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 participating loans a real-estate lender made to out-of-state partnerships 'investment capital' (favorably allocated) or 'business capital,' and does a tax-free reorganization change how the resulting interest income is sourced to New York?
The loans are business capital, not investment capital -- because investment capital is limited to securities issued by corporations or governments, and a loan to a partnership doesn't qualify -- so t…
Does laboratory furniture used to test incoming electronic equipment for quality control qualify for New York's research-and-development or production machinery sales-tax exemption?
No — it qualifies for neither exemption, so it's taxable. Grumman Aerospace Corporation bought laboratory furniture (work stations, multi-wired legs, pedestals, etc.) for its avionics lab, where it te…
As a general matter (not tied to one company's specific facts), does a foreign corporation become subject to New York's corporate franchise tax merely by becoming a limited partner in a limited partnership that does business in New York?
No -- addressing this as a general hypothetical rather than one company's specific facts, the Department held that a foreign corporation which is otherwise not subject to Article 9-A does not become d…
Is a telecommunications utility wholly owned and operated by a foreign government (here, Australia) exempt from New York's franchise tax on foreign transportation and transmission corporations just because it's a government utility, if it maintains a small liaison office in New York?
No -- there is no statutory exemption in sections 183 or 184 for a foreign transportation/transmission corporation merely because it's owned and operated by a foreign government; maintaining even a sm…
Is the technical advice of a licensed professional engineer — evaluating and recommending upgrades to a building's air-conditioning system — subject to New York sales tax?
No — a licensed professional engineer's technical advice is not subject to sales or use tax. R.H. McDermott Corp., a licensed professional engineer, is engaged (usually by other engineering firms) to …
What sales tax rate applies when a dealer sells a new boat together with a trailer — the rate where it's delivered, or the rate where the buyer lives?
The boat is taxed at the delivery-point rate, but the trailer is taxed at the rate where the buyer resides. M & D Inc. asked the correct sales tax rate on a sale of a new boat and trailer. Tax Law § 1…
Can New York require an out-of-state mail-order subsidiary with no in-state presence to collect sales tax, when its parent solicits New York customers and steers them to the subsidiary?
Yes — on these facts the subsidiary is deemed a New York vendor that must collect sales tax. A CPA asked (as a hypothetical) whether an out-of-state direct-marketing Subsidiary — no NY property or off…
Are corrugated point-of-sale display materials sold with a product exempt as packaging, or are they taxable — and does it matter whether the display is a separate insert or part of the shipping carton?
It splits by design: a shipping carton reused as a display is exempt packaging, but a separate insert display is taxable. A carton manufacturer designs and sells corrugated point-of-sale display mater…
Is an advertising agency that buys media and materials for the U.S. Army a purchasing agent for the federal government (so its buys are tax-exempt), or a taxable contractor selling to the Army?
The agency is a taxable contractor, not the Army's purchasing agent — so its purchases aren't exempt federal-government buys. Young & Rubicam Inc. is the advertising agency for the United States Army …
Is the gas and electricity a subcontractor uses to reprocess a manufacturer's rejected metal, glass, or plastic parts back into resalable material exempt as production fuel?
Yes — the gas and electricity is exempt production fuel to the extent used directly and exclusively (100%) in the reprocessing, even though the subcontractor never owns the material. Burn Brite Metals…
New York Advisory Opinion TSB-A-88 (1)I: For personal income tax purposes, can a shareholder of an electing S corporation still claim a pro rata share of the special additional mortgage recording tax credit for taxable years beginning after 1987?
Yes. The Department ruled that shareholders of electing S corporations may continue to claim their pro rata share of the special additional mortgage recording tax credit (originally allowed to the cor…
Is hazardous-waste cleanup and hauling to a disposal site taxable, is a separately stated transportation charge taxable, and can the company buy its supplies for resale?
The service is taxable trash removal, the separately stated freight is taxable too, and whether the supplies are resale-exempt is a factual audit question. West Central Environmental Corp. cleans up h…
Can a franchisor that buys the gas and electricity for its franchisee-operated stores get a sales tax refund for the portion the franchisees use in an exempt, production manner?
