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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Is a body-worn appliance that protects the hips from fracture in a fall exempt from sales tax as medical equipment or a prosthetic aid?
No — it is taxable. Robert C. Ferber (of Prevent-Wise, Inc.) invented HIP-GUARD, a protective body-worn appliance meant to shield an older person's hips from fracture or dislocation if they fall onto …
A mail-order company distributes catalogs through an airline's on-board program (paying the airline a sales commission) and ships merchandise to New York customers who order from those catalogs — does the company owe New York franchise tax, and does it have to collect New York sales tax?
The company is exempt from Article 9-A franchise tax under federal Public Law 86-272 because its only New York activity is order solicitation followed by shipment from outside the state. But it must s…
New York Advisory Opinion TSB-A-88 (16)I: Issue raised is whether an individual domiciled outside New York State is a New York State resident, pursuant to section 605(b)(1)(B) of Article 22 of the Tax Law, when the individual spends in the aggregate more than 183 days in New York State but maintains a permanent place of abode in New York State for only a portion of the year.
No. The Department ruled that a non-New York-domiciled individual is not a New York statutory resident under Tax Law § 605(b)(1)(B) - even after spending 200 days in New York during the year - because…
Does a corporate insurance general agency owe New York franchise tax merely because it's licensed by the New York Insurance Department, licenses independent agents in New York, reviews insurance applications from New York residents, or has its issuing insurers accept and sell policies in New York?
No. None of those activities — insurance licensing, licensing/appointing independent agents in New York, reviewing applications generated by those agents outside New York, or the issuing insurer selli…
When a mortgage banking company packages New York mortgage loans into FNMA/GNMA certificates and sells them, how much of its origination fees, servicing fees, sale gains, and interest income counts as New York business receipts for the corporate franchise tax?
Only the gain -- not the full sale price -- on FNMA and GNMA certificate sales counts as a business receipt, and it (along with origination fees, servicing fees, and interest) is New York-sourced only…
Is installing a legally required underground vapor-recovery system at a gas station a capital improvement (so the contractor's charge is not taxable)?
It can be — but only if the installation is intended to be permanent. Larry E. Tyree Co., Inc. asked whether installing a vapor-recovery system (underground piping that returns gasoline fumes to the u…
When a photographer briefly lends a client a print or transparency just to reproduce it (then gets it back), is that a taxable sale?
No — it is not a taxable sale. Jim Bush Photography, a commercial photographer, lets clients temporarily hold a print or transparency solely to reproduce it in a promotional publication; the client ma…
Can an out-of-state life insurance company that isn't licensed to do business in New York buy mortgages secured by New York real estate for investment without owing New York franchise tax?
Yes -- because the company isn't authorized to transact business in New York under an insurance certificate of authority, it owes no premiums tax under section 1510, and section 1505 caps its total Ar…
New York Advisory Opinion TSB-A-88 (15)I: Issue raised is whether income from trading activities is exempt from personal income tax pursuant to section 631(d) of the Tax Law, where a nonresident individual trades a security account under an arrangement with a partnership that does nothing but trade securities for its own account.
No. The Department ruled that a nonresident individual who trades a securities account funded by a partnership's capital, in exchange for an increasing percentage share of the account's net trading pr…
Douglas Condon (Trager, Glass & Co., CPAs) asked how New York's now-repealed 1987-1988 tax on unearned income applies to a resident individual's income from an S corporation that made the New York S election, and from rental real property, across five ownership/participation/salary scenarios.
New York unearned income includes S-corp and rental-property income that flows into New York adjusted gross income, reduced only by whatever portion qualifies as 'earned income' - a reasonable allowan…
Is a data-transmission service taxable as telephone/telegraph service, and must the provider charge tax on the receivers it sells and installs?
Yes on both, with an interstate carve-out. Peat Marwick Main & Co. asked, for a client ('XYZ Corporation'), how New York sales tax applies to a data-transmission business that moves data over dedicate…
When a printer produces free advertising materials mailed in and out of New York, who owes sales/use tax and on how much?
It depends on who does the mailing. Freed Maxick Sachs and Murphy, P.C. asked how sales/use tax applies when it hires advertising agencies and printers to make promotional materials (ads, catalogs, li…
Can a trade-show installer subtract its supervisors' costs and other expenses from the amount of a taxable service charge?
