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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Are sales to a New York customer, drop-shipped to the customer's out-of-state buyers, New York receipts for the business allocation percentage?
It depends on where the goods are shipped, not who the customer is. For the receipts factor of the Article 9-A business allocation percentage, receipts from sales of tangible personal property are all…
Is a New York corporation owned by tribal members and operating entirely on an Indian reservation exempt from Article 9-A franchise tax?
No. A New York domestic corporation that runs a bingo operation entirely on the St. Regis Mohawk Reservation and is owned entirely by tribal members is still subject to the Article 9-A franchise tax. …
Is a toxic-waste cleanup company's service taxable, and are the equipment and supplies it uses during a cleanup subject to sales tax?
Yes -- the cleanup service itself is taxable as processing and real-property-maintenance work, and the company's own cleanup equipment (booms, vacuums, earth-moving machinery) and protective gear/disp…
Does a condominium's common-area electricity qualify for New York's reduced residential energy sales tax rate, including electricity used for the pool, laundry room, and a rooftop antenna lease?
Partly. Hall lights, stairway lights, heaters, and outside lighting tied to the residential building are common-area uses that DO qualify for the reduced residential energy rate. But electricity for t…
When a building owner hires an independent managing agent to hire, pay, and supervise building maintenance staff, are those workers' wages exempt from New York sales tax as employee wages, or taxable as the managing agent's service charge?
It depends on who really controls the workers. Where the building owner -- not the managing agent -- sets staffing levels, work hours, shifts, and pay rates, funds the payroll (even though the agent p…
Are receipts from selling custom industrial-control software, and from ongoing modification/updating services on that software, subject to New York sales and use tax?
No -- software designed and developed to a specific purchaser's own specifications ('custom' software) stays exempt from sales and use tax after the September 1, 1991 law change, and so do charges to …
Is a research firm's government-funded pilot plant, built to test a new pollution-control process at a power station, exempt from sales and use tax as research equipment, government property, production machinery, or a capital improvement?
Partly. Tangible personal property bought for use directly and predominantly in the experimental/laboratory research is exempt. Property that becomes part of a permanent capital improvement (the shelt…
Are standalone elevator inspection services subject to New York sales tax?
Yes, when the customer is the property owner or lessee. Inspecting elevators to check code compliance is a diagnostic service that counts as maintaining real property under Tax Law section 1105(c)(5) …
We're lending over $50 million to a borrower under a revolving credit facility secured by warehouses in multiple states, including one in New York. The New York mortgage caps its own secured amount at a fixed dollar figure well below the total loan, and says all daily readvances and repayments get applied to the OTHER states' collateral first, with the New York amount reduced only by the truly final repayment. Will we only pay New York mortgage recording tax once, on that fixed cap?
Yes -- a one-time tax on the properly capped New York amount, as long as the mortgage's own allocation language controls. BT Commercial Corporation made an over-$50 million revolving loan to a borrowe…
Are an insurance group's affiliated companies' equipment purchases and leases, made as an agent of a city industrial development agency (IDA) under a bond-financing job-retention deal, exempt from sales and use tax?
Yes, generally -- purchases and leases made as the IDA's disclosed agent are exempt from sales and use tax as long as the IDA genuinely owns the property, and exempt maintenance/repair covers only equ…
Is a subscription regulatory-update newsletter an exempt periodical, or a taxable information service?
It is a taxable information service, not an exempt periodical. The publisher's RCRA Update is a bimonthly service consisting mostly of photocopied Federal Register pages plus staff summaries of EPA ha…
Are recording tape and equipment rentals used to make promotional demo tapes taxable, or exempt as production equipment?
They are taxable. An artist-promotion company bought recording tape and rented equipment to make demonstration tapes it sent free to record companies. Buying tape and renting equipment are taxable ret…
When a kitchen contractor sells cabinets, does it collect sales tax from the customer, or pay tax on its own purchase of the cabinets?
It depends on whether the contractor installs them. If the contractor merely sells the cabinets without installing them, it is making a retail sale and must collect sales tax from the customer under T…
Does a contractor owe sales tax on armored-car transport, delivery, and storage services when it performs them as an authorized agent of a New York State agency?
