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 perpetual license to computer software that the vendor analyzes and customizes for each customer subject to New York sales tax?
Not under the law in effect in 1986 — the customized software is treated as a non-taxable intangible. Financial Decision Systems sold perpetual licenses to CORPTAX, a mainframe corporate-tax product. …
Does a customer's capital improvement certificate relieve an equipment supplier of the duty to collect New York sales tax, and who is liable if the customer won't pay?
No — a capital improvement certificate does not relieve the supplier, and both the supplier and the customer are liable if tax goes uncollected. Superior Restaurant Equipment sells commercial kitchen …
An out-of-state company leases trucks WITHOUT drivers and merely drives them through New York on the highways (paying highway use tax) -- does that make it a 'transportation business' subject to New York's Article 9 franchise tax on trucking companies, or could it instead owe Article 9-A tax if it also leases trucks TO New York customers?
No -- a company principally engaged in leasing trucks WITHOUT drivers (as opposed to leasing vehicles WITH drivers, which does count as a transportation business under prior case law) is NOT 'principa…
Does a New York mutual savings bank's conversion to stock form -- a federal tax-free 'F reorganization' -- also qualify as a tax-free reorganization for New York's bank franchise tax under Article 32?
Yes -- because Article 32 has no modification provision addressing an IRC section 368(a)(1)(F) reorganization, a mutual-to-stock savings bank conversion that qualifies as a tax-free federal reorganiza…
New York Advisory Opinion TSB-A-86 (8)I: Do support payments a divorced woman receives from her ex-husband - calculated as a portion of his pension under their separation agreement - qualify for the $20,000 pension and annuity exclusion under Tax Law § 612(c)(3-a)?
No. The Department ruled that Dorothea Petersen's support payments from her ex-husband, though calculated as a specified portion of his pension under their 1971 separation agreement, are characterized…
Are charges for hot air balloon rides subject to New York sales tax, and can a balloon operator get back tax it mistakenly remitted?
The rides aren't taxable if the operator keeps control of the balloon, but a refund depends on the operator's records. 1000 Island Balloon Co. asked whether its $75 hot air balloon rides are taxable a…
Is a modular home a 'mobile home' for New York sales tax, and who collects or pays the tax when it's sold and installed?
A modular home is not a 'mobile home,' and who owes the tax depends on who installs it. Affordable Homes, a mobile-home dealer starting to sell modular homes, asked three things. First, the home doesn…
Are building materials and installation labor for a project financed by an Industrial Development Agency exempt from New York sales and use tax?
Exempt. Casabonne Bros., a contractor, asked how far the sales and use tax exemption reaches on a structure partly funded by an Industrial Development Agency (IDA). Because General Municipal Law § 874…
New York Advisory Opinion TSB-A-86 (7)I: Are fees an investment syndicator receives for raising money for real estate partnerships, and renewal commissions he still receives from his former career as an independent insurance agent, subject to the New York Unincorporated Business Tax?
Yes to both. The Department ruled that fees Mark Schachter received as an investment syndicator - who set up temporary offices in various states to raise investor money for real estate partnerships, t…
New York Advisory Opinion TSB-A-86 (6)I: Can a nonresident sales manager, whose compensation is based on the sales volume of the salespeople he supervises (not his own personal sales), choose to allocate his New York income based on sales volume rather than days worked in New York?
No, he has no choice. The Department ruled that Richard C. Thompson, a nonresident advertising sales manager whose compensation depended on worldwide sales made by the salespeople under his supervisio…
Which of a meat market's prepared foods are taxable, and which are exempt off-premises food-store sales?
Arranged platters are taxable; the other prepared foods are exempt only if sold unheated, in food-store form. Cobbs House of Meats sells baked stuffed potatoes, quiche, TV-style dinners, cold soups, s…
Are 'suggested donations' a religious organization collects for meals taxable as sales of food and drink?
Yes — the 'donations' were really payment for the meals and are taxable. The SYDA Foundation, a 501(c)(3) religious organization, served meals alongside its daily services and solicited 'voluntary don…
Can a pay-phone operator buy phone service for resale, must it collect tax on per-call charges, and are commissions it pays taxable?