No. I & D Inc. assembles and disassembles trade-show exhibits and asked whether it could carve its supervisory-personnel costs (and their related duties — hiring laborers, arranging shipment, buying p…
Is a monthly financial newsletter of stock recommendations a tax-exempt periodical, or a taxable information service?
It is a taxable information service, not an exempt periodical. Generic Stock Investment Service, Inc. publishes a monthly newsletter of financial investment information — mostly analysis and buy/sell …
If a New York corporation dissolves but keeps holding title to real property purely as a nominee for other people's benefit, does it still owe corporation franchise tax and stay subject to a franchise-tax lien?
No -- a dissolved corporation that does nothing but hold record title to real property as nominee for the beneficial owners, with no business activity of its own, is not "conducting business" under se…
Does an out-of-state shell corporation that only holds title to New York land, as a nominee to hide the real buyers' identity from neighbors, owe New York corporate franchise tax?
Yes, but only for the years it existed while holding title -- an inactive foreign corporation that is a New York record title holder for others' benefit is doing business under section 209.1 and Regul…
Must a tax-exempt nonprofit collect sales tax on items sold from a temporary table set up at its meetings?
No — not on these facts. The Richard Wagner Society of NY, Inc., a 501(c)(3) organization exempt under Tax Law § 1116(a)(4), sells Wagner-related books, records, and similar items (mostly by mail, but…
Can a printer get a New York refund of sales tax paid on production machinery after already losing a hearing on the assessment?
No. Express Printing Co. sought a refund of $7,162.33 in sales/use tax it said was paid on machinery and equipment used directly and predominantly to produce tangible personal property for sale. The D…
Are a club tennis pro's lesson fees, billed on members' monthly club statements, taxable as club dues?
Not taxable — but only if four conditions are met. Asher Kahn (d/b/a Fenway Tennis Shop) is an independent contractor who runs the tennis operation at a private golf club and gives lessons; a member b…
If a corporation's only shareholders personally own the building it leases and pay for improvements to it, can either the corporation or the shareholders claim New York's economic development zone investment tax credit for those improvements?
No -- the credit is denied to both sides: the tenant corporation didn't purchase the property (its shareholders did, as separate legal owners), and the shareholder-landlords, though they did purchase …
Douglas Condon (Trager, Glass & Co., CPAs) asked how New York's Article 22 personal income tax treats a New York resident's income or loss from a corporation that has federal S-corporation status but has not made (and cannot make) a New York S-corporation election, because the corporation does not do business in New York and is not subject to New York's Article 9-A corporate franchise tax.
The New York S-corporation election under Tax Law § 660, and the S-corporation-related modifications tied to it (§ 612(b)(18)-(21), § 612(c)(21)-(22), and § 615(c)(6)), simply do not apply when the fe…
Are admission charges to a small folk-music cafe taxable as cabaret charges when food sales are only a small part of the business?
No — the admission charges are not taxable. Philip Ciganer (d/b/a The Towne Crier Cafe) presents small folk-music concerts (about 95 seats, no dance floor) and also sells food and drink. He asked whet…
If a company spins off a manufacturing division (including its New York plant) into a new wholly-owned subsidiary tax-free under IRC section 351, does it have to pay back the New York investment tax credit it already claimed on that plant?
No recapture is required -- because the spin-off qualifies as a tax-free reorganization under IRC section 351 and meets the federal mere-change-in-form conditions (same trade or business, transferor r…
Does a direct-response advertising firm charge sales tax to its clients, or pay tax on its own purchases?
It pays tax on its own purchases and does NOT collect tax from clients. Names in News/Direct Response Inc. assembles advertisers into a mass card-deck mailing: it takes each client's printing 'mechani…
Is aerial photogrammetry performed by licensed surveyors and engineers a taxable sale, an exempt professional service, or an exempt information service?
It depends on what is sold. This Modified Advisory Opinion reconsiders TSB-A-87(26)S after Lockwood Support Services supplied fuller facts showing it performs aerial photogrammetry using licensed land…
My 1958 lease, grandfathered because it predates New York's Real Property Transfer Gains Tax, already contains two 30-year renewal options with a rent formula built in. The tenant is now exercising the first renewal, and we're negotiating the exact renewal rent (per the lease's own formula) plus a brand-new, THIRD 30-year renewal option we're independently agreeing to grant, on similar terms. Does either step -- setting the renewal rent, or granting the new independent option -- break the lease's grandfathered status?