No. The charges are exempt. The petitioner arranged armored-car transport and bulk storage of federal food-stamp coupons for the New York State Department of Social Services. Storage services (Tax Law…
Are a tire shop's recycling fees -- both what it charges customers and what it pays haulers -- subject to sales tax?
It depends on the transaction. When a customer buys or has tires installed and the shop keeps the old tires, the $1.50 recycling fee is a charge for servicing tangible personal property and is taxable…
Is a corporation dissolved by proclamation in 1981, holding only real property as nominee for others, subject to Article 9-A franchise tax?
Two periods, two answers. For the taxable years while the corporation was incorporated (here, the years ended February 28, 1978 through September 30, 1981), it owes the Article 9-A franchise tax under…
Is restoration of a building's deteriorated balconies and catwalks a tax-exempt capital improvement or a taxable repair?
It is a taxable repair, not a capital improvement. A co-op hired a contractor to inspect, test, clean, patch, and coat the deteriorated concrete of its balconies and catwalks -- removing cracked and s…
In a bond-financed sale-leaseback structure with a city industrial development agency (IDA), are a corporate tenant's affiliate's purchases, leases, and maintenance contracts -- made as the IDA's disclosed agent -- exempt from state and local sales and use tax?
Yes, generally -- purchases, leases, and maintenance/repair/service contracts entered as the IDA's disclosed agent are exempt from sales and use tax as long as the IDA is the true owner/lessor/lessee …
We're a securities broker-dealer buying two office buildings for our headquarters. To avoid putting $500 million of real estate and debt on our own balance sheet -- which would reduce our regulatory net capital under broker-dealer rules -- the seller will transfer title directly to a financing trust instead of to us. The trust will fund the purchase with senior notes, junior notes, and investor certificates, then lease the buildings back to us with a purchase option we can exercise anytime. We'll pay all taxes, insurance, and maintenance, keep all appreciation, bear all depreciation risk, and be treated as the owner for income tax purposes (though not on our own books). None of the financing mortgages will be recorded unless our parent company's credit rating drops. Does this financing structure trigger New York's Real Estate Transfer Tax, Real Property Transfer Gains Tax, or Mortgage Recording Tax at any step?
Exempt at every step described -- Smith Barney, Harris Upham & Co. structured an off-balance-sheet financing purchase of two Manhattan office buildings (388 and 390 Greenwich Street) so that beneficia…
Alvin Nathel, a shareholder of an S corporation that never made New York's separate S-corporation election, failed for years to claim the offsetting subtraction that would have kept his corporation's income from being taxed twice - once at the corporate level and again on his personal return. By the time he discovered the error, the ordinary refund deadline had passed for the earlier years. Can the Department use its discretionary special refund authority under Tax Law § 697(d) to refund those time-barred years anyway?
No. The Department ruled that Nathel's error was a mistake of law, not a mistake of fact, because he understood all the relevant facts (that Wishnatzki was a federal S corporation, that its income pas…
Can Robert J. and Barbara Hanrahan get a 1988 New York income tax refund for tax they mistakenly paid on pension income that should have been excluded, when they only asked for it in 1993, after the ordinary refund deadline had passed?
No. New York denied the refund for two independent reasons: (1) the ordinary three-year refund deadline under Tax Law § 687(a) for the 1988 tax year had already expired by the time the Hanrahans reque…
Can a monthly 'recurring credit' on a taxable service contract be subtracted from the amount subject to sales tax?
No. A travel agency's contract for American Airlines' SABRE system gave it a fixed monthly 'recurring credit' of $610 tied to hitting a booking target. The Department found this was not a true discoun…
Does a for-profit art college's photography, film, and computer equipment qualify for the Article 9-A investment tax credit?
No. A for-profit college of visual arts cannot claim the Article 9-A investment tax credit on its photography, film, video, and computer-graphics equipment. The credit under Tax Law section 210.12 is …
Must a manufacturer collect sales tax on orthopedic braces and splints that normally qualify as exempt medical equipment?
Sometimes yes. Orthopedic devices such as braces, splints, cervical collars, and supports qualify as exempt medical equipment under Tax Law section 1115(a)(3). But that exemption does not apply to med…
We're a nonprofit local development corporation that makes business loans secured by mortgages, and we record those mortgages ourselves. Is that exempt from New York's mortgage recording tax, whether we're the one giving the mortgage or the one receiving it?
