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 nonresident shareholders liquidate a New York S corporation whose only asset is a partnership interest in New York rental real estate, what are the New York personal income tax consequences under Article 22 of the Tax Law - and can a loss on the deemed sale of their S-corporation stock offset the gain on the deemed sale of the corporation's underlying asset?
No, the loss cannot offset the gain for New York purposes, and the result is asymmetric. Because the New York S corporation allocated 100% of its income to New York for franchise tax purposes, the non…
Are municipal put bonds investment capital, and how does the put date affect their classification under Article 9-A?
A municipal put bond's put date counts as a 'date of maturity' under 20 NYCRR 3-4.2. So the bond is generally classified as investment capital, except that it must be classified as cash (not investmen…
Is a dissolved corporation that merely holds record title to New York real property as nominee for others, while otherwise inactive, subject to Article 9-A franchise tax?
It depends on whether the corporation was still incorporated. Midstate Research was a New York corporation that owned four acres of vacant land but stopped all activity in 1971 and was dissolved by pr…
Our company owns numerous New York real estate interests, many of which we built ourselves, generating huge volumes of vendor invoices, purchase orders, and accounting records supporting the 'original purchase price' we'd need to prove for the Real Property Transfer Gains Tax. Can we keep those supporting records solely on microfilm or similar media, instead of retaining the original paper documents?
Yes -- microfilm (or similar media) recordkeeping is acceptable for substantiating original purchase price, as long as the taxpayer follows the Department's established recordkeeping procedures for su…
Is a manufacturer's rebate that a car lessee assigns to the dealer as a 'capitalized cost reduction' still part of the taxable receipt on the lease?
Yes. A rebate the car manufacturer pays you and that you sign over to the dealer as a 'capitalized cost reduction' does not shrink what you owe the dealer, so it stays part of the taxable lease receip…
Is the IRC section 847 special deduction for an insurance company's discounted unpaid loss reserves allowed in computing entire net income under Article 33 of the New York Tax Law?
No -- the section 847 deduction is effectively reversed for New York. IRC section 847 lets a property/casualty insurer take an extra deduction for discounting its unpaid loss reserves, but only if it …
We're building a cogeneration plant at JFK Airport under Port Authority agreements, financed by up to $250 million in Port Authority bonds. The Port Authority will assign its lease rents to the bond trustee (exempt, since it's a government instrumentality), and we'll separately grant the trustee a leasehold mortgage on our own leasehold interest as additional security. Is our leasehold mortgage exempt too, or only the Port Authority's assignment?
Exempt too, but ONLY if recorded after the Port Authority's own exempt Assignment of Rents -- and this is the origin ruling establishing that sequencing rule, later applied and reaffirmed on a refundi…
May a new business get a refund of its unused Article 9-A investment tax credit under section 210.12(j), and for which year must the refund claim be filed?
Yes -- a qualifying new business can have its unused investment tax credit refunded, with conditions. NEWCO, a manufacturer incorporated in 1984 that met the section 210.12(j) new-business tests, may …
The Transit Supervisors Organization, a union representing employees of the Manhattan and Bronx Surface Transit Operating Authority (MABSTOA), asked whether pensions paid to MABSTOA employees are taxable under New York's personal income tax - especially after the MABSTOA pension plan was revamped to more closely resemble the New York City Transit Authority's pension fund.
MABSTOA pensions remain fully taxable - even after the plan's revamp, it still is not exempt as a 'New York State or municipal retirement system' under Tax Law § 612(c)(3), because it remains outside …
Does an off-campus pizzeria owe sales tax on food it delivers to college students under a campus meal-plan voucher system?
Yes. The student meal-plan exclusion only covers food sold at a restaurant located on the college's premises. An off-campus pizzeria delivering to students — even under the campus voucher plan — isn't…
For privacy, my husband and I formed a corporation to hold title to our residence, which we occupy exclusively as our home -- we've never rented it or claimed depreciation on it. If we later sell the property, does New York's Real Property Transfer Gains Tax's personal residence exemption apply, even though a corporation technically owns it?