Neither step is taxable -- setting the rent for the already-provided-for first renewal option isn't a substantial modification, and the brand-new additional renewal option is analyzed completely indep…
When a New York florist takes an order and wires it to another florist, where — and whether — is sales tax collected?
It depends on whether the sale runs through a florist wire (telegraphic/telephonic delivery) association. John Raspante, CPA, asked about a New York client who takes flower orders from the public and …
Does a vendor owe New York sales tax when an out-of-state buyer has the goods shipped to a New York address?
Yes — the vendor must collect New York tax. C.R. Daniels, Inc., a Maryland corporation registered as a New York sales tax vendor, sells to a purchaser in Pennsylvania and, at that purchaser's request,…
Is an economic-commentary newsletter that comes out only 'approximately' quarterly an exempt periodical?
No — it is taxable. Sage Alternatives, Inc. publishes 'Sage Advisory,' an economic commentary reviewing and analyzing past events for subscribers, which it says comes out 'approximately' quarterly. It…
Are an investment adviser's phone consultations, hotline, and newsletter subject to New York sales tax?
Mostly no — none of the three services is taxable here. Harmonic Research, Inc., an SEC-registered investment adviser, offers (1) consultations, (2) a telephone hotline, and (3) newsletter subscriptio…
New York Advisory Opinion TSB-A-88 (9)I: Issue raised is whether New York State will waive interest and penalties for a 10 year period, on net rental income from a New York building, where the illness and death of a taxpayer's parent caused personal income taxes thereon to be paid inadvertently to the state of the taxpayer's residence.
No. The Department ruled that interest under Tax Law § 684(a) can never be waived, for any reason, once a personal income tax payment is late. As for the separate penalties under § 685(a), a taxpayer …
When one savings bank buys another for cash through a merge-then-liquidate structure (a reverse triangular cash merger followed by upstream liquidation), do the banks or their shareholders owe New York corporate or personal income tax on the deal?
No New York tax results for the banks or the target's shareholders beyond whatever they owe federally: because the deal is a qualified stock purchase under IRC section 338(d)(3) followed by a tax-free…
New York Advisory Opinion TSB-A-88 (11)I: Issues raised are (1) whether the purchase and sale by the Petitioner, for its own account, of futures contracts on commodities, foreign currencies, debt obligations, indexes and eurodollars will cause the Petitioner to be engaged in a business, trade, profession or occupation in New York State within the meaning of Section 631 of the Tax Law and (2) whether the writing, by Petitioner, of options on indexes, foreign currencies, debt obligations and futures contracts and the exercise, closing out or expiration of such options will cause the Petitioner to be engaged in a business, trade, profession or occupation in New York State within the meaning of Section 631 of the Tax Law.
No. The Department ruled that Kenneth S. Davidson Partners' own-account purchase and sale of futures contracts (on commodities, foreign currencies, debt obligations, indexes, and eurodollars), and its…
Are a New York mover's business forms and selling supplies taxable if bought from an out-of-state franchisor and used for interstate moves?
They are taxable. Bay Shore Warehouse, Inc., a New York mover operating under a franchise with an out-of-state van line, must buy the van line's forms and selling supplies (delivered to it in New York…
Which of a bank data processor's computer services are taxable, and which are exempt information or bookkeeping services?
It splits by the type of work. Northeastern Computer Services, Inc. provides on-line computer processing for banks, savings-and-loans, and credit unions (maintaining depositor/loan/checking/IRA accoun…
New York Advisory Opinion TSB-A-88 (10)I: Issue raised is whether advanced diagnostic imaging equipment purchased and owned by Petitioner and used for processing and producing X-rays, scans, images and related diagnostic information qualifies for the investment credit under section 606(a) of the Tax Law.
Yes. The Department ruled that Petitioner's diagnostic imaging equipment - MRI, CT scanner, radiologic/fluoroscopic unit, mammography unit, and ultrasound unit - qualifies for the section 606(a) inves…
When a savings bank reorganizes into a bank holding company structure by merging a shell subsidiary into itself and exchanging shareholder stock for holding-company stock, do the bank, its new parent, or its shareholders owe New York tax?
