Which of a video/audio advertising production company's many line-item charges (scriptwriting, shooting, editing, studio rental, tangible media) are taxable to its clients, and which of its own production purchases qualify for exemption?

Plain-English summary

A production company creates video and audio advertising for clients, typically delivering the finished commercial on a disc, CD-ROM, or other physical media (which becomes the client's property), but occasionally transmitting it purely electronically (mp3, wav, etc.) instead. The company isn't an advertising agency — it doesn't place ads or buy media time — though it will sometimes separately contract just to deliver a finished ad to media the client has already chosen. Its itemized bills mix creative-service line items (script writing, shooting, producing, editing, graphic artwork, music, talent/voice-over, studio rental) with tangible-goods line items (film/tape/digital media stock, dubs, video duplication).

The Department worked through two separate questions: what the company must charge clients tax on, and what the company itself can buy tax-free. On sales: delivering the finished product as tangible media (a tape, CD, DVD) is a taxable retail sale, and — critically — every other itemized charge billed alongside that tangible delivery (scriptwriting, shooting, editing, etc.) is treated as a nondeductible cost of making that sale, so the WHOLE invoice is taxed together, not just the "tangible" line items. But if the finished product is instead delivered purely electronically, there's no tangible personal property changing hands at all, so nothing is taxed. On purchases: pure creative-labor services like scriptwriting and talent/voice-over aren't enumerated taxable services at all, so the company never pays tax on those regardless of delivery format. Purchases of tape, film, and similar media that get physically transferred to the client as part of the finished product qualify as tax-free purchases for resale. And separately, because creating video/audio media is itself a manufacturing activity, the company's machinery, equipment, and (for genuine "film" productions — TV commercials, not radio) an even broader film-specific exemption reach its cameras, editing equipment, studio-rented recording gear, and repair/maintenance services on that equipment — as long as it's used directly and predominantly in actual production rather than administrative or distribution work, and as long as (for radio-only commercials without physical delivery) the finished product is actually being produced "for sale" as tangible personal property in the first place.

What this means for you

Video/audio production companies delivering both physical and electronic media

The delivery format of your FINISHED product controls the entire invoice's taxability — bundle any physical-media delivery with your creative service charges and the whole thing gets taxed together; deliver purely electronically instead and none of it is taxed as a sale of tangible property. Consider how you structure delivery options with this in mind.

Producers renting recording or editing equipment and studio space

Split your studio-rental invoices between real property (the sound stage/room itself, always nontaxable) and any recording/production equipment bundled into the rental (potentially taxable unless it separately qualifies for the manufacturing or film production exemption) — and get that equipment-vs-space breakdown separately stated if you want the space-only portion protected.

Companies producing radio-only commercials for electronic delivery

Watch the gap here: the broader "film" production exemption (covering TV commercials, documentaries, etc.) doesn't reach audio-only radio spots, and if a radio commercial is delivered purely electronically rather than as physical tape/CD, even the ordinary manufacturing exemption may not apply since no tangible personal property is being produced "for sale" in that transaction.

Production companies buying media, film, or tape that partly gets used internally

Only the tape/film/media that's ACTUALLY transferred to the client as part of the finished, unaltered product qualifies as a tax-free resale purchase — media you use up in the process (like a working audio tape later discarded once its content is transferred to a CD) is a taxable purchase for your own use, though it may separately qualify for the production exemption since it was consumed directly in making the sellable product.

Common questions

Q: If we deliver a finished commercial electronically instead of on physical media, do we still owe sales tax?
A: No — delivering a finished video or audio production purely electronically isn't a sale of tangible personal property, so it isn't taxed as a retail sale (though see the note on radio-only productions and the film-specific exemption below).

Q: Are creative-service charges like scriptwriting or editing taxable when billed separately on our invoice?
A: If they're billed alongside a tangible-media delivery (tape, CD, etc.), yes — they're treated as nondeductible costs of that taxable sale and get taxed along with everything else, even if separately itemized. If the underlying delivery is electronic only, none of it is taxed as a property sale.