Exempt, both directions -- mortgages given TO the corporation and mortgages given BY it. This is a foundational, general-purpose ruling establishing that Not-For-Profit Local Development Corporations …
We're modifying a mortgage so that accrued-but-unpaid interest gets deferred and paid as a fixed lump sum at maturity, without bearing its own interest and without being added to the principal balance. Does that modification trigger additional mortgage recording tax?
No additional tax -- but the details of HOW interest is deferred matter enormously, and this ruling draws a precise line. Ticor Title Guarantee Company asked whether modifying a mortgage to defer accr…
A partnership owes $30 million on a nonrecourse mortgage loan, secured by real property worth $10 million plus a $50,000 cash account the bank also has a security interest in. The partners personally guaranteed part of the debt. If the partnership transfers everything to the bank in lieu of foreclosure -- or the bank forecloses and is the winning bidder -- in exchange for cancelling the debt and the guarantees, what's the 'consideration' for New York's Real Property Transfer Gains Tax, and does it matter whether the loan was recourse or nonrecourse?
For a transfer occurring before April 15, 1993, the consideration was the amount of debt cancelled, apportioned to reflect only the real property's share of value -- and the answer was the same whethe…
Are massage services by a New York State licensed massage therapist subject to New York City and New York State sales tax?
They are taxable for New York City but not for New York State. New York City taxes massage services under Tax Law section 1212-A(a)(2) and NYC Administrative Code section 11-2002(h). Those laws exclud…
Is a power lift recliner exempt from sales tax as medical equipment?
No. A power lift recliner sold by a retail furniture store does not qualify as exempt medical equipment under Tax Law section 1115(a)(3). To be exempt, equipment must be primarily and customarily used…
Are chocolate-covered cookie bars like PB Max and Twix taxed as candy or exempt as food?
It depends on how they are packaged, marketed, and sold. PB Max and Twix are chocolate-coated wafer cookie bars. When sold in family packs and advertised, marketed, and sold as packaged cookies or sna…
Does an orthotist owe sales tax on braces, canes, crutches, and walkers it buys, and is fitting a brace a taxable medical service?
No, the purchases are exempt, because the orthotist is not performing a medical service. Braces (with component parts), canes, crutches, and walkers are exempt medical equipment under Tax Law section …
Is a Section 468B escrow settlement fund subject to New York franchise or personal income tax, and will New York waive penalties as the IRS did?
No tax is due, and the penalty question is moot. The SEC v. Vaskevitch escrow fund, treated as a qualified settlement fund under Section 468B, is not subject to New York franchise tax or New York Stat…
Our company's Employee Stock Ownership Plan (ESOP), an ERISA-covered retirement plan, owns nearly all the stock of our company, which itself holds leasehold interests counting as New York real property. If the ESOP sells all its stock in the company for $100 million allocable to that real estate -- a controlling-interest transfer -- does New York's Real Property Transfer Gains Tax apply?
The gains tax would otherwise apply, but ERISA preempts it as long as the selling entity remains an ERISA-covered employee benefit plan. Avis, Inc.'s Employee Stock Ownership Plan (Avis ESOP), created…
A husband and wife subdivided lakefront land into lots, sold four, and later put the remaining nine lots into a family trust for estate planning, gradually gifting beneficial interests to their children. When the trust liquidates and distributes the lots to all nine beneficiaries proportionally, does New York's Real Property Transfer Gains Tax apply to that distribution, and are the beneficiaries' later individual sales of their lots aggregated with each other for the $1 million threshold?
The trust's liquidation and distribution of lots to its nine beneficiaries counted as a taxable partition, with all the beneficiaries' shares aggregated to test the $1 million threshold -- but each be…
Our eight-unit condominium (each unit is a two-family semi-attached house with its own 12.5% interest in the shared common elements/yards) wants to terminate the condominium declaration entirely. Under our plan, all eight owners would first become tenants-in-common in the whole property, then each owner would receive a deed from the other seven conveying their combined 87.5% share of that owner's home-and-yard, so each owner ends up owning 100% of just their own unit and yard outright (no more condo regime). No money changes hands since everyone's share is roughly equal in value. Will this termination-and-partition trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax? And if the gains tax applies, is each owner's 'consideration' measured on the increase in their property's value, and do all eight owners' shares get combined to see if we cross the $1 million threshold?