The operator buys phone service for resale, collects tax on the full call charge, and its commissions aren't taxable. Coinven installs pay telephones in restaurants and bars, buys telephone service fr…
New York Advisory Opinion TSB-A-86 (4)I: If a New York resident defers compensation under a New York State employee deferred compensation plan and later becomes a nonresident, is the withdrawal subject to New York personal income tax, and does the $20,000 pension exclusion apply?
Partially taxable as wages, and no pension exclusion. The Department ruled that Robert Vincent Smith's withdrawal from a New York State employee section 457 deferred compensation plan - which, followi…
After the Department's first ruling forced a Puerto Rico bank to allocate part of its home-office U.S. bond interest to New York using a special reserve/gross-income formula, did a reexamination change that result -- and can the bank instead use its existing separate-accounting method, which would allocate the interest entirely outside New York?
Yes -- this modified opinion ANNULS the special reserve/gross-income allocation formula set out in the original [TSB-A-86(5)C](/ny/tsb-a-86-5c-issue-raised-is-whether-for-taxable-years-1975-through-19…
Must a national charity collect New York sales tax on mail-order sales shipped into the state, and does it need to register as exempt first?
It must first establish exempt status; once recognized, its mail-order sales aren't taxable shop/store sales. The National Wildlife Federation, a 501(c)(3) charity, sells a limited range of products (…
My late husband's cooperative apartment shares passed under his will into a testamentary trust, of which I'm co-trustee. If the trust now sells the co-op shares, does the personal-residence exemption from New York's Real Property Transfer Gains Tax apply the same way it would if the estate itself were selling?
Not automatically -- it depends on who is living there. Dasha A. Epstein, co-trustee of a testamentary trust holding her late husband Harry D. Epstein's cooperative apartment shares (his former primar…
Does a New York mutual savings bank's conversion to stock form -- a federal tax-free 'F reorganization' -- also qualify as a tax-free reorganization for New York's bank franchise tax under Article 32?
Yes -- because Article 32 has no modification provision addressing an IRC section 368(a)(1)(F) reorganization, a mutual-to-stock savings bank conversion that qualifies as a tax-free federal reorganiza…
Are labor charges billed under a fleet maintenance agreement taxable service, or exempt employee wages, when the mechanics are on the customer's payroll?
Taxable — the labor is a maintenance service, not exempt employee wages. Coca-Cola Bottling of New York kept auto mechanics on its own payroll but made them available to Soft Drink Leasing Corporation…
How is a New York printer/mailer taxed on promotional mailings, and what proof lets it exclude out-of-state pieces?
Printed promotional material is taxed by destination, and the printer can exclude out-of-state pieces only with substantiating records. George Silver, a printer and mailer, produces labels from custom…
New York Advisory Opinion TSB-A-86 (3)I: If a New York resident contributes to an IRA and later becomes a nonresident before withdrawing the funds, is the IRA distribution subject to New York personal income tax?
Only partially, based on where the underlying employment was performed. The Department ruled that Robert Vincent Smith's IRA distribution, received after he became a nonresident, is subject to New Yor…
New York Advisory Opinion TSB-A-86 (2)I: Does logging equipment used to cut and deliver logs to a paper company qualify for New York's investment tax credit, even though the logger performs the work as a contracted service rather than using the equipment in his own manufacturing business?
Yes, for the production equipment - but not for the trucks. The Department ruled that an individual who uses chain saws, loaders, and skidders to cut logs and deliver them to a loading area for a pape…
New York Advisory Opinion TSB-A-86 (1)I: If a New York resident wins the state lottery and later becomes a nonresident before receiving all of the annual prize installments, is the remaining prize money subject to New York personal income tax?
Yes, generally all at once, unless the winner posts a bond. The Department ruled that a Lotto jackpot winner who becomes a nonresident must accrue and include in his New York adjusted gross income - f…
When a New York mutual savings bank converts to stock form -- a federal tax-free 'F reorganization' -- does New York's bank franchise tax and personal income tax follow the same tax-free treatment, both for the bank itself and for its depositors who receive stock subscription rights?