The exemption MAY apply, but it has to be earned on the specific facts -- a corporation can't automatically claim the residence exemption just because its shareholders live in the house, but it can qu…
Is a company's service of testing computer circuits taxable when the circuits will be assembled into products held for resale?
No — not taxable here. Testing computer circuits is a taxable service on tangible personal property, but because the circuits will be assembled into products held for resale, the testing isn't taxed, …
Is a warehouse club's annual membership fee subject to sales tax when it buys members access to lower merchandise prices?
Yes. Because the club's low prices are funded by the membership fee, the fee is in substance a prepayment for the merchandise members buy, so it's taxable under Tax Law 1105(a) — not treated as tax-fr…
Are an asbestos-removal contractor's purchases of plastic disposal bags and plastic wall/floor poly taxable when the work is done for tax-exempt property owners?
The plastic disposal bags are 'actually transferred' to the customer along with the asbestos, so buying them isn't taxable; but the plastic poly used to seal walls and floors is consumed by the contra…
In a paperless electronic-coupon system, how must a grocer disclose a manufacturer's coupon so tax is figured on the reduced price?
The grocer must show the item is a manufacturer's coupon item by marking 'MFG'/'M' on manufacturer coupons in its in-store circulars and newspaper inserts. An 'MFG'/'M' code on the shelf label alone d…
Is a caterer's separately stated 18% 'service charge' taxable, or is it an exempt gratuity?
Taxable. A caterer's 18% 'service charge' is part of the taxable receipt because it isn't designated a gratuity (the menu even says it isn't) and it's really the staff's wages — and wages can't be ded…
Must a national fraternity's parent organization collect sales tax when it sells pins, cards, and supplies to its chapters and members?
Yes. When the parent organization sells items like ID cards, pins, and supplies to chapters or members, those are retail sales — it buys them tax-free for resale but must collect sales tax on the sale…
Is replacing an underground fuel oil storage tank a nontaxable capital improvement, even though it can eventually be taken out of service?
Yes. Installing a replacement underground fuel oil tank — poured on a concrete slab, buried, and asphalted — is a capital improvement, so the work isn't taxable. No local law forces its removal when o…
A New York S-corporation shareholder who moved to Virginia asks three questions: (1) are dividends paid out of his corporation's accumulated earnings from the years it was a New York C corporation taxable to him as a nonresident for New York personal income tax purposes; (2) if he later buys another business in New York, does that purchase - by itself, whether he moves back right away, moves back later, or never moves back and runs it from Virginia - change his New York residency status; and (3) if he doesn't buy the New York business and simply stays in Virginia, will he be treated as a New York nonresident?
Dividends a nonresident shareholder receives that represent a distribution of the corporation's accumulated earnings from years it was a New York C corporation are not New York-source income under Tax…
Is a one-time sale of the right to reproduce a photograph subject to sales tax, and what about buying the photograph outright?
Selling the one-time right to reproduce a photograph is not taxable — it's treated as a royalty, and the customer only takes temporary custody. But buying the photograph outright from the photographer…
Does a veterinary clinic collect sales tax on pet food and pet supplies, and what about grooming — given the special veterinarian tax rules?
A veterinarian pays sales tax when it buys pet food, supplies, and medicine, and does not collect tax when it resells those animal-care items to customers. But grooming is a taxable service, so the cl…
Does a company that arranges repair and maintenance work through subcontractors and bills customers a marked-up price owe sales tax on its charges?
Yes. A company that contracts to have repair and maintenance done, subcontracts the actual work, and bills the customer a marked-up price is acting as a prime contractor. Under Tax Law § 1105(c)(5) an…
Does a tenant owe sales tax on removing and replacing fuel tanks when the property is leased from a state agency and title to the improvements vests in that agency?
No tax is due. Because the tenant leased the site from the New York State Department of Transportation — an exempt agency under Tax Law § 1116(a)(1) — and title to the tanks vested in the Department u…
Is a discounted group-sales amusement-park ticket taxable when admission is called 'free,' and is installing a fiberglass tubeslide a nontaxable capital improvement?
