New York State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in New York, with full citations and the original source on every page.
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When a data processor maintains and prints a client's membership list, is it selling a taxable printed product or an exempt information service?
A data processor that maintains a client's membership list and delivers updated printed lists is selling taxable tangible personal property, not an exempt information service, because the essence of t…
Does a sale-and-leaseback of leased vehicles trigger sales tax, or is it exempt as a purchase for resale?
A sale-and-leaseback of vehicles that stay in a leasing business is made solely for resale, so neither leg is subject to sales tax. Key Capital, an auto-leasing company, proposed to sell its already-l…
If a corporation is part of a federal consolidated group but files its own separate New York franchise tax report, does it report its allocated 'share' of the group's consolidated federal taxable income, or the income it would have reported had it filed its own separate federal return?
A corporation filing a separate New York franchise tax report, even though it's part of a federal consolidated group, must compute its entire net income as if it had filed its own separate Federal tax…
A bank holding company wants to form a new subsidiary to hold stock in out-of-state banks and to own financial-service subsidiaries (finance, leasing, real estate credit) that its own New York national bank isn't authorized to own directly. Can that new subsidiary be included in the bank holding company's Article 32 consolidated franchise tax return?
No. Marine Midland Banks, Inc. proposed forming Marine Midland National Corporation ('National') to hold stock in out-of-state banks and to own new financial-service subsidiaries (finance, leasing, re…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. Ampal American Israel Corporation asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows th…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. Dean Witter Reynolds, Inc. asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows the funds…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. Esselte Pendaflex Corporation asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows the fu…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. General Discount Corporation and CBT Leasing Corporation asked the Department to confirm that interest paid to a shareholder owning more than 5% of a corporation's stock would be fully deductible …
The Department had told MC Minerals Corporation and Mitsubishi International Corporation, in a March 1981 Advisory Opinion, that interest paid on funds borrowed from a related stockholder and re-lent could escape the section 208.9(b)(5) interest add-back if a four-part pass-through test was met. Two and a half years later, having concluded that answer was legally wrong, does the Department revoke the ruling -- and does that revocation reach back and undo the taxpayer's past reliance?
The Department revoked its own prior ruling, but only prospectively. In March 1981, the Department had issued MC Minerals Corporation and Mitsubishi International Corporation an Advisory Opinion, [TSB…
The Department had told MCF Footwear Corporation and Mitsubishi International Corporation, in a March 1981 Advisory Opinion, that interest paid on funds borrowed from a related stockholder and re-lent could escape the section 208.9(b)(5) interest add-back under a four-part pass-through test. Two and a half years later, does the Department revoke that ruling, and does the correction reach back and undo past reliance?
The Department revoked its own prior ruling, but only prospectively. In March 1981, the Department had issued MCF Footwear Corporation and Mitsubishi International Corporation an Advisory Opinion, [TS…
A Canadian aluminum manufacturer wants to ship a metal-bearing byproduct to an unrelated New York processor, who will reclaim the aluminum for a fee and ship it straight back to Canada, disposing of the unusable waste. Does owning that material while it's being processed in New York, by itself, create New York franchise tax nexus?
No. Aluminum Company of Canada, Ltd. proposed shipping dross (an aluminum-bearing byproduct of its primary aluminum manufacturing) to an unrelated New York processor, who would reclaim the aluminum fo…
A bank's two new securities-dealer subsidiaries (one owning the other) want to file a combined Article 9-A return together, and also want to know whether interest they'll pay on short-term borrowings from the bank -- their common grandparent -- is subject to the related-party interest add-back. What's the answer to both questions?
Two different answers to two different questions. On COMBINED FILING: Chase Manhattan Government Securities, Inc. ('CMGS') is a wholly owned subsidiary of Chase Manhattan Capital Markets Corporation (…
A finance company's home office is in New York, but larger loans require credit approval from out-of-state regional offices, with only the very largest requiring a final review back in New York. How much of the resulting loan interest income counts as 'earned within' New York for the business allocation percentage?
The Department set out the governing framework but declined to give a specific percentage. CIT Financial Corporation, headquartered in New York, is a finance-business holding company whose finance agr…
A propane dealer imports propane into New York for sale, and more than half of it is sold for home heating. Does selling propane for residential use qualify the company for the tax law's exclusion for sellers of residential 'fuel oil,' exempting it from the oil company franchise tax?
