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 feeding pumps and tubes prosthetic aids or taxable medical supplies, and must an out-of-state mail-order seller collect New York tax?
The products are medical equipment/supplies (not fully exempt prosthetic aids), and the out-of-state seller must collect New York tax. Biosearch Medical Products, Inc., a New Jersey company, mail-orde…
Is a digital-microwave-network company that leases dedicated data/voice circuits to businesses a taxable 'transmission corporation' under Article 9 sections 183 and 184, even though it isn't a licensed common carrier and can't connect directly to the public phone network?
Yes, once its receipts are principally from that business -- and it's also separately subject to the section 186-a telephone-service tax regardless. Interactive Media Services, Inc. operates a digital…
Is a corporation still liable for New York franchise tax and its shareholders liable as transferees, when the corporation was dissolved by proclamation in 1978 but kept a bank account, collected rents, and stayed listed as landlord on renewed leases for another decade before formally transferring the property?
Yes to both. Barshabe Realty Corp. was dissolved by proclamation on September 26, 1978, but its bank account (opened in 1972 for rent deposits) stayed open, and its tenant leases were continued and re…
Is selling and installing a steam boiler for a dry-cleaner in leased space a tax-free capital improvement?
No — the boiler's sale and installation are taxable, not a capital improvement. Allied Steam Corp. sold and installed a high-pressure steam boiler that supplies steam to a dry-cleaning operation in re…
When an ad agency buys a jingle, which parts of the demo, creative, and production fees are taxable, given that an original written score is an intangible manuscript?
An original written lead sheet or musical score is an intangible manuscript, so the part of the fee for it is not taxable even when the jingle deal closes with a taxable broadcast tape. This opinion m…
Can a food-service management company buy supplies tax-free for a school district it serves, when the district reimburses it?
No — the management company can't use the school district's exemption. ARASERVE, Inc., a food-service management company, runs a New York school district's meal program and buys 'miscellaneous expense…
Is a homeowner association's mandatory annual charge for a pool, beach, and lake rights taxable as club dues?
Yes — the annual charge is taxable dues. Lake Louise Marie Country Club, Inc. charges homeowners $125 per year, under recorded covenants, for the use of a swimming pool, bathrooms, beach, and lake rig…
Does a low-income housing cooperative organized under Article 11 of the Private Housing Finance Law have to file New York State corporate franchise tax returns, even though it's federally classified as a cooperative housing corporation that pays some federal corporate income tax?
No filing required for state purposes. The corporation was organized under Article 11 of the Private Housing Finance Law and Business Corporation Law section 402 to develop a low-income housing projec…
Does an out-of-state financial trading company create New York nexus by having independent brokers trade commodity futures on the COMEX floor, if it occasionally takes brief warehouse-receipt title to precious metals held in New York vaults?
Likely no nexus, though the Department left the ultimate call to the facts. Cargill Financial Services Corporation, a Delaware trading subsidiary of Cargill, Incorporated with no employees, office, or…
Is the sale or license of a specialized software program that the vendor analyzes and adapts for each customer subject to New York sales tax?
No — the software is exempt intangible property, so its sale and licenses are not taxable. Astrogamma Inc. licenses 'Fenics,' a specialized program that helps foreign-currency options traders compute …
Can a New York corporate franchise tax lien on a dissolved corporation's only asset be compromised (reduced) for a sale, when the property's appraised value is less than the tax owed?
Yes, down to the property's appraised value. Finger Lakes Realty Company Incorporated was dissolved by proclamation in 1967 and owed over $12,347.82 in accumulated franchise taxes, interest, and penal…
Is a Swiss nonprofit medical-research joint-stock company, federally tax-exempt under IRC section 501(c)(3) and dedicated entirely to charitable cancer research with no shareholder profit rights, exempt from New York's Article 9-A franchise tax simply because it has stock?
No, it's taxable. The Ludwig Institute for Cancer Research is a Swiss nonprofit joint-stock company devoted entirely to charitable cancer research, funded by an endowment, with fifty shares carrying o…
When a natural gas utility sells and installs vehicle conversion kits, sells compressed natural gas (CNG) as motor fuel at its own filling stations, and wholesales natural gas to fleet owners and other filling stations, which of those transactions trigger sales tax, motor fuel excise tax, and section 186/186-a utility gross earnings tax?