Yes — the franchisor gets a refund for the exempt production portion of utilities it buys, unless it resells the utilities to franchisees, in which case it must collect tax. The Southland Corporation …
Does an in-store 'eye examination unit' used by a retail optical chain to test customers' vision before filling eyeglass prescriptions qualify for New York's investment tax credit as manufacturing/processing equipment?
No -- the investment tax credit requires property principally used in manufacturing or processing (a substantial or significant change to the shape, form, or nature of tangible personal property), and…
When a trucking firm hauls material for contractors with its own driver, is it providing a nontaxable transportation service or a taxable rental of the truck — and when does it owe tax on the material?
Hauling with the firm's own driver and control is a nontaxable transportation service; only when the firm buys and sells the material does resale-tax handling apply. C.K. Industries Corp., a trucking …
When a social services agency commits to pay a public-assistance client's electric bill directly, is the utility's sale of that electricity an exempt sale to a government agency?
Yes. This Modified Advisory Opinion supplements a Con Edison opinion issued August 31, 1987 — TSB-A-87(27)S, on the same Petition No. S870602C — by analyzing its new 'Direct Vendor' program. Under the…
Under three different levels of New York contact -- no NY presence at all, an agency-like arrangement with an unrelated NY bank, and an actual NY office -- when does a mortgage banking company that packages and sells loans as FNMA/GNMA certificates become subject to New York corporate franchise tax, and how is its income sourced?
Under Alternative #1 (no NY office, no NY-originated loans, only a New York bank delivering certificates and collecting payment as agent) there is NO New York nexus; under Alternative #2 (using an unr…
Are dues to a golf and tennis club taxable when the club is corporately owned and runs private outings without members' consent, but members elect the board that manages it?
Yes — the dues are taxable and there's no refund, because the members elect the board that controls the club. Harold Rothberg argued that dues to the Canyon Club (a golf and tennis club) weren't taxab…
Is the service of pumping accumulated water out of a landfill's required liners a taxable real-property maintenance service, or a tax-free capital improvement?
It's taxable — pumping the water out keeps the landfill functioning, which is real-property maintenance, not a capital improvement. 110 Sand Company mines sand and gravel and also operates a landfill …
Are annual fees for a computer service that matches investors with businesses seeking capital a taxable information service, or exempt personal information?
Yes — the annual fees are a taxable information service, because the matching reports aren't the personal, confidential information the exclusion protects. Venture Capital Network (VCN) of New York, I…
When a mutual savings bank converts to a stock-form savings bank in a transaction that's a tax-free federal reorganization, does the conversion end the bank's taxable year or otherwise trigger New York bank franchise tax consequences?
No -- because the conversion qualifies as a tax-free reorganization under IRC section 368(a)(1)(F) and New York has no separate modification for that kind of reorganization, Article 32 simply follows …
Are construction materials that become part of real property owned by New York City or the Transit Authority — including land the Authority holds only by a permanent easement — exempt from sales tax?
Yes — materials that become integral components of real property of the Transit Authority or the City, including land the Authority holds under a permanent and perpetual easement, are exempt. Citibank…
Does computer-aided design and engineering equipment qualify for New York's research-and-development sales-tax exemption when it's used to develop more efficient production equipment?
It qualifies only to the extent it's used directly and predominantly (over 50% of the time) for genuine research, not ordinary design and drafting. Union Carbide Corporation produces atmospheric gases…
Is the flat monthly End-User Common Line (EUCL) charge on a phone bill subject to New York sales tax, or is it an exempt interstate charge?
Yes. New York Telephone Company asked whether the flat-rate End-User Common Line ('EUCL') charge it bills every subscriber — an FCC-mandated way to recover part of its cost of providing interstate acc…
A contractor working on a federal Department of Energy project rents equipment and claims it is the government's agent. Is the equipment rental exempt from New York sales tax?