No -- Petitioner remains subject to the section 182-a oil company franchise tax despite selling more than 50% of its propane for residential purposes. Seimax Gas Corp. imports propane into New York fo…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. Heraeus-Volkert, Inc. asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows the funds sole…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to the shareholder's outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. KB Business Credit, Inc. asked the Department to confirm that interest it pays to a shareholder owning more than 5% of its stock would be fully deductible where the shareholder borrows the funds s…
If a more-than-5% shareholder borrows money solely to re-lend it to the corporation, and the corporation pays interest to the shareholder that just passes through to an outside lender, is that pass-through interest exempt from New York's 90% related-party interest add-back as a mere 'conduit' payment?
No. MC Minerals Corporation and Mitsubishi International Corporation asked the Department to confirm that interest paid to a shareholder owning more than 5% of a corporation's stock would be fully ded…
A New York corporation makes a Subchapter S election and is therefore exempt from the regular corporate franchise tax. It plans to buy gasoline and diesel fuel out of state, take title there, and ship it into New York for sale to its New York customers. Does its Subchapter S exemption from the regular franchise tax also exempt it from New York's separate oil company tax?
No, the Subchapter S exemption doesn't help -- the corporation is still subject to the oil company tax. Petitioner, a New York corporation that made a Subchapter S election and was therefore exempt fr…
A more-than-5% shareholder borrows money from an outside lender solely to re-lend it to the corporation, and the corporation's interest payments to the shareholder simply pass through the shareholder, like a conduit, to that outside lender. Does that pass-through structure let the corporation fully deduct the interest instead of adding back 90% under the related-party interest rule?
No. This is a modification appending a second question to the same petition already answered in TSB-A-82(15)C. The Ore and Chemical Corporation asked whether interest paid to a more-than-5% shareholde…
The Department had previously told a taxpayer, in a December 1981 Modified Advisory Opinion, that its interest payments could avoid the section 208.9(b)(5) related-party interest add-back under certain circumstances. Two years later, having concluded that answer was legally wrong, can the Department simply revoke its own prior ruling -- and if so, does the correction reach back and undo the taxpayer's past reliance on it?
The Department revoked its own prior ruling, but only prospectively. In December 1981, the Department had issued a Modified Advisory Opinion to Kowa Realty (America), Ltd. stating that, under specifie…
Is the gas and electricity that runs coin-operated washers and dryers in an apartment building exempt as residential energy use?
Gas and electricity that power coin-operated washers and dryers in a residential apartment building are used in a trade or business, not for residential purposes, so they are taxable and don't qualify…
If an owner buys a recreational vehicle to rent out but also for some personal use, can the purchase be tax-free as a purchase for resale?
A vehicle bought both to rent out and for the owner's own use is not purchased exclusively for resale, so the purchase is a taxable retail sale — the resale exclusion doesn't apply. May Associates ren…
If an owner buys a vehicle to rent out but also uses it personally, is the purchase tax-free as a purchase for resale?
A vehicle bought both to rent out and for the owner's own use is not purchased exclusively for resale, so the purchase is a taxable retail sale — the resale exclusion doesn't apply. May Associates lea…
Does a tax-exempt nonprofit have to collect sales tax on casual door-to-door product sales run by its student program?
A qualifying exempt organization's casual door-to-door product sales are not taxable, because they aren't made through a shop, store, or restaurant the organization operates. Junior Achievement of Wes…
We're the State of New York Mortgage Agency (SONYMA), and under our new Forward Commitment Program, local banks originate mortgages on our behalf and then promptly assign them to us. Does mortgage recording tax apply when those banks record the mortgages, given that our enabling law exempts our 'operations' from taxation?
Exempt. The State of New York Mortgage Agency (SONYMA), created in 1970 to keep residential mortgage credit flowing when private lending dries up, was given expanded authority in late 1982 to run a 'F…
Are charges to modify or repair a customer's foundry patterns taxable, and when can a resale certificate or the manufacturing exemption apply?
Charges to modify a customer's foundry patterns are taxable fabricating/processing services (§ 1105(c)(2)), and charges to repair them are taxable repair services (§ 1105(c)(3)) — unless the service i…
Does a caterer owe tax on floral centerpieces it buys for customers, and are its leasehold improvements exempt as capital improvements?
A caterer's floral centerpieces are taxable, and its leasehold marble floor and new ceiling are capital improvements, but its disco lights are taxable trade fixtures. Bayshore Catering buys standard f…
Can a seller exclude a flat separately stated shipping-and-handling charge from taxable receipts?
A flat, separately stated shipping-and-handling charge that bears no relation to actual transportation cost — and that doesn't separate the shipping portion from the handling portion — cannot be exclu…
Is the electricity that powers a deli's coolers exempt as used in production, when the food is both sliced for sale and made into ready-to-eat items?
A deli's cooler electricity is exempt from sales tax only for the portion used to cool food that is later sliced and sold by weight as tangible personal property — not for food used to make ready-to-e…
Would a college meal plan lose its sales-tax exclusion if it started refunding students for unused meal points?