The whole group ticket is taxable unless it separately states admission and rides. An amusement park's ride charges escape tax only when its pay-one-price ticket separately states the taxable admissio…
As a bank, I made a construction loan to a cooperative sponsor, secured by a pledge of the sponsor's unsold co-op shares, proprietary leases, and purchase-money notes. The sponsor defaulted, and I'm about to foreclose under the UCC by bidding in my share of the debt. Will I become personally liable, as 'transferee,' for any unpaid Real Property Transfer Gains Tax the sponsor owes, once I take ownership of the pledged shares and leases through the foreclosure?
No transferee liability -- a 1992 statutory amendment specifically releases a secured party from personal liability for the transferor's unpaid gains tax when it enforces its lien on pledged cooperati…
Sidney and Freda Esikoff filed their 1987 New York return as full-year nonresidents on Form IT-203, without checking the part-year-resident box or attaching the required Form IT-360, and later filed an amended 1987 return. When the Department audited them, they asked whether the statute of limitations had already run out on assessing additional tax for that 1987 return.
The Department didn't decide the two biggest questions - whether the return was fraudulent (which would allow assessment at any time) or whether the extended six-year period for omitting more than 25%…
Business Operations Systems & Svcs., d/b/a Computerized Payrolls, a payroll preparation service in Cheektowaga, New York, asked whether it must furnish its own employer identification number (EIN) to its employer-clients so they can complete the WT-1 Return of Tax Withheld filed with New York State, and if so, whether it could instead give clients a different identification number.
Yes - the payroll service must furnish its own EIN to its clients, and no, it cannot substitute a different identification number. Because the WT-1 Return of Tax Withheld requires an employer to list …
A taxpayer who was long domiciled in New York City sold his co-op apartment, bought a Connecticut home he intends to make permanent, registered to vote and got a driver's license in Connecticut, moved his company's headquarters there, and will spend fewer than 183 days a year in New York - while still keeping his Montauk vacation home, New York club memberships, and relationships with New York bankers, advisers, and attorneys. Has he changed his domicile from New York to Connecticut and become a New York nonresident?
The Department declined to decide whether Taxpayer actually changed his domicile, because that is a question of fact that falls outside the scope of an Advisory Opinion - an Advisory Opinion can only …
Does the owner of an aircraft owe sales tax on the monthly rent it charges a lessee, when the owner did not obtain a resale certificate showing the lessee re-rented the plane?
The owner owes the tax unless it can prove otherwise. Leasing an aircraft is a retail sale of tangible personal property, taxable under Tax Law § 1105(a). The rent is exempt only if the owner obtained…
Is a New York vendor relieved of its duty to collect sales tax if it accepts, in good faith, a properly completed exemption certificate from the customer?
Yes. A New York vendor that takes a properly completed exemption certificate from its customer in good faith — with no knowledge it is false — is relieved of the duty to collect sales tax on that tran…
Does a detective agency's shopping service owe sales tax on merchandise returned for full reimbursement and on the shipping charges for those returns?
The reimbursement for returned merchandise is not taxable — it's treated as a cancelled sale. The shopping service itself is a taxable protective and detective service under Tax Law § 1105(c)(8), and …
Are sales of a licensed software product taxable when the maker embeds each customer's settings and identity into an otherwise standard program?
Yes, and generally the whole charge is taxable. The Fenics option-pricing program is pre-written software that the maker modifies to each purchaser (embedding time zone, base currency, and the custome…
A shareholder of our corporation, which owns real property, acquired 44% of our stock back in 1981 -- before either the gains tax or the transfer tax's entity-transfer rules existed. He now wants to acquire another 49% now, and the remaining 7% at some future point. Does his old 1981 stake count toward triggering a taxable 'controlling interest' acquisition when he buys the rest?
The pre-existing 44% stake does not count. A shareholder's acquisition of a 44% stock interest in a corporation before the effective dates of the gains tax (March 28, 1983) and the transfer tax's enti…
Are public relations services subject to New York sales or use tax?