No. Butler Mechanical, Inc. performs services at the federal West Valley Demonstration Project (run by West Valley Nuclear Services for the U.S. Department of Energy) and argued it was acting as the g…
New York Advisory Opinion TSB-A-87 (11)I: Does the $20,000 pension and annuity exclusion under section 612(c)(3-a) of the Tax Law apply to payments from TIAA-CREF retirement annuity contracts that the retiree funded entirely with his own money?
No. The Department ruled that Robert Stolberg's payments from his T.I.A.A.-C.R.E.F. retirement annuity contracts do not qualify for the $20,000 pension and annuity exclusion under Tax Law § 612(c)(3-a…
Does someone selling a mail-order 'kit' that helps property owners challenge their tax assessments have to collect New York sales tax on it?
Yes. Linda and Ralph Spaulding sell a mail-order 'Taxbuster kit' to help property owners in the City of Troy challenge their tax-assessment increases; it contains an article and charts they wrote, a g…
Must a corporation add back 90% of the interest it pays on a loan from a 'nephew' corporation -- a second-tier subsidiary of its ultimate parent, not a direct shareholder or a shareholder's own subsidiary -- when computing New York entire net income?
No -- section 208.9(b)(5)'s 90% interest addback only reaches interest paid to a shareholder owning more than 5% of the taxpayer's stock, or to a subsidiary of such a shareholder; a 'nephew' corporati…
Are receipts from licensing prepackaged (canned) computer software, and from the support contracts that go with it, subject to New York sales tax?
No, on these facts. Cognos Corporation licenses prepackaged (canned) software — a fourth-generation language called Powerhouse for the HP3000 — on magnetic tape, along with software support (telephone…
Is a radio paging company subject to New York's gross receipts utility tax when customers reach subscribers by dialing a phone number that automatically links into the radio paging system?
Yes -- the company is a radio common carrier and therefore a taxable utility under section 186-a regardless of whether the telephone link-up is only incidental to its main paging business, but the tax…
New York Advisory Opinion TSB-A-87 (10)I: For purposes of the section 603-A maximum tax on personal service income, is a shareholder-employee's personal service income from an S corporation limited to the amount the corporation designated as salary on his W-2?
Not necessarily. The Department ruled that a shareholder-employee's 'New York personal service income' under the now-repealed section 603-A maximum tax is not automatically limited to the amount his S…
Does a paintball or 'survival game' operator have to charge sales tax on the admission to play, and on the equipment used in the game?
The admission to play is not taxable, but a separate charge for equipment is. Ralph M. Toscano Jr. asked about a 'survival game' — teams shooting CO2-powered non-toxic paint pellets on a playing field…
Is a local phone company's flat End-User Common Line (EUCL) charge taxable, or is it an exempt interstate charge?
Yes, it is taxable. Rochester Telephone Corporation, a local exchange carrier serving six counties in Western Central New York, asked whether the flat-rate End-User Common Line ('EUCL') charge it bill…
Is a nuclear plant decommissioning trust fund subject to New York's corporate franchise tax or personal income tax, and can the Department rule on New York City's General Corporation Tax?
No to both state taxes -- the trust isn't a stock-issuing 'corporation,' so Article 9-A doesn't apply, and because it has no federal taxable income (it would otherwise qualify as a grantor trust), it …
New York Advisory Opinion TSB-A-87 (9)I: Is a withdrawal by a NYC teacher, who is not retired and is under 59½, from a Tax Deferred Annuity Program account subject to New York personal income tax?
Yes. The Department ruled that amounts withdrawn by a teacher who is not retired and is under 59½ from a Tax Deferred Annuity Program account (New York City Teachers' Retirement System) are subject to…
When does equipment a data-communications hardware maker buys for research and development qualify for New York's sales-tax exemption for R&D property?
It depends on how the equipment is actually used. Protocom Devices Inc. makes data-communication hardware and software (packet assemblers/disassemblers for X.25 networks) and asked whether the equipme…
A company builds window and floor displays of liquor products inside retail liquor stores and bills the distributor. Does it have to charge New York sales tax on that service?