A college meal plan keeps its sales-tax exclusion when unused points are not refunded, but loses it if the plan is changed to refund unused points — because the points then act like taxable scrip. Stu…
Are a country club's membership fees and dues taxable when members have no control or ownership and membership is open to the public?
A country club's membership fees and dues are not taxable where members have no proprietary interest and no control over the club's activities or management, and membership is open to the public on a …
Can a seller exclude a flat separately stated shipping-and-handling charge from taxable receipts?
A flat, separately stated shipping-and-handling charge that bears no relation to actual transportation cost — and that doesn't separate the shipping portion from the handling portion — cannot be exclu…
Is renting a trailer that only hauls a manufacturer's industrial waste to a treatment center exempt as production equipment?
Renting a trailer used only to transport a manufacturer's industrial waste to pollution-control centers is taxable — the trailer is not machinery or equipment used directly and predominantly in produc…
Does a college owe sales tax when a graduating student forfeits a deposit to keep an assigned computer instead of returning it?
A college owes no sales tax when a graduating student forfeits a $200 maintenance deposit to keep an assigned computer instead of returning it for a refund — because the sale isn't made through a shop…
Are a swim club's seasonal membership charges taxable dues when members have no control or ownership and membership is open?
A swim club's membership payments are not taxable dues where members have no proprietary interest and no control over the club's activities or management, and membership is sold on a first-come, first…
Is chemically cleaning and waterproofing a building's exterior a tax-exempt capital improvement or a taxable repair service?
Chemically cleaning and waterproofing a building's exterior to restore it is a taxable service of maintaining, servicing or repairing real property — not a tax-exempt capital improvement. Empire Resto…
Are the bags and boxes a beer wholesaler sells to retailers for sorting empty returnable containers taxable?
Bags and boxes a beer wholesaler sells to retailers for counting, sorting and returning empty deposit containers are taxable retail sales, and don't qualify for the packaging-materials exemption. Unde…
Does a temp agency owe sales tax on charges for supplying office, clerical, and lab personnel to clients?
Charges for supplying trained office, clerical, and laboratory personnel to clients are not subject to sales, use, or excise tax, because neither those services nor the service of providing personnel …
Are country-club membership fees taxable dues when membership is limited to residents of one apartment complex, even without member control?
A country club whose membership is limited to residents of a single apartment complex is a taxable social or athletic club — its exclusivity makes it one even without member control or ownership. The …
How is sales tax applied when a company rents equipment from its own subsidiary — for re-rental, for its own use, plus fuel and maintenance?
Equipment a company rents from its subsidiary to re-rent to customers is a purchase for resale (not taxable, with a resale certificate), but equipment it takes for its own use in exchange for maintena…
Are an oil producer's subcontracted well-pulling repair service, its bulldozers and snowmobiles, and the diesel fuel for those vehicles subject to New York sales or use tax?
An oil producer's subcontracted well-pulling work is a taxable repair service (though the State portion was later exempted for production equipment), and its bulldozers, snowmobiles and the diesel fue…
Are an oil producer's subcontracted well-pulling repair service, its bulldozers and snowmobiles, and the diesel fuel for those vehicles subject to New York sales or use tax?
An oil producer's subcontracted well-pulling work is a taxable repair service (though the State portion was later exempted for production equipment), and its bulldozers, snowmobiles and the diesel fue…
Are an oil producer's subcontracted well-pulling repair service, its bulldozers and snowmobiles, and the diesel fuel for those vehicles subject to New York sales or use tax?
An oil producer's subcontracted well-pulling work is a taxable repair service (though the State portion was later exempted for production equipment), and its bulldozers, snowmobiles and the diesel fue…
My corporation, whose sole shareholder is a partnership, owns real property worth over $1 million. If the corporation liquidates and conveys title to that real property directly to its sole shareholder, is that conveyance a taxable transfer under New York's Real Property Transfer Gains Tax?
No. Jefferson Highland Corporation asked whether conveying title to its real property (valued over $1 million) to its sole shareholder -- a partnership -- upon the corporation's liquidation would be a…
My company owns vacant land and will ground-lease it to an industrial development agency (IDA), which will sublease it back to me as its construction agent, financed by an IDA industrial revenue bond that I effectively repay through rent equal to the bond's debt service. Neither the IDA nor I have a purchase option, but title to the improvements reverts to me (as ground-lease landlord) when the ground lease ends. Can I include the capital improvement costs -- funded by the bond -- in my 'original purchase price' for gains-tax purposes when I eventually sell the completed building and land?
