because they spent more than 183 days in New York that year?
No. Even though they spent more than 183 days in New York during 1996, the Kukulkas moved all their household furnishings, clothing, and personal effects out of their New York home by August 17, 1996 …
Which parts of a print-and-mail company's letter-printing and mailing service are taxable printing versus exempt mailing, and does the tax rate depend on where the letters are mailed to?
A company that prints and mails specialized notices and letters must charge sales tax on its printing of letters, envelopes and address labels (taxable under the printing/imprinting rules), but not on…
How does New York sales tax apply to the many different services and equipment rentals an executive office suite provider bills to its tenants -- phone answering, copying, word processing, mail handling, catering, and pass-through charges?
An executive office suite operator's tenant services are taxed item-by-item depending on their end result: telephone answering and equipment-based copying/faxing are taxable, word processing is not, e…
When an unredeemed towed vehicle is sold at a New York City Marshal's auction, are the towing charges paid to the towing company out of the auction proceeds subject to sales tax?
No -- towing charges that a New York City Marshal pays to a towing company out of the proceeds of an unredeemed vehicle sold at a Marshal's auction are not subject to sales tax, because the Marshal pu…
Is a check-guarantee service's per-check fee, which merchants pay to have a customer's check backed against non-payment, subject to New York sales tax?
No -- a check guarantee service's fees, including its per-check charge and its minimum monthly account fee for low-volume merchants, are not subject to New York State or New York City sales tax, becau…
Who has to collect New York sales tax on towing charges and vehicle auction sales when a New York City Marshal tows away cars for unpaid parking tickets -- the Marshal or the independent towing company?
The New York City Marshal, not the independent towing company, must collect and remit sales tax on towing charges paid by a vehicle owner reclaiming a car towed under the Parking Violations Bureau pro…
Our client, a publicly traded corporation that owns New York real estate, is being acquired by another publicly traded company through a reverse triangular merger structured as a tax-free reorganization -- our client's shareholders will exchange their stock for less than 50% of the acquirer's voting power and value. Since our client itself is a real-estate-owning entity being acquired via its shareholders exchanging stock, is our client (the acquired company) primarily and jointly liable, along with its own shareholders, for New York's Real Estate Transfer Tax on this controlling-interest transfer -- or is that liability solely the acquiring company's?
Yes -- the acquired company and its shareholders are jointly liable as grantor, with the acquirer secondarily liable as grantee. Company X, a widely held, publicly traded C corporation owning New York…
Is admission to a sports card and memorabilia show, the vendor table fees, and autograph sales all subject to New York sales tax?
Admission to a sports card and memorabilia show and the fee charged to vendors for table space are not subject to New York sales tax, but a promoter must collect sales tax on autographed products it s…
Is artwork a fabric manufacturer buys and scans to design a computer-generated weaving blueprint for upholstery fabric exempt from New York sales tax as production equipment?
Yes -- artwork a textile manufacturer purchases and scans into a computer to design a weaving blueprint for upholstery fabric qualifies for New York's Statewide production machinery and equipment exem…
Is an integrated CAD/CAM/CAE computer system used both to develop generic product designs and to configure specific customer orders exempt from New York sales tax as research and development or production equipment?
A fully integrated CAD/CAM/CAE hardware, software and maintenance system qualifies for the research and development exemption when used to create documented, generic marketable product designs, and se…
How is a New York corporation and its shareholders taxed when the shareholders of a federal S corporation make a section 338(h)(10) election on a sale of the company's stock?
The target corporation (X) is subject to Article 9-A whether or not it is a New York S corporation, and the section 338(h)(10) deemed asset sale is reflected in its franchise tax. X files two short-pe…
Is a drugstore's free monthly newsletter for senior customers exempt from sales tax as a periodical or shopping paper, or is its cost a taxable purchase by the store?
No -- a drugstore's free monthly newsletter for senior customers is not exempt from sales tax, because giving a publication away free for promotional purposes is a taxable retail purchase by the store…
Are dues paid to a private beach club association that's limited to residents of a specific housing development exempt from sales tax as a homeowners association?
Yes -- dues and initiation fees paid to a private beach club association whose membership is limited to residents of a defined housing development, and which operates recreational facilities (a pool, …
Is a long-established out-of-state manufacturer a new business eligible for the refundable EDZ investment tax credit when it acquires a New York Article 9-A taxpayer it was not previously affiliated with?
Yes. A corporation is a new business under Tax Law section 210.12(j) -- and so eligible for the refundable economic development zone investment tax credit -- unless it is over-50% owned by an existing…
Is a loss-consulting firm's investigative reports, built from subcontracted private investigators and other experts, subject to sales tax as protective and detective services?
Yes -- a loss-consulting firm's investigative reports built from surveillance and background-investigation work by subcontracted private investigators and other experts are taxable protective and dete…
Is hiring a trucking company to haul asphalt to a paving job a nontaxable transportation service, or a taxable equipment rental?
Hiring a trucking company to pick up and deliver asphalt to a paving job site -- where the trucking company supplies its own truck and driver, chooses its own routes, pays all operating expenses, and …
Is a court-created qualified settlement fund that only invests and distributes funds subject to the New York franchise tax or personal income tax?
No. A qualified settlement fund under IRC section 468B that only holds, invests, and distributes funds is not conducting a business, so it is not a corporation subject to the Article 9-A franchise tax…
We're restructuring ownership of a Manhattan office building through five coordinated steps happening the same day, maybe within minutes of each other: a bank's new entities will buy out a 74% interest in two upper-tier partnerships; simultaneously, the remaining lower-tier partnership entity will buy out the other partner's 74% stake in the property-owning partnership, which then dissolves and distributes its real estate to the surviving entity; the bank's new entities will then redeem their upper-tier partnership interests for a direct 74% stake in the entity that now holds the real estate; and finally, the original upper-tier partners will form a new joint entity holding the remaining 26%. Which of these steps trigger New York's Real Estate Transfer Tax, and which are exempt restructuring steps?
Split outcome -- the core 74% acquisition is taxable (viewed as one integrated transaction), while the remaining restructuring steps are exempt. The property at 40 West 53rd Street was owned by 40 Wes…
Is an out-of-state corporation that owns a limited partnership interest in a partnership doing business in New York subject to New York franchise tax?
Yes. Under 20 NYCRR 1-3.2(a)(6) a foreign corporation is treated as doing business in New York if it is a limited partner in a partnership (other than a portfolio investment partnership) that does bus…
Are reinsurance premiums counted as 'premiums' when testing whether more than 95% of an insurer's premiums are for annuity contracts under section 1505(b)?
Yes. For the section 1505(b) test of whether more than 95% of an insurance company's premiums are received as consideration for annuity contracts (or section 1510(c)(2) policies), 'premiums' has the m…
Do league fees paid to a nonprofit that organizes recreational softball, volleyball, and table tennis leagues count as taxable 'club dues'?
No -- league fees paid by teams to a nonprofit that runs open, non-exclusive softball, volleyball, and table tennis leagues aren't subject to the club dues sales tax, because the members have no propr…
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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.