Yes, on both fronts. Because the mutual-to-stock conversion qualifies as a tax-free reorganization under IRC section 368(a)(1)(F) for federal purposes -- with no gain/loss to the bank, carryover basis…
Does a sales agent who only arranges orders have to report the sales or collect New York tax on drop-shipped goods?
An agent who only arranges orders isn't the vendor, but must make sure suppliers collect tax on New York deliveries. Edna Jacobs, d/b/a Industrial Sales, takes phone orders for appliances and places t…
Is installing a satellite dish antenna a tax-exempt capital improvement, or a taxable sale and installation?
The dish and its installation are taxable; only the concrete foundation is a capital improvement. Multi-View Communication installs satellite dish TV antennas that are welded or otherwise attached to …
A non-stock, non-profit corporation exists solely to hold title to real property for a labor union local, and is federally exempt under IRC section 501(c)(2) as a title-holding company -- is it exempt from New York's Article 9-A corporate franchise tax?
Yes -- a non-stock corporation organized other than for profit, with no net earnings inuring to any officer, director, or member, that is exempt from federal income tax under IRC section 501(a) (here,…
Does a nonprofit service club have to collect New York sales tax on candy it sells to fund charitable work?
Yes — the club must collect sales tax on its candy sales. The West Seneca Lions began selling candy mints around West Seneca, with the proceeds going to a Project Fund that helps the blind, disabled a…
A New York condominium association (organized under Real Property Law Article 9-B) doesn't issue stock certificates to unit owners, but earns income from garage/parking/laundry rentals, commercial space leases, and interest -- is it a 'corporation' required to file a New York Article 9-A franchise tax return, regardless of how it elects to file its federal return?
Yes -- even though the condominium association doesn't issue stock certificates, each unit owner's proportionate 'common interest' is itself evidenced by a written instrument (the deed/declaration) un…
Is renting a self-service storage unit a taxable storage service or a tax-exempt lease of real property?
Exempt — a self-service unit is a lease of real property, not a taxable storage service, if it meets the tests. The Storage Shed leases specific numbered, enclosed spaces (e.g., 10' x 10') that tenant…
Must an out-of-state catalog seller that has retailers, employee visits, and trade-show activity in New York collect New York sales tax on its mail-order sales here?
Yes — the out-of-state catalog seller has nexus with New York and must collect New York sales and use tax on its retail mail-order sales to New York customers. The Orvis Company, a Vermont seller of h…
Is an architectural model maker's charge a non-taxable service or a taxable sale of tangible personal property?
Taxable — the whole charge is a sale of tangible personal property, not a service. Awad Architectural Models builds three-dimensional models from architects' drawings; roughly 90% of its work is desig…
In a leased-department arrangement where the host store collects the money, who is responsible for the sales tax?
The host store (licensor) reports and remits the tax, but both it and the licensee are jointly liable. Peter Knych holds a license to sell goods he buys from an unrelated third party at a host busines…
A Puerto Rico-chartered bank's HOME OFFICE (not its New York branch) holds U.S. government securities, and federal law (IRC section 882(e)) forces the bank to treat that interest as U.S.-trade-or-business income purely because it also has a U.S. branch -- does that federal rule pull the interest income into New York's bank franchise tax base too, and if so, how much of it is New York's share?
Yes -- because Article 32's entire net income starts from federal taxable income, and section 1453 has no modification carving out IRC section 882(e) interest, a Puerto Rico bank's U.S.-obligation int…
Do I owe sales tax on the fee I pay my equipment lessor to cancel a lease early and get released?
Yes — the early-termination fee is taxable. Robert L. Goodrich and Bruce A. Sahs (R.L. Goodrich & Company) lease computer equipment under a seven-year lease at $1,169 a month plus sales tax and now wa…
A not-for-profit homeowners association elects federal 'homeowners association' tax treatment under IRC section 528 and its only income is member assessments (for maintaining roads and recreational facilities) plus bank interest -- is it exempt from New York's Article 9-A corporate franchise tax, or at least is its NY taxable income limited to just the interest income?