Different treatment for each of five transaction types. The Brooklyn Union Gas Company planned to sell/install below-cost CNG vehicle conversion kits, sell CNG as motor fuel at its own filling station…
MAJ Stephen E. Charkow, a New York domiciliary in the U.S. Army stationed in Germany, plans to retire from active duty at the end of October 1991 and then return to New York State. Will he be treated as a New York nonresident for calendar year 1991, the year he retires?
It depends on which 548-day window he picks and how many days he actually spends in New York, but if structured carefully he can qualify as a nonresident for all or part of 1991 under the 548-day fore…
Which sales tax exemption documents should a painting contractor obtain when working as a subcontractor for a prime contractor or directly for an owner or tenant?
It depends on the type of job. Sharon P. Sheinfeld asked, for a painting contractor who does both capital improvements and repairs (as a subcontractor for prime contractors and directly for owners and…
When a taxable information report is delivered to a client's offices both inside and outside New York, how much of the charge is subject to New York sales tax?
Only the part delivered in New York is taxable. Paul R. Comeau asked how much sales tax an information-service company must collect when it sends taxable research and marketing reports to a client tha…
Must a New York manufacturer collect sales tax when an unregistered out-of-state wholesaler buys goods for resale and has them drop-shipped to New York school districts?
Yes — the manufacturer must collect New York sales tax unless it gets a valid resale certificate, and the unregistered wholesaler cannot issue one. Vanguard Corporation, a New York maker of steel fili…
Are sales of aerosol sprays that detect drugs or explosives taxable, and does it matter whether the buyer is a government agency, a business, or an individual?
The sprays are taxable tangible personal property when sold to private buyers, but sales to federal, state, or local government are exempt. Sher Test Corporation planned to sell sets of aerosol sprays…
When a company's New York net operating loss for a particular year has already been fully used up in an earlier aggregate carryforward, but the federal loss for that same year still has unused carryforward remaining, can the company still claim a New York aggregate NOL deduction for a later year that includes that already-exhausted year?
No -- a year with a fully exhausted New York NOL drops out of later New York aggregates, even while the corresponding federal loss for that year still has carryforward remaining. Arista Records, Inc. …
Barry N. Wish, a founding partner of a merchant-banking and securities dealer/trader partnership, reported large net short-term capital gains from trading regulated futures contracts as part of his 1986 self-employment income, and treated that income as 'personal service income' eligible for New York's Maximum Tax on Form IT-250. Do Wish's partnership distributive share and, in particular, his regulated-futures-contract trading gains, qualify as personal service income under former Tax Law § 603-A?
As a matter of law, no - Wish's regulated futures contract trading gains are not 'earned income' or personal service income under IRC § 401(c)(2)(C) or Tax Law § 603-A(b)(1)(B), because his personal e…
May a painting contractor accept a Resale Certificate (Form ST-120) in good faith when claiming a sales tax credit for tax paid on materials used in services sold for resale?
Yes — a properly completed resale certificate may be accepted in good faith. Sharon P. Sheinfeld asked whether a painting contractor claiming a Tax Law § 1119(c) credit for New York sales tax paid on …
Are a soft-drink bottler's reusable trays and dispenser tanks, transferred to wholesalers on a deposit-and-return basis, taxable?
No — the trays and tanks are exempt packaging materials, and the bottler may buy them for resale tax-free. Clinton's Ditch Co-op Co., a soft-drink bottler, sells its 2-liter product in reusable plasti…
When a business bills a customer for many small taxable sales in one period, does it compute sales tax on each sale or on the billing total?
Compute the tax once on the total for the billing period, not on each individual sale. Rochester Credit Center, Inc. sells many credit reports to each client during a monthly billing cycle and had bee…
Must a tax-exempt university collect sales tax when it bills its own students for telephone lines, long-distance authorization, and usage?
No — the university does not have to collect sales tax on those charges. Alfred University, an educational organization exempt under Tax Law § 1116(a)(4), runs a telephone system as a service to stude…
Is a forensic engineer's accident-investigation and expert-report work a taxable detective service, and does out-of-state delivery change the answer?