Q: Does the special film production exemption (§ 1115(a)(39)) cover radio commercials too?
A: No — that broader exemption is specific to actual "film" (TV commercials, documentaries, features, shorts, etc.); audio-only radio production instead relies on the ordinary manufacturing production exemption, which requires the finished product to actually be produced for sale as tangible personal property.

Q: Is renting a recording studio always tax-free?
A: The real-property (room/space) portion is tax-free, but if the rental fee bundles in taxable recording equipment without a separately stated real-property charge, the whole rental fee can become taxable — unless the equipment itself independently qualifies for the production exemption.

Citations and references

Statutes and rules:

• Tax Law § 1101(b)(1), (3), (4), (5), (6) (retail sale, receipt, sale/purchase, tangible personal property)
• Tax Law § 1105(a), (c)(2), (c)(3) (retail sales tax; processing services; installation/repair services)
• Tax Law § 1105-B (short-life parts/tools/supplies exemption)
• Tax Law § 1115(a)(12), (a)(39), (bb) (production machinery exemption; film production exemption; film services/utilities exemption)
• 20 NYCRR 526.5, 526.6(c)(1), 526.7 (receipt, resale exclusion, sale/possession-transfer rules)
• 20 NYCRR 528.13 (production/administration/distribution phases)

Prior advisory opinions relied on:

• Charles Mintz, TSB-H-81(76)S; Crushing Enterprises, Inc., TSB-A-90(30.1)S (scriptwriting/talent services not enumerated taxable)
• CAV Corp dba Soundtrack NY, TSB-A-98(33)S (studio/equipment rental exemption certificate procedure)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2004.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a04_26s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-04(26)S
Sales Tax
November 22, 2004

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S030904A

On September 4, 2003, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Debra Horn Stachura, 374 Delaware Avenue, Suite 314, Buffalo, New
York, 14202. Petitioner, Debra Horn Stachura, provided additional information pertaining to the
Petition on December 10, 2003 and February 24, 2004.
The issue raised by Petitioner is whether certain purchases and sales by its company as
described below are subject to sales tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner’s company (Company) specializes in the production of video and audio
advertising for its clients. Company delivers the finished product to its client in the form of a
disc, CD-ROM or other tangible electronic media. However, in addition, Company may
occasionally transmit the finished product to its client or a media outlet contracted by the client
via the Internet by mp3, wav, or other file format compatible with Internet transmission.
Company’s product in tangible form becomes the property of its client upon completion of the
contract. Media placement is the responsibility of Company’s clients. However Company will,
in a separate agreement, contract to merely deliver the advertisements to media of the client’s
choice. Company does not contract with its clients to conduct advertising campaigns. Company
is not an “advertising agency” to the extent that it does not place ads or buy media time and
space for its clients.
Company may provide its clients with an itemized bill for the following items, which
include items from third parties and in-house costs:
Purchases
$
$
$
$
$
$
$
$
$
$
$

Script writing - process of conceptualizing and writing creative copy for TV, radio and
print
Shooting - filming footage based on story board in studio or on location
Producer - coordinates and oversees entire production
Film processing and transfer- transferring footage from one format to another for editing
Make-up/Stylist
Graphic Artwork - digital elements used in conjunction with footage
Music
Video duplication - copying tapes in volume
Studio rental - rental of space used for production shoots
Talent and voice-over - money paid to free-lance and in-house actors
Dubs - copies of television and radio commercials and corporate videos

2

$
$

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Film, tape and digital media stock - raw material used to record audio and video
Props - wardrobe and other objects used in creating sets necessary to the production
In-house costs

$
$
$
$

Pre-production - meetings to discuss creative process
Production - overall process of creating television and radio commercials, and corporate
videos
Editing - selecting and arranging footage to create video
Electronic filing - electronic transmission of creative material over Internet