Yes. Starlite Display, Inc. creates window and floor displays of liquor distributors' products inside retail liquor stores — arranging liquor bottles owned by the retailer, sometimes adding signs and …
Can a retail petroleum distributor avoid New York's Article 13-A gross receipts tax on its retail markup by having a related corporation become the importer and pay the tax instead?
Yes -- if a newly formed related corporation actually holds the required licenses and pays the Article 13-A gross receipts tax on the petroleum it imports, the retail distributor buying from that rela…
When a utility must give a mandated 3% rate reduction to certified businesses in an economic development zone, how should it compute its section 186-a gross receipts tax and claim the offsetting credit?
The utility's approach was correct: reduce the eligible customer's bill by 3% before adding sales tax, use that reduced amount as the section 186-a tax base, and then claim a credit equal to 97% of th…
New York Advisory Opinion TSB-A-87 (7)I: Does New York State follow the Internal Revenue Service's procedure for avoiding repetitive audits of the same issue?
No. The Department ruled that New York has no law, regulation, or policy adopting the IRS's repetitive-audit relief procedure, so a taxpayer who was audited by the IRS on an issue in a prior year (wit…
Does a business have to charge New York sales tax for cleaning the carpeting and upholstery inside a customer's car?
No, not for the cleaning itself. Broome Steam Carpet Cleaning Inc. asked whether cleaning automobile carpeting and upholstery is subject to sales or use tax. Tax Law § 1105(c)(3) taxes maintaining, se…
Does a manufacturer owe New York use tax on its own products that its sales reps use as demonstration units before those units are eventually sold?
Yes. Datascope Corp. manufactures electronic medical monitoring equipment and asked whether compensating use tax is due on units it capitalizes and principally uses for demonstration by its field sale…
Are subscription newsletters exempt from New York sales tax as periodicals, and is a training video sold with them taxable?
The newsletters are exempt periodicals and their printing can be bought for resale, but the training video is taxable. R.C. Anderson Associates Inc. publishes two monthly subscription newsletters — th…
Can an aircraft that its owner uses more than half the time for its own corporate travel — and charters out the rest — qualify for New York's commercial-aircraft sales-tax exemption?
No. Stephen J. Epstein asked whether an aircraft used more than 55% of the time by its owner (a corporation or partnership) for corporate purposes, and chartered to others the rest of the time, qualif…
Are the monthly assessments a homeowners association charges to maintain common areas — including a tennis court — taxable as social or athletic club dues?
Yes. Stratford RP, Inc. created the Stratford Green Homeowners Association (a Not-for-Profit corporation) to own and operate a housing development's common property; membership and one vote are automa…
New York Advisory Opinion TSB-A-87 (6)I: For the 1987 taxable year, how should a married E-1 treaty trader who is a dual-status alien for federal purposes handle New York filing status, the standard deduction, proration of deductions/exemptions between resident and nonresident periods, and claiming a nonworking spouse as a dependent?
The Department answered all four questions for the 1987 tax year: (1) a married treaty trader forced to use the federal 'married filing separately' table must use the same New York table; (2) the trad…
After a shell corporation acquires a target company's assets by merger and inherits its investment tax credit, can it claim the follow-on employment incentive tax credit using its own pre-merger employment level (zero employees) as the statutory baseline?
Yes -- the successor corporation qualifies for the employment incentive tax credit for the two years after the merger, because its own employment level in those years exceeded 101% of its own (pre-mer…
I own two of four contiguous parcels individually, and my wholly-owned corporation owns the other two. All four are being sold together to one buyer under a single contract for $1.2 million, with consideration allocated separately to each parcel so that neither I nor my corporation would individually receive $1 million or more. Are my corporation and I treated as separate transferors for New York's Real Property Transfer Gains Tax, so our considerations aren't aggregated?