The work is a taxable detective service, but reports delivered out of state are not taxed. Stanley Greenfield is an engineer specializing in machine design who inspects industrial machinery involved i…
Is the sale and installation of power-grid equipment for an electric utility taxable when the seller never received an exemption certificate from the utility?
Yes — the seller must collect tax on the entire sale-and-installation charge because it never received an exemption certificate. ABB Power Transmission, Inc. sold and installed a Static Var Compensato…
We're an old-style membership housing association -- not a formally chartered cooperative corporation -- where each member owns one share of stock tied to their apartment and pays monthly maintenance. When a member sells their interest, do we owe New York Real Estate Transfer Tax the same way a formal co-op would, even though we're organized differently?
Yes, taxable -- functional substance controls over corporate label. Parkside Association, a membership corporation formed in 1927 by Norwegian immigrants (nicknamed "Finnish House"), owned a 41-unit B…
A deceased cooperative sponsor sold some apartments himself before he died, and bequeathed the remaining eight units in his will -- one each to three unrelated people, and five (as tenants in common) to his parents and brother. Is the bequest itself a taxable transfer, does it get combined with the sponsor's own pre-death sales for the $1 million gains-tax threshold, and are the family members' later individual sales aggregated with each other or with the unrelated beneficiaries' sales?
The bequest itself isn't a taxable transfer at all, and the beneficiaries' later individual sales are generally NOT aggregated with the sponsor's own prior sales, or with each other's, unless the fami…
If a REIT forms a wholly owned subsidiary corporation that's a 'qualified REIT subsidiary' under IRC section 856(i) to hold a New York real estate partnership interest, does that subsidiary still owe New York Article 9-A tax on its own income, or does everything flow up to the parent REIT?
The subsidiary remains a separate Article 9-A taxpayer, but effectively owes only the fixed dollar minimum tax. Corporate Property Investors (a Massachusetts business trust REIT under IRC section 856/…
Are a consultant's personal reports taxable, and is consulting that is bundled into the price of taxable training tapes taxable too?
The personal reports and scripts are not taxable, but consulting folded into the price of taxable training tapes is taxed unless billed under a separate contract. A behavioral scientist (client of Mor…
Can a restaurant buy the toy premiums it includes with kids' meals tax-free as a purchase for resale?
No — the toys are promotional items used with taxable meals, so the restaurant owes tax when it buys them, not a resale purchase. McDonald's Restaurants of New York asked whether the premiums (toys) i…
Does a New York resident owe use tax on an aircraft bought and hangared out of state when it lands and stays overnight in New York?
Yes — the resident owes New York State use tax once the aircraft is actually used in New York, though an emergency landing doesn't count and only state (not local) tax applies here. George Sexton, a N…
Michael Kreimer asked whether five zero-coupon Treasury-derivative products - CATS (Certificate of Accrual on Treasury Securities), TBR (Treasury Bond Receipts), CTR (Coupon Treasury Receipts), ETR (Easy Growth Treasury Receipts), and STRIPS (Separate Trading of Registered Interest and Principal of Securities) - count as 'obligations of the United States,' so that the interest they generate is exempt from New York personal income tax under Article 22 of the Tax Law.
Yes. The Department ruled that all five named zero-coupon Treasury-derivative products - CATS, TBR, CTR, ETR, and STRIPS - are treated as 'obligations of the United States' for purposes of Tax Law § 6…
Charles E. Rockey, a retired employee of the Federal Reserve Bank of New York, asked whether the pension payments he received in 1989 from the Federal Reserve Retirement Plan are exempt from New York income tax under Tax Law § 612(c)(3)(ii).
Yes. The Department ruled that Rockey's 1989 Federal Reserve Retirement Plan pension payments are pension payments made to an employee of a United States instrumentality, so they qualify for the secti…
Is an unincorporated residential condominium association, whose only income is common-charge assessments and interest, taxed as a corporation under New York's Article 9-A franchise tax?
Yes. 103 Avenue A Condominium is an unincorporated association organized under Article 9-B of the Real Property Law (22 residential units, 2 commercial units) that issues no stock or ownership certifi…
Is a jingle house's 'demo fee' — paid for an ad agency's option to buy the rights to a jingle — subject to sales tax?