Mixed result -- the condominium termination itself is fully exempt from both taxes, but the follow-on exchange among the individual owners is a separate, potentially taxable event for gains tax purpos…
How does New York sales tax apply to selling, leasing, and using a medical PAP-smear screening device and a slide-scanning service?
It depends on the transaction and delivery point. Selling or leasing the 'Classifier' device to a New York laboratory that uses it in performing medical services for compensation is taxable, because t…
Is a Section 468B qualified settlement fund subject to tax under Article 9-A or Article 22 of the New York Tax Law?
No. A qualified settlement fund under Section 468B of the Internal Revenue Code is not subject to tax under either Article 9-A or Article 22 of the New York Tax Law -- even where the defendant, the fu…
Is a $100 million Section 468B civil claims settlement fund subject to New York franchise tax or New York State and City personal income tax, and what must it file?
No tax, no return. The Salomon civil claims fund -- a $100 million settlement fund created by federal court order and treated as a qualified settlement fund under Section 468B -- is not subject to New…
Can a printer buy its machinery, equipment, and supplies tax-free under the production exemption?
Only when it uses them to produce its own goods for sale. If a printer uses machinery, equipment, and supplies directly and predominantly (more than 50%) to produce printed matter that it will sell --…
Does reincorporating a New York corporation in Delaware by merger trigger New York tax, and how many franchise tax reports are required?
Reincorporating a New York corporation as a Delaware corporation by statutory merger -- a mere change in form qualifying as a tax-free reorganization under IRC section 368(a)(1)(F) -- is also tax-free…
As sponsor of a non-eviction cooperative conversion, I estimated the Real Property Transfer Gains Tax consideration for my unsold shares based partly on a wraparound mortgage. I'm now negotiating to give the co-op board back my unsold, underperforming shares, and as an incentive I'll reduce the underlying mortgage by $375,000. Does that mortgage reduction lower my gains-tax consideration?
Only PARTIALLY -- the $375,000 mortgage reduction lowers the gains-tax consideration solely to the extent it's allocable to the STILL-UNSOLD shares being returned to the cooperative board, not to unit…
Can a contractor buy construction materials tax-free when they will be built into property owned by New York State?
Yes. A subcontractor widening and lengthening a Meadowbrook Parkway ramp owned by the New York State Parks Department may buy the materials without paying sales tax. Although a sale of materials to a …
We're merging a related corporation that owns real estate into our company, with its former shareholders receiving stock in ours. The two companies are owned by overlapping family members, but not in identical percentages -- does New York's Real Property Transfer Gains Tax apply to this merger, or does the mere-change-of-identity exemption cover it?
The merger is a taxable controlling-interest acquisition, but the mere-change-of-identity exemption applies proportionally -- so gains tax was owed only on the small SLICE of beneficial interest that …
Can a publisher treat several differently-named weekly shopping guides as geographical editions of one shopping paper for the sales tax exemption?
No, not on these facts. A publisher wanted its four weekly shopping guides treated as geographical editions of a single 'shopping paper,' so they would count as one issue when testing the shopping-pap…
Is a service that reviews a store's cash-register internal controls a taxable information or detective service?
No, as described it is not taxable. A consultant observes how a retail store's cash-register operators ring up sales and make change, then writes a report to management about the store's internal cont…
Will the Department use an advisory opinion to approve a taxpayer's method of computing sales tax?
No. The Department declined to rule. A GM subsidiary that places computers at customer premises asked whether the method it used (and that had been examined on audit) to determine sales tax would be a…
Is the income of a court-approved Section 468B qualified settlement fund subject to New York franchise tax or New York State and City personal income tax?
No. A designated settlement fund that is a qualified settlement fund under Section 468B of the Internal Revenue Code is not subject to New York franchise tax or to New York State or City personal inco…
When a New York City resident is about to take a U.S. Senate-confirmed executive-branch position and relocate to Washington, D.C., does his New York domicile change the moment the Senate confirms him, even though his family, home sale, and home purchase are all timed to that same event?