No to both questions -- the association is NOT exempt from Article 9-A, and its New York taxable income is NOT limited to just its interest income. Even though the association is a not-for-profit corp…
Does a gas utility charge sales tax on new gas-service hookups, and does it owe tax on the pipe and materials it installs?
The utility must collect sales tax on new gas-service installation charges, and it owes sales or use tax on the pipe, fittings, tools and supplies it buys. Syracuse Suburban Gas Company installs new s…
Are student textbook purchases paid for by government grants like PELL or VA exempt from sales tax as sales to the government?
Taxable — the grant-funded textbook sales are subject to sales tax. Erie Community College's bookstore sells textbooks to students who receive aid from PELL, the Trade Readjustment Act, the Veterans A…
When related companies move equipment between each other, is it a taxable sale — and does it matter that no money changes hands?
It depends on how the transfer is structured. Browning-Ferris Industries owns majorities of many related subsidiaries and asked whether moving tangible property between them — with no money changing h…
If I drop-ship goods into New York for an out-of-state buyer who can't give a New York resale certificate, do I have to collect New York sales tax?
Yes — the vendor must collect New York sales tax on a drop-shipment delivered into the state. Touche Ross asked about an importer (X Company, a registered New York vendor) that sells goods in Californ…
Does a New York mutual savings bank's conversion to stock form -- a federal tax-free 'F reorganization' -- also qualify as a tax-free reorganization for New York's bank franchise tax under Article 32?
Yes -- because Article 32 has no modification provision addressing an IRC section 368(a)(1)(F) reorganization, a mutual-to-stock savings bank conversion that qualifies as a tax-free federal reorganiza…
My corporation owns New York real estate. Before it liquidates under IRC § 333, its shareholders will first contribute all their stock to a new limited partnership pro rata to their existing ownership (some getting general-partner interests, some only limited-partner interests), and the corporation will then distribute all its assets to that partnership and dissolve. Does this trigger New York's Real Property Transfer Gains Tax?
No. B. Bros. Realty Corporation's proposed plan -- shareholders contributing all their stock to a newly formed limited partnership in exchange for pro rata partnership interests, followed by B. Bros.'…
Do municipal industrial development bonds -- held by an investment company as its sole asset, generating interest income -- count as 'investment capital' (rather than ordinary business capital) for New York's Article 9-A franchise tax, and if a company didn't originally classify them that way on its return, can it go back and reclassify them later to claim a refund?
Yes to both questions -- (1) municipal industrial development bonds meet the regulatory definition of 'other securities' under 20 NYCRR 3-4.2(c) (issued by a governmental body, customarily sold on the…
A not-for-profit corporation that merely holds title to real property for an exempt labor union local -- but HAS issued stock to the union's trustees -- has no net earnings and wants its New York corporate tax capped at the flat $250 minimum. Does issuing stock disqualify it from the non-profit exemption, and can a company simply elect the $250 minimum regardless of what the other computation methods produce?
No on both counts. Because Petitioner has issued STOCK (to the trustees of Local 1049 I.B.E.W.), it does not fall within the 20 NYCRR 1-3.4(b)(6) exemption for non-STOCK, non-profit corporations, even…
When a taxicab is leased with its city license, can the separately stated charge for the license be left out of sales tax?
The taxicab license charge is a registration fee, not a separately exempt intangible, and it fits into New York City's 90 percent rental computation. The Metropolitan Taxicab Board of Trade's members …
Is the fee for a video club membership that gets me cheaper movie rentals subject to sales tax?
Yes — the video club membership fee is taxable. Douglas J. Fideor (Village Mall Video) asked whether a one-year video club membership — which lets a member rent movies at a lower rate — is subject to …
Are welding supplies used to maintain production machinery exempt, and do voltage transformers count as exempt production equipment?