The demo fee is not taxable when the agency rejects the jingle, but the demo and creative fees are taxed when the agency buys and takes a tape. Crushing Enterprises is a music 'jingle house' that crea…
Bryan R. Sullivan asked, on behalf of a nonresident commodities trader referred to as 'Client B,' whether rental income from leasing memberships ('seats') in New York commodities exchanges is New York-source income taxable to a nonresident, and whether receiving that rental income would cause New York to also tax Client B's own commodities-trading profits for his own account.
Yes for the rental income, no for the trading profits. Because Client B's leasing of extra exchange memberships is conducted with a fair measure of permanency and continuity, that leasing activity con…
We're the ground lessors under a roughly 60-year cooperative housing lease signed in 1970, before New York's Real Property Transfer Gains Tax even existed. The lessee disputes how the rent-escalation formula should work and, to settle the dispute without litigation, we're negotiating changes to the lease's rent calculation and adding a side partnership arrangement for some commercial space. Does modifying this old lease risk losing its 'grandfathered' pre-1983 status and triggering the gains tax on what's effectively a 60-year lease?
The lease keeps its pre-1983 grandfathered exemption -- because the negotiated changes clarified the parties' original intent about the rent formula (and actually LOWERED, not raised, the rent) rather…
Is the permanent installation of mirrors in homes a nontaxable capital improvement?
Yes — permanently installing the mirrors is a capital improvement, so the installation charge is not taxable. Robert Otto Inc. permanently affixes mirrors to walls in new and renovated homes with a sp…
Does an advertising agency charge sales tax on its coupon-booklet fees, and does it pay tax on the printing, mailing, and materials it buys?
The agency's fees to clients are a nontaxable advertising service, but the agency owes tax on the materials and services it buys, plus use tax on distributing the booklets in New York. Richard Martin …
Is removing contaminated soil, done as part of installing new gasoline storage tanks, a nontaxable capital improvement?
It depends on whether the tank installation is a capital improvement. Stewart's Ice Cream Co. removes old underground gasoline tanks, installs new ones, and — where a tank has leaked — also removes th…
Can a petroleum wholesaler form a separate corporation (NEWCO) to handle fuel imports, so that the wholesaler itself avoids Article 13-A importer status and its associated Article 9-A tax add-back, and under what specific delivery/title arrangements does a purchase count as 'importing'?
Yes, a separate corporate structure works, subject to real operational separation and detailed title/delivery rules. Petroleum Sales and Service, Inc., a vertically integrated Buffalo motor-fuel whole…
Are an ad agency's color separations taxable when sent to an out-of-state printer, and does the client owe use tax on catalogues distributed in New York?
The color separations are not taxable when delivered out of state, but the client owes New York use tax on catalogues it distributes in New York. Morten L. Coren, P.C. asked about a New York client wh…
Our corporation, owned 50/50 by two shareholder groups who now want to go their separate ways, is planning a federal tax-free 'split-up' or 'split-off' reorganization: dividing our real estate between two new subsidiaries, then distributing all the stock of one subsidiary to each shareholder group (in a split-up, with our original corporation then liquidating; or, in a split-off, exchanging one group's original shares for the new subsidiary's shares). Does any step of this trigger New York's Real Property Transfer Gains Tax?
The initial division of real property into wholly-owned subsidiaries is exempt as a mere change of identity, but distributing the subsidiaries' stock out to the separate shareholder groups is a taxabl…
How should a telex reseller that can't tell where messages are delivered figure and document the sales tax on its charges?
The Department did not prescribe a method — the vendor must propose one that meets the recordkeeping rules, and the Department will then approve or reject it. Taft Consulting Corporation resells telex…
Does an out-of-state manufacturer owe New York use tax on free promotional products it ships to New York customers, and on what value?
Yes — after September 1, 1989 the free promotional hose are subject to New York use tax, valued at the manufacturer's normal selling price. Sara Lee - Hanes Hosiery makes hosiery outside New York and,…
Is installing raised access flooring a nontaxable capital improvement or 'floor covering,' or a taxable sale and installation of tangible personal property?