No. Public relations services are not on New York's list of taxable enumerated services under Tax Law § 1105(c), so a PR firm's charges are not subject to sales or use tax — as long as no tangible per…
Is a custom telephone-survey marketing research report a taxable information service, or is it exempt as personal or individual to the client?
It is exempt. Collecting, compiling, and analyzing information and furnishing reports is normally a taxable information service under Tax Law § 1105(c)(1). But this marketing research qualifies for th…
Are a golf and country club's dues taxable when members have no proprietary interest or control and membership is limited only by facility size, and what about locker and food charges?
The dues are not taxable. Because members have no proprietary interest, no control over the club's activities or management, and membership is limited only by the size of the facilities (not by exclus…
How is use tax computed on custom cabinets a manufacturer builds and installs, and does its production machinery qualify for the manufacturer's exemption?
Because the cabinets are custom-built to each job's specifications, they are not 'items of the same kind' as any catalog or inventory product, so the maker's use tax on cabinets it installs is compute…
Are payments by a corporation to independent sales corporations excluded from both the numerator and denominator of its Article 9-A payroll factor?
Yes -- payments to genuinely independent sales corporations are left out of the payroll factor entirely. Generra, an out-of-state apparel company with New York nexus, markets through three independent…
Are marketing consultation services subject to New York sales or use tax?
No. Marketing consultation — advising a company on its marketing efforts, writing a marketing plan, drafting questionnaires and scripts, and reviewing sales literature — is not one of New York's taxab…
Is a 'marking service' — attaching price tickets to merchandise — a taxable enumerated service, and is it exempt as work on goods held for sale?
It is taxable. A 'marking service' — attaching price-ticket labels to garments and other merchandise — is one of the enumerated services taxed under Tax Law § 1105(c). And it can't be purchased for re…
Gordon Tresch, a retired New York public employee, receives yearly distributions from a deferred compensation plan he contributed to while working as a town clerk. Part of his 1984 contribution was already taxed by New York up front, under a rule since repealed, even though it wasn't taxed federally that year. When that same money comes back to him as a distribution, must he pay New York tax on it again?
No, not on the part already taxed. Because Tresch's $7,500 contribution was already included in his New York adjusted gross income back in 1984 under the now-repealed Tax Law section 612(b)(26), he ma…
As a licensed household-goods mover, can I haul the packing debris and cardboard boxes left over from a move to the dump without needing a Truck Mileage Tax permit?
Yes, conditionally. Tax Law § 504.5 exempts vehicles used exclusively to transport household goods from the truck mileage and fuel use taxes. A certificated household goods carrier that, immediately f…
Is a shareholder personally required to file the corporation's franchise tax report, or personally liable for the corporation's unpaid franchise tax and penalties?
No on both counts. The franchise tax report obligation under section 211.1 falls on the corporation (the 'taxpayer' defined in section 208.2), not on its individual shareholders. So a shareholder is n…
Does a builder owe sales tax on factory manufactured homes it buys, and does it matter who hires and pays the crane crew that sets the home on the foundation?
It depends on who arranged the installation. An uninstalled factory manufactured home is taxable tangible personal property, but a home sold with installation as a component of the sale (a capital imp…
If a securities-trading partnership has its main office, staff, and trading operations in New York, but trades only for its own account rather than as a dealer, is a nonresident general partner taxed by New York on the guaranteed payments and distributive share the partnership pays him - even when those payments pass through a second, tiered partnership first?
No. Because the partnership traded solely for its own account - it wasn't a dealer, had no customers, and didn't make a market - it fell within the Tax Law § 631(d) trading-for-own-account safe harbor…
Is developing and maintaining a database of a client's own membership data a nontaxable information service, or a taxable sale of tangible personal property?
It is a taxable sale of tangible personal property. Building and maintaining a computer database from a client's own membership data and returning it on floppy disks or computer reports merely convert…
Does a dissolvable corneal collagen shield used after eye surgery qualify for New York's sales-tax exemption for medical supplies?