Company is registered for New York State sales tax purposes and possesses a valid
Certificate of Authority for sales tax.
Applicable law and regulations
Section 1101 of the Tax Law provides, in part:
Definitions.
*

*

*

(b) When used in this article for the purposes of the taxes imposed by
subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section eleven
hundred ten, the following terms shall mean:
(1) Purchase at retail. A purchase by any person for any purpose other than those
set forth in clauses (A) and (B) of subparagraph (i) of paragraph (4) of this subdivision.
*

*

*

(3) Receipt. The amount of the sale price of any property and the charge for any
service taxable under this article . . . valued in money, whether received in money or
otherwise, including any amount for which credit is allowed by the vendor to the
purchaser, without any deduction for expenses or early payment discounts and also
including any charges by the vendor to the purchaser for shipping or delivery . . .
regardless of whether such charges are separately stated in the written contract, if any, or
on the bill rendered to such purchaser and regardless of whether such shipping or delivery
. . . is provided by such vendor or a third party, but excluding any credit for tangible
personal property accepted in part payment and intended for resale. . . .
(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such or as a physical component part of tangible
personal property, or (B) for use by that person in performing the services subject to tax
under paragraphs (1), (2), (3), (5), (7) and (8) of subdivision (c) of section eleven hundred

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five where the property so sold becomes a physical component part of the property upon
which the services are performed or where the property so sold is later actually
transferred to the purchaser of the service in conjunction with the performance of the
service subject to tax. . . .
*

*

*

(5) Sale, selling or purchase. Any transfer of title or possession or both, exchange
or barter, rental, lease or license to use or consume (including, with respect to computer
software, merely the right to reproduce), conditional or otherwise, in any manner or by
any means whatsoever for a consideration, or any agreement therefor, including the
rendering of any service, taxable under this article, for a consideration or any agreement
therefor.
(6) Tangible personal property. Corporeal personal property of any nature. . . .
Such term shall also include pre-written computer software, whether sold as part of a
package, as a separate component, or otherwise, and regardless of the medium by means
of which such software is conveyed to a purchaser. . . .
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax. On and after June first, nineteen hundred seventy-one,
there is hereby imposed and there shall be paid a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
*

*

*

(2) Producing, fabricating, processing, printing or imprinting tangible personal
property, performed for a person who directly or indirectly furnishes the tangible
personal property, not purchased by him for resale, upon which services are performed.
(3) Installing tangible personal property . . . or maintaining, servicing or repairing
tangible personal property . . . not held for sale in the regular course of business, whether
or not the services are performed directly or by means of coin-operated equipment or by
any other means, and whether or not any tangible personal property is transferred in
conjunction therewith , . . .
Section 1105-B of the Tax Law provides:

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Exemptions for certain parts, tools, supplies and services relating to tangible
personal property used or consumed in production:
(a) Receipts from the retail sales of parts with a useful life of one year or less,
tools and supplies for use or consumption directly and predominantly in the production of
tangible personal property, gas, electricity, refrigeration or steam for sale by
manufacturing, processing, generating, assembling, refining, mining or extracting shall be
exempt from the tax imposed by subdivision (a) of section eleven hundred five of this
article.
(b) Receipts from every sale of the services of installing, repairing, maintaining or
servicing the tangible personal property described in paragraph twelve of subdivision (a)
of section eleven hundred fifteen of this article, including the parts with a useful life of
one year or less, tools and supplies described in subdivision (a) of this section, to the
extent subject to such tax, shall be exempt from the tax on sales imposed under
subdivision (c) of section eleven hundred five of this article.
(c) Parts with a useful life of one year or less, tools and supplies described in
subdivision (a) of this section and services described in subdivision (b) of this section
shall be exempt from the compensating use tax imposed by section eleven hundred ten of
this article.
Section 1115 of the Tax Law provides, in part:
Exemptions from sales and use taxes (a) Receipts from the following shall be
exempt from the tax on retail sales imposed under subdivision (a) of section eleven
hundred five and the compensating use tax imposed under section eleven hundred ten:
*