No New York tax results beyond the federal treatment: because the reorganization qualifies as a tax-free statutory merger under IRC section 368(a)(1)(A) (with parent stock used per section 368(a)(2)(E…
When a car buyer trades in an old vehicle to the dealer but leases the new one from a separate finance company, can the trade-in value reduce the lease amount subject to New York sales tax?
No — the trade-in value can't reduce the taxable lease amount, so New York sales tax is due on the full lease price. Marine Midland Automotive Financial Corp. leases cars to consumers through dealers …
Are membership dues at a golf-and-pool facility owned and run by one individual, where members have no say in management or membership, subject to New York sales tax on club dues?
No — the dues are not taxable, because this isn't really a club. EverGreen Country Club, Inc. offers members a golf course and swimming pool (also open to non-members for a fee) but is owned and opera…
If an out-of-state bank regularly sends its own officer or a New York agent into New York to negotiate purchases of New York mortgage loans, is it 'doing business' in New York and subject to the bank franchise tax, even without a New York office or employees?
Yes -- regularly sending its own chief operating officer into New York, or using a New York agent, to negotiate purchases of New York-secured mortgage loans is doing business under Article 32, regardl…
Must an advertising agency collect New York sales tax when it bills clients for arranging billboard displays and for placing ads in trade journals that aren't sold at newsstands?
No — both charges are exempt advertising services, so the agency doesn't collect sales tax from clients. Stillman Advertising Inc. asked about (1) arranging billboard advertising and (2) placing ads i…
Is a vendor's sale of medical practice-management software taxable, when the software is either sold as-is, customized, or recompiled to add a doctor's insurance ID for electronic billing?
It depends on whether the vendor analyzes or adapts it. Compu Service sells 'THE MEDICAL MASTER,' a medical office-management program (with hardware and installation) that lets physicians file insuran…
When a business buys custom software along with taxable hardware, is the software taxable — and what happens if the vendor doesn't separate the software price from the hardware price?
The software is exempt, but an unsegregated bundle is fully taxable. Rock's Tire and Battery, Inc. bought a computer system after months of vendor analysis; the initial bill did NOT separate the softw…
New York Advisory Opinion TSB-A-88 (6)I: Issue raised is whether, for taxable year 1987, the gain realized on the sale of stock in a cooperative housing corporation is subject to New York personal income tax under Article 22 of the Tax Law when the owner was a non-resident of New York State at the time of the sale and the cooperative apartment was partially used for business purposes.
Only in part. Because Petitioner was a nonresident when she sold her stock in a New York City cooperative housing corporation, the gain is New York-source income under Tax Law section 632(b)(2) only t…
Can an alien (foreign) bank with a New York International Banking Facility exclude interbranch interest income from its taxable entire net income while still counting that same interbranch income toward its separate, tax-favored IBF income calculation?
No -- for taxable years 1982 through 1985 and after, the bank must first modify its federal taxable income to restore (recognize) the interbranch income and expenses between its New York IBF and its f…
What makes a New York exemption certificate properly completed, who then owes the sales tax, and what are a contractor's obligations when it receives a capital improvement certificate?
A properly completed certificate shifts the tax burden to the buyer; a contractor doing a capital improvement pays use tax on its own materials. D.C. Distributing Inc., a siding-and-window wholesaler …
Is a contract to clean grease and odor exhaust systems in commercial kitchens exempt as interior cleaning and maintenance, or is it taxable equipment maintenance?
It's taxable — this specialized equipment cleaning isn't the exempt ordinary interior janitorial service. Shaban & Son, Inc. cleans grease and odor exhaust systems in commercial kitchens under contrac…
New York Advisory Opinion TSB-A-88 (5)I: Issue raised is whether for personal income tax purposes the general partners and the corporate limited partner of Petitioner may claim an investment tax credit, pursuant to section 606(a)(1) of the Tax Law, with respect to Petitioner's investment in equipment to be used in a hydroelectric facility that will manufacture electric energy.
No. The Department ruled that neither the general partners (under Tax Law § 606(a), Article 22) nor the corporate limited partner (under Tax Law § 210.12(a), Article 9-A) of Newport Hydro Associates m…
Can a sportsmen's club buy the clay targets it uses for members' trap and skeet shooting tax-free for resale, since it charges members taxable fees to shoot?