Yes, as a medical supply. A corneal collagen shield — placed in the eye after surgery and absorbed within about a day — is not a drug or medicine but qualifies as an exempt medical supply under Tax La…
Are writing and editorial services to produce an annual membership directory taxable, or is the directory manuscript intangible and exempt?
The writing and editorial charges are not taxable. An original manuscript — here, the annual membership directory ('Service Guide') a firm writes and edits — is intangible personal property, not tangi…
For a company that books trips and tours, what share of its service receipts is allocated to New York for the Article 9-A receipts factor when the booking agents are in New York but the back office is elsewhere?
All of it -- 100% of the service receipts are allocated to New York. For a company that 'books' trips and tours, the receipts come from services, and under 20 NYCRR 4-4.3 service receipts are allocate…
Are personalized behavioral-analysis reports on an individual a taxable information service, or are they exempt as personal or individual in nature?
They are exempt. Preparing reports on a particular individual's behavioral tendencies from a questionnaire the customer completes is an information service that qualifies for the 'personal or individu…
Is admission to a 'Haunted Hayride' exempt from sales tax as a dramatic performance, or taxable as admission to a place of amusement?
It's taxable. Admission to a 'Haunted Hayride' — a haywagon tour past twenty or more short, one-to-two-minute costumed horror scenes — is a taxable admission charge to a place of amusement under Tax L…
Must an out-of-state seller that also has New York stores collect NY sales tax on goods it ships by common carrier from out-of-state warehouses to New York customers?
Yes. A company that maintains offices and retail stores in New York must collect New York State and local sales and use tax on merchandise it sells and ships to New York customers by common carrier fr…
For sales before September 1991, were a firm's custom software, stock-pricing service, and trade-confirmation reports subject to New York sales tax?
It depends on the item. For the audit period (Sept. 1, 1988 to Aug. 31, 1991): custom software written for one customer's specific computer environment was treated as intangible property, so its sale …
Can a trash-removal company buy the containers it rents to customers tax-free as a purchase for resale?
No. A trash-removal company cannot buy its trash containers exempt as a purchase for resale, even when it separately states a container rental charge on the customer's bill. Under Tax Law § 1105(a) an…
Are a company's charges for letting a medical practice use its leased MRI machine a taxable rental of equipment, or a nontaxable service?
Yes — the charges are a taxable rental of equipment. Where a company subleases an MRI system to a professional corporation (PC) and the PC's own technicians operate the machine and direct its use — wh…
The Niagara Falls Bridge Commission plans to issue bonds to finance improvements to and maintenance of the highway bridges it operates across the Niagara River. Will interest paid to individual bondholders be subject to New York State and New York City personal income tax?
No. The interest is exempt from both New York State and New York City personal income tax, because the Commission is neither another state's political subdivision nor a federal instrumentality - it's …
Is installing a synthetic-turf putting green on real property a nontaxable capital improvement, or a taxable installation service?
It's a nontaxable capital improvement — with a catch. Installing a permanent synthetic-turf putting green on real property qualifies as a capital improvement under Tax Law §§ 1105(c)(3) and 1101(b)(9)…
Does the reduced residential sales-tax rate on energy apply to a homeowners association's energy used to maintain development common areas?
No. The reduced residential sales-tax rate on energy sources and services under Tax Law § 1105-A does not apply to a homeowners association's charges for energy used to maintain the development's comm…
Is a corporation that filed a 'final' return and stopped operating, but was never formally dissolved, still subject to Article 9-A franchise tax for the years it remained incorporated?
Yes -- it owes franchise tax for all those years. Vi-Toria Building Corp. filed a 'final' return for 1980, stopped collecting rents, signing leases, and paying bills, and the owner's heir managed the …
Is microfilming blueprints and reports required for building permits a nontaxable capital improvement, or a taxable sale of tangible personal property?
It's taxable. Microfilming blueprints, applications, and inspection reports for architects, engineers, and developers is a sale of tangible personal property subject to sales tax under Tax Law § 1105(…
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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.