It is taxable — raised access flooring is neither a capital improvement nor 'floor covering.' Raised Computer Floors, Inc. installs access flooring on bolted or epoxied pedestals above a building's sl…
Is hauling waste water and sludge from a customer's site to a disposal plant a taxable real-property service, or a nontaxable transportation service?
It is taxable. Ecologics Management, Inc. contracts (usually annually) with generators of liquid waste — municipalities, food processors, landfills — to haul their waste water and sludge (96%–98% wate…
Is a solvent recycler's charge for removing recyclable materials from a New York site taxable, even though the materials are recycled and processed out of state?
It is taxable. Marisol, Inc., a solvent recycler, picks up recyclable material from sites in New York (in its own or subcontracted trucks), transports it to processing facilities in New Jersey, and us…
May a car distributor pay use tax on resale-inventory vehicles that officers and employees also drive using the 2%-per-month depreciation method, and are showroom demonstrators a taxable use?
Yes to the depreciation method, and showroom demonstrators are not taxed. BMW of North America, Inc. — the sole U.S. importer-wholesaler of BMWs — keeps cars in inventory for resale to dealers but let…
Which of a dog club's charges — show admissions, dog-entry fees, cage rentals, and baked-goods sales — are subject to sales tax, and does 501(c)(7) status exempt them?
Most are taxable, and 501(c)(7) status does not exempt them. A dog club organized under IRC § 501(c)(7) holds dog shows to raise money, giving any excess to animal-welfare charities. The Department he…
Is renting out a crane with an operator a taxable rental of tangible personal property, and are the operator's wages excludable?
It is taxable, but separately stated operator wages come out. Northeast Timber Erectors, Inc. planned to rent out a crane with an operator to place modular homes, set beams and trusses, and hoist stru…
Is a charge for monitoring air for asbestos content during removal, and issuing reports, a taxable information service?
It is not taxable — the charge falls within the personal/individual exclusion for information services. George Industries, Inc. hired a consultant (A & A) to take air samples monitoring asbestos conte…
Does a California company that sells computerized movie-theater management systems nationwide, with a New York sales footprint limited to about 4% of revenue and just 13 installation trips over five years, owe New York Article 9-A franchise tax for sending an employee to install and train customers on each system sold there?
Yes, subject to tax for all years at issue. Theatron Data Systems, Inc., a California corporation marketing automated movie-theater management systems nationwide, had no New York office, assets, or ba…
Arthur R. Rosen of Morrison & Foerster asked, on behalf of a hypothetical client ('Mr. Y'), what categories of income are included in the New York taxable income of a New York resident individual who is a nonresident alien for federal income tax purposes.
The Department ruled that Mr. Y remained a New York domiciliary - and therefore a New York resident - because he had not yet actually moved and established a new permanent home elsewhere, even though …
Is a bimonthly industry newsletter an exempt periodical, and does having all its articles written by one person change the answer?
It depends on authorship. Edward A. Donoghue Associates, Inc. proposed a bimonthly newsletter, Elevator Code News, reporting on codes and standards for the vertical-transportation (elevator) industry,…
Is a cooperative direct-mail advertising program a nontaxable advertising service or a taxable sale of property, and who owes use tax on the mailed materials?
The fees are a nontaxable advertising service, but the agency owes use tax on the materials it distributes in New York. A law firm asked, for its client ('Company'), about a cooperative direct-mail pr…
Is a not-for-profit stamping organization created by statute a New York State agency or public corporation exempt from sales and use tax?
No — it is not exempt. The Excess Line Association of New York, a not-for-profit organization created by an act of the Legislature (Insurance Law § 2130(a)) to review and 'stamp' excess-line insurance…
Is a home-inspection report bought by a prospective buyer a taxable information service, or a service to real property?
It is not taxable. Joseph A. Matocha asked whether charges for 'home inspection services' are subject to sales and use tax. In the transaction, a prospective buyer hires an inspector to examine a resi…
Do a window-and-door distributor's fabrication operations qualify its machinery for the manufacturing (production) exemption?
Yes — its production machinery qualifies for the exemption. RyTown Millwork, Inc., a distributor of windows and doors that sells to builders and contractors but does no installation, asked whether its…
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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.