No — the clay targets are taxable to the club as consumed supplies, not resold to members. Camillus Sportsmen's Club, Inc. is a social or athletic club (Tax Law § 1101(d)(13)) that collects sales tax …
Does a foreign corporation that isn't otherwise subject to New York franchise tax become taxable merely because it privately purchased a limited partnership interest in a partnership that does business in New York?
No -- the Department abandoned a 1954 Attorney General opinion that had treated limited partners as automatically doing business wherever their partnership does, and held that a genuinely passive fore…
Does a New Jersey corporation holding a small (6-8%), non-controlling limited partnership interest in a New York investment fund become subject to New York franchise tax just because the fund does business here?
No -- following the same reasoning as its companion opinion issued the same day (TSB-A-88(11)C), the Department held that a foreign corporation's passive, non-controlling limited partnership interest …
Richard C. Spaulding, a retired 61-year-old New York State employee receiving annual distributions from the New York State Deferred Compensation Plan (funded through IRC § 457 salary deferrals), asked whether those distributions qualify for the Tax Law § 612(c)(3-a) $20,000 pension-and-annuity exclusion available to individuals age 59 1/2 or older - even though the plan administrator labeled his first payment an 'annuity payment.'
No. The Department ruled that distributions from the New York State Deferred Compensation Plan are characterized as wages, not pensions or annuities, for both federal and New York income tax purposes,…
Does a repair subcontractor have to charge a video-equipment retailer sales tax on repairs, when the retailer marks up the charge and collects tax from the final customer?
No — the subcontractor doesn't collect tax from the retailer if the retailer gives a proper resale certificate, because the repair is for resale. Video Systems Service sets up service departments insi…
Is an unincorporated cattle-breeders' club that runs a commission cattle auction, but issues no stock or ownership certificates, subject to New York's corporate franchise tax?
No -- because the club is an unincorporated association that issues no stock, certificates, or other written instruments evidencing ownership interests, it doesn't meet the regulatory definition of a …
New York Advisory Opinion TSB-A-88 (3)I: Issue raised is whether the Petitioner, as a shareholder of an S corporation, is entitled to a pass through of the S corporation's employment incentive tax credit provided for under section 210.
No. The Department ruled that S corporation shareholders are not entitled to a pass-through of the corporation's employment incentive tax credit under Tax Law section 210.12-A, because that credit is …
We're restructuring NBC's occupancy of Rockefeller Center through a complex package: assigning an old RCA lease to NBC (its GE sibling), amending and consolidating existing leases, creating a brand-new 37-year Tower Lease, a separate Studio-RCA West Lease with an eventual purchase option, additional-space leasing rights, and an Industrial Development Agency sale-leaseback for tax benefits. Which pieces of this multi-part transaction trigger New York's Real Property Transfer Gains Tax?
Out of the entire multi-part restructuring, only ONE piece is taxable: the Studio-RCA West Lease, because it's coupled with a future purchase option, with tax due -- based on the present value of net …
My company arranges trip leases with independent truckers and never directly employs the drivers. Am I still liable for New York's highway use tax and fuel use tax on those trucks?
Possibly yes, depending on control, not labels. New York's highway use tax (Tax Law § 503) and fuel use tax (§ 503-a) fall on the "carrier," defined as the owner or anyone else with control of or the …
New York Advisory Opinion TSB-A-88 (2)I: Issue raised is whether, under Article 22 of the Tax Law for taxable years 1984, 1985 and 1986, an investment tax credit is allowed for the equipment used in a frozen custard business.
No. The Department ruled that preparing frozen custard for retail sale is food preparation, not 'manufacturing' or 'processing' within the meaning of Tax Law § 606(a), so Keith and Gloria Wilson could…
Can a utility company allocate its gains from selling stocks, bonds, and options using the issuer's allocation percentage (the same method used for dividend income), the way it can under the general corporate franchise tax?
No -- unlike the general Article 9-A corporate franchise tax, sections 186 and 186-a don't allow gains on stock, bond, and option sales to be allocated using the issuer's allocation percentage; instea…
When an insurance holding company's Subpart F income is deemed a dividend, is the 50% of that deemed dividend included in New York entire net income treated as investment income (from investment capital) or as business income?
It depends on direct ownership: the taxable 50% of a Subpart F deemed dividend is investment income only to the extent the taxpayer has a direct investment (not exceeding 50% ownership) in the stock o…
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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.