Yes. The Edgewater Company of Ulster proposed a structure where it would own vacant land in fee, ground-lease it to an industrial development agency (IDA), and serve as the IDA's construction agent fo…
A bank borrows funds and re-lends them to its own Article 9-A subsidiary at a markup. Because the subsidiary can't fully deduct that interest expense (due to the related-party interest add-back), the same spread effectively gets taxed twice within the corporate family. Can the bank exclude that spread from its own income to avoid the double taxation?
No. Kredietbank, N.V., an Article 32 banking corporation, sought to exclude from its entire net income the excess of interest it received from its own Article 9-A subsidiary (on loans it made to that …
Does a membership swimming-pool operator owe sales tax on seasonal membership fees, and on separate charges for renting chaise lounges and lockers?
A membership swimming pool's seasonal fees are not taxable club dues, but its separate charges to rent chaise lounges and lockers are taxable. Because the operator has exclusive ownership and control …
Are a gas driller's site-prep and well-service vehicles taxable, and does use tax apply to a copy machine bought in Louisiana and moved to New York?
A gas driller's four-wheel-drive site-preparation vehicles and its equipment-carrying pickup trucks were taxable before an August 26, 1981 law change and exempt after, and a copy machine bought in Lou…
Must a health and fitness center collect sales tax on membership dues when members have no control, no proprietary interest, and there is no exclusivity?
A health and fitness center's membership charges are not taxable 'dues' because the center is not a social or athletic club — its members have no control over the club's activities, no proprietary int…
Are membership fees at an owner-operated country club taxable dues when the owner controls all activities and members have no proprietary interest?
Membership fees at an owner-operated country club are not taxable 'dues' because the club is not a social or athletic club — the sole owner controls all of its activities and the members have no propr…
Is a timely-delivery bonus a manufacturer receives from the end customer taxable when the customer bought the goods from a separate dealer?
A prompt-delivery bonus a furniture manufacturer receives directly from the end customer is not a taxable receipt, because the customer bought the furniture from a separate dealer — not from the manuf…
A corporation was formed partway through the year and had its first tax year run as a short period. It bought qualifying equipment and earned an investment tax credit it can't fully use. Can it still elect a refund of the unused credit instead of carrying it forward, or does the short first period disqualify it?
Yes. Syracuse Colour Graphics, Ltd., a newly formed New York corporation, bought equipment for its offset-printing business that qualified for the investment tax credit under Tax Law § 210.12. As a 'n…
New York Advisory Opinion TSB-A-83 (4)I: What Unincorporated Business Income Tax rate applies to a business's fiscal tax year that begins in 1980 (when the rate was 4%) and ends in 1981 (when the rate dropped to 0%)?
The full 4% rate applies to the entire taxable year, with no reduction for the portion falling in 1981. The Department explained that Chapter 69 of the Laws of 1978 phased out the Unincorporated Busin…
Are a racquetball club's membership dues and court fees taxable, and can tax it wrongly collected be credited to members instead of remitted to the State?
A racquetball club's membership dues and court-time fees are not taxable, but any sales tax it wrongly collected must be remitted to the State — it cannot be handed back to members as a credit. Becaus…
Are a health club's membership fees taxable, and what about its locker rentals and New York City's health-club tax?
A health club's membership fees are not taxable club dues, but its annual small-locker rentals are taxable, and New York City's 4% health-club tax applies to the facility charges. Because the members …
Are admission charges to an arts and crafts fair with sales, demonstration and exhibition areas subject to sales tax?
Admission charges to an arts and crafts fair with sales, demonstration and exhibition areas are taxable as charges to a place of amusement. Section 1105(f)(1) taxes admission charges to a place of amu…
When computing a shopping paper's advertising percentage, is the area of an inserted advertising supplement counted — after the Department's 1983 modification?
Not counted — this modification excludes the supplement's area. This is a MODIFIED Advisory Opinion that changes the Department's earlier opinion to the New York State Publishers Association, TSB-H-81…
Are a tenant's contractor-installed heating system, bathroom, plant foundation and water line capital improvements exempt from sales tax?
A tenant's contractor-installed heating system, bathroom, concrete plant foundation, loading platform and water line are capital improvements, so the charges to install them are not subject to sales t…
Must a club catering a member's party charge sales tax on a separately stated fee for musicians it arranged for the party?
A club that caters a member's private party must charge sales tax on the entire bill, including a separately stated charge for professional musicians it arranged for the party. Section 1105(d)(i) taxe…
Must a temporary-staffing agency collect sales tax on its billings when its workers perform taxable services under the customer's control?
A temporary-staffing agency generally does not collect sales tax on its billings when it merely supplies laborers who work under the customer's control, because the workers become the customer's 'spec…
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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.