The Department declined to decide when (or whether) the taxpayer's domicile actually changes, because that is an inherently factual question that cannot be resolved in an Advisory Opinion. Instead it …
In a New York City Industrial Development Agency (IDA) sale-leaseback financing arrangement, are a company's affiliated 'Group Agents' purchases, lease payments, and buyout payments to the IDA exempt from sales and use tax, no matter which affiliate actually pays the vendor or how bond proceeds are routed?
Yes, generally -- purchases and leases made by any affiliated Group Agent acting as the IDA's disclosed agent, and inter-affiliate cost allocations and reimbursements, are exempt from sales and use ta…
Metro-North Commuter Railroad asked whether four categories of employees who perform duties in both New York and Connecticut are 'regularly assigned' to more than one state under section 7 of the Amtrak Reauthorization and Improvement Act of 1990, so that their nonresident compensation is exempt from New York income tax and withholding.
Two of the four categories are exempt and two are not. Employees whose job descriptions systematically require work in both New York and Connecticut as part of a set territory or line segment (Categor…
Is renting out a topsoil-screening machine subject to sales tax, or exempt as production equipment?
It can be exempt, but only in specific circumstances. Renting a 'power screen' topsoil-screening machine is normally a taxable retail sale under Tax Law sections 1101(b)(4), 1101(b)(5), and 1105(a). H…
When a heating contractor rents mobile boilers to supply temporary heat to an exempt organization's building while installing a permanent system, does the contractor owe sales or use tax on the boiler rental?
Yes. Although the contractor's service of providing temporary heat to the exempt organization is not taxable, the contractor owes sales or use tax on the mobile boilers it rents, because rented equipm…
When a social club collects membership dues and activity fees and forwards part of them to another club it shares facilities with, which club must report and remit the sales tax?
The club that bills its members must collect and remit the sales tax itself. A social club owes tax on its dues and on activity fees it charges members, cannot shift that tax onto the club it shares f…
Is a company's information service — a listing of area events sent to newspapers, radio stations, and TV stations — subject to New York sales tax?
No, when sold to news media. Information services are normally taxable in New York, but the law expressly excludes information services used by newspapers, radio, and TV broadcasters in collecting and…
Are a telephone company's receipts from private line circuits taxable as intrastate telephone service, or excluded from sales tax as interstate telephone service?
It depends on geography. Private line circuits that begin and end within New York are taxable intrastate telephone service; circuits that cross the state line are exempt interstate service. Where a Ne…
Are Japanese specialty sweets made from beans, flour, rice powder, and sweeteners exempt 'food' in New York, or taxable candy and confectionery?
Exempt. The Department ruled these traditional Japanese sweets — cakes, pastries, powders, and gelatins made from azuki beans, flour, rice powder, and sweeteners — are exempt food and food products un…
Which fees in a computerized securities-trading information network — directory listings, oral transmissions, delivery-instruction processing, broker referral premiums, and corporate-release fees — are subject to New York sales tax?
It splits by function. Fees to receive compiled trading information (including bundled directory listings and oral or Alert transmissions) are taxable information services; pure advertising listings a…
A nonresident alien partner in a New York law firm works entirely from the firm's London office and receives fixed annual 'guaranteed payments' under IRC section 707(c), on top of his distributive share of partnership income. Are those guaranteed payments taxable as New York source income, even though he performs no services in the United States?
It depends on federal tax treatment, and the Department did not decide that federal question. The Department held that if a guaranteed payment to a nonresident alien partner is not includible in the p…
Is an advertising agency's charge for a video tape produced for advertising taxable, or is it an exempt advertising service?
It depends on the structure. Pure advertising concept work is an exempt service, but selling the video tape itself is a taxable sale of tangible personal property. If the client cannot buy the video s…
Is a company's lease of mobile MRI tractor-trailer units exempt from New York sales tax under the heavy tractor-trailer exemption, or taxable because of the MRI machine inside?
Taxable. The tractor and trailer alone would qualify for the heavy-vehicle exemption, but the MRI machine is taxable medical equipment used to perform medical services for compensation — and because t…
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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.