Welding supplies used to maintain production equipment qualify for the § 1105-B reduced (0% after March 1, 1981) state rate, but the transformers do not get the production exemption. Gernatt Asphalt P…
Is a landlord's separate charge to a commercial tenant for heated and chilled water used to heat and cool the space taxable?
Taxable — the landlord's charge for heated and chilled water is taxable as steam and refrigeration service. Robert M. Markham, P.C., a prospective New York City tenant, asked whether a landlord's sepa…
Is a central coolant and chip-handling system for metal-cutting machines exempt production equipment, and how is its foundation and installation labor taxed?
The coolant/chip handling system itself is exempt production equipment, but its foundation materials are taxable and its assembly and installation labor fall under the § 1105-B reduced (0% after March…
Is a nonlawyer service that fills out and files uncontested-divorce forms for clients subject to sales tax?
Not taxable — the divorce-form preparation and filing service is not subject to sales tax. Bonnie Herde (Divorce Yourself) helps people get uncontested divorces by filling out legal forms from informa…
Is pizza sold unheated for takeout taxable, or does it fall under the exception for unheated food commonly sold in food stores?
The unheated pizza is taxable unless the vendor can prove it is of a type commonly sold, in the same form and packaging, in food stores such as bakeries — and each selling method must qualify separate…
Is a machine that recycles foundry sand for reuse in manufacturing exempt as production equipment?
The sand reclamation unit is not exempt as production machinery under § 1115(a)(12), but it qualifies for the § 1105-B statewide exemption if purchased on or after March 1, 1981. Buffalo Forge Company…
Does a video-rental 'membership fee' that only entitles the customer to discounted rentals count as a taxable prepayment for those rentals?
Yes — the membership fee is taxable, reversing the earlier opinion going forward. This 1985 modified opinion corrects TSB-A-81(20)S, issued to Norman Eiger in 1981, which had held that a video-rental …
A foreign parent corporation owns 100% of one New York subsidiary and 79% of a second, different New York subsidiary engaged in a related but distinct business -- does common majority ownership by the same parent make the second subsidiary 'substantially similar in ownership' to the first, disqualifying it as a 'new business' for the investment tax credit refund election, even though the two subsidiaries aren't owned in identical percentages or by identical shareholders?
Yes -- Corporation C (79%-owned by the common parent, Corporation A) IS 'substantially similar in ownership' to Corporation B (100%-owned by the same parent), and therefore does NOT qualify as a 'new …
Which mail-room services are taxable, and does the mailer owe tax on the folding and postage machines it buys?
Addressing (label-affixing) is taxable, but folding, inserting, sealing, collating and posting are exempt if separately stated — and the mailer owes tax on the mail-room machines it buys for its own u…
Is the cost of printing a free advertising-only paper taxable, and are ad fees or subscriber postage charges taxed?
An advertising-only publication is not a tax-exempt newspaper or periodical, so the printing that produces it is taxable — but the advertising revenue is exempt and subscriber 'handling' charges are t…
Is the charge for occupancy in a convalescent home, plus separately billed telephone and air conditioning charges, subject to New York sales tax?
No — the convalescent home's occupancy charges are not subject to sales tax, and the separately billed telephone and air conditioning charges are exempt as well. New York's hotel occupancy tax (Tax La…
Are charges for the use of tanning beds and hot tubs subject to New York sales tax?
It depends on location. Statewide, charges for the use of tanning beds and hot tubs are not subject to New York State or county sales tax — using these facilities is neither a retail sale of tangible …
Do the food and supplies a company buys to raise dogs and ferrets for sale qualify for New York's manufacturing or production exemptions from sales tax?
No — the food and supplies are taxable. Marshall Research Animals raises beagles and ferrets in closed breeding colonies and sells them, and it wanted its feed and similar supplies exempt under the pr…
Does a contractor on an Industrial Development Agency project owe sales tax on the materials, equipment, and supplies it buys for the work?
It depends on whether the contractor is a designated agent of the IDA. An Industrial Development Agency is a tax-exempt public corporation (Tax Law 1116(a)(1); 20 NYCRR 529.2), but a contractor is nor…
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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.