No -- because John Malasky owned 100% of John Malasky, Inc., he and the corporation are treated as a SINGLE transferor under the gains tax's 'look-through' principle, so their combined consideration m…
If a nonprofit social club exempt under IRC § 501(c)(7) has unrelated business income of less than $1,000 after deductions, does it still have to file Form CT-13 and pay New York's $250 minimum unrelated business income tax?
Yes -- unlike federal law, New York has no minimum dollar threshold before its unrelated business income tax applies, so any § 501(c)(7) organization carrying on unrelated business in New York must fi…
New York Advisory Opinion TSB-A-87 (5)I: May an S corporation qualify as a 'new business' so an investor can use the Tax Law § 612(o) capital-gain exclusion or the § 612(p) reinvestment deferral for money invested in it?
It depends on which provision. The Department ruled that a corporation cannot be an S corporation at the date it adopts its new-business plan and still qualify as a 'new business' for the section 612(…
Is a homeowners association that maintains a private beach for its members subject to New York's corporate franchise tax, even if it elects federal homeowners-association tax treatment under IRC § 528?
Yes -- maintaining the beach for members' benefit is an 'inurement' of net earnings to members, so the association doesn't qualify for the not-for-profit exemption from Article 9-A, regardless of whet…
Does New York use tax apply to a tractor-trailer used in interstate and foreign commerce, and does the answer change if the owner is an out-of-state corporation with a New York place of business?
It depends on the trip's endpoints, not on whether the truck is in interstate or foreign commerce. Monroe Contractors Equipment, Inc. (a New York corporation) bought a tractor-trailer out of state, fi…
Does a recording studio that rents studio time and equipment to record-company producers qualify for New York's investment tax credit and sales tax manufacturing exemptions, or is it treated as a rental/service business?
No investment tax credit or employment incentive credit -- because more than half the actual mixing work is done by producers and engineers who aren't Sigma's own employees, Sigma is treated as rentin…
Does a sound-recording mastering lab qualify for New York's investment and employment tax credits, and are its production equipment, supplies, and electricity exempt from sales tax?
Mostly yes — the mastering lab is manufacturing, so it qualifies for the Article 9-A investment and employment credits and a sales-tax exemption for its production machinery, supplies, and production …
Does an amusement park with no gate fee have to charge sales tax on the tickets customers buy to go on individual rides?
No. Hoffman's Playland Inc. operates an amusement park with rides such as a ferris wheel and merry-go-round; there is no charge to enter the park, but each ride requires buying a specified number of t…
If a New Yorker buys a boat through an out-of-state corporation and leases it back, does New York tax apply — and what happens if the corporation is a sham?
New York tax applies either way. Ameire Ltd., a Delaware corporation whose sole shareholder is New York resident Marvin Arnold Pollack, bought a $227,574 boat in Florida (delivered in Delaware, no tax…
Are the yearly dues a homeowners beach-club association charges its members taxable as dues to a social or athletic club?
Yes. Pickwick at Rocky Point Beach Club, Inc. is a homeowners association that owns and maintains a beach facility on Long Island Sound; membership is required of every record owner of a lot subject t…
Does a record-mastering company -- which cuts master phonograph records and creates master tapes using its own employees -- qualify for New York's investment tax credit and sales tax production exemptions on its mastering equipment?
Yes -- because Frankford/Wayne's own employees (not outside producers) perform the actual mastering/manufacturing work, its mastering equipment, related environmental/gas systems, and mastering suppli…
If I live in one New York city but buy a boat in another, which city's sales tax rate applies?
The boat is taxed at the rate where it is delivered. Robert Cimillo, a Peekskill resident, bought a new boat in New Rochelle. Because New York sales tax is a destination tax — the point of delivery or…
If my company submeters and bills tenants for the electricity they use, am I a vendor that must collect sales tax — and do I owe tax on electricity I buy but don't resell?
Yes on both. Owners & Tenants Electric Company meters electricity for landlords, bills the tenants, collects the money (net of sales tax), and files sales tax returns for its clients. The Department h…
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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.