*

*

(12) Machinery or equipment for use or consumption directly and predominantly
in the production of tangible personal property, gas, electricity, refrigeration or steam for
sale, by manufacturing, processing, generating, assembling, refining, mining or
extracting, but not including parts with a useful life of one year or less or tools or supplies
used in connection with such machinery or equipment. . . .
*

*

*

(39) Tangible personal property for use or consumption directly and
predominantly in the production, including editing, dubbing and mixing, of a film for sale
regardless of the medium by means of which the film is conveyed to a purchaser. For
purposes of this paragraph, the term “film” means feature films, documentary films,
shorts, television films, television commercials and similar productions.
*

*

*

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(bb) 1. Receipts from the sale of services described in paragraph two or three of
subdivision (c) of section eleven hundred five of this article, and consideration given or
contracted to be given for, or for the use of, such services, shall be exempt from tax under
this article when rendered with respect to property exempt under paragraph thirty-nine of
subdivision (a) of this section.

2. Fuel, gas, electricity, refrigeration and steam, and gas, electric, refrigeration
   and steam service of whatever nature for use or consumption directly and exclusively in
   the production of a film for sale, as described in paragraph thirty-nine of subdivision (a)
   of this section, shall be exempt from the taxes imposed under subdivisions (a) and (b) of
   section eleven hundred five and the compensating use tax imposed under section eleven
   hundred ten of this article.
   Section 526.5 of the Sales and Use Tax Regulations provides, in part:
   Receipt. (a) Definition. The word receipt means the amount of the sale price of
   any property and the charge for any service taxable under articles 28 and 29 of the Tax
   Law, valued in money, whether received in money or otherwise. . . .
   Section 526.6(c)(1) of the Sales and Use Tax Regulations provides, in part:
   Where a person, in the course of his business operations, purchases tangible
   personal property or services which he intends to sell, either in the form in which
   purchased, or as a component part of other property or services, the property or services
   which he has purchased will be considered as purchased for resale, and therefore not
   subject to tax until he has transferred the property to his customer.
   Section 526.7 of the Sales and Use Tax Regulations provides, in part:
   Sale, selling or purchase. (a) Definition. (1) The words sale, selling or purchase
   mean any transaction in which there is a transfer of title or possession, or both, of
   tangible personal property for a consideration.
   *

*

*

(4) The term sale also includes the rendering of a service enumerated in
subdivisions (b) and (c) of this section, and the transactions enumerated in subdivision
(d), (e) or (f) of section 1105 of the Tax Law, except services taxed under section 1105(c)
of the Tax Law when performed by an employee.
*

*

*

(e) Transfer of possession. (1) Except as otherwise provided in paragraph (3) of
this subdivision, a sale is taxable at the place where the tangible personal property or
service is delivered, or the point at which possession is transferred by the vendor to the
purchaser or his designee.

6

*

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*

(6) When a lease of equipment includes the services of an operator, possession is
deemed to be transferred where the lessee has the right to direct and control the use of the
equipment. The operator's wages, when separately stated, are excludible from the receipt
of the lease, provided they reflect prevailing wage rates.
Section 528.13 of the Sales and Use Tax Regulations provides, in part:
Machinery and equipment used in production; telephone and telegraph
equipment; parts, tools and supplies.
(a) Exemption. (1) Exemption from statewide tax. An exemption is allowed from
the tax imposed under subdivisions (a) and (c) of section 1105 of the Tax Law, and from
the compensating use tax imposed under section 1110 of the Tax Law, for receipts from
sales of the following:
(i) Machinery or equipment (including parts with a useful life of more than one
year) used or consumed directly and predominantly in the production for sale of tangible
personal property, gas, electricity, refrigeration or steam, by manufacturing, processing,
generating, assembling, refining, mining or extracting. . . .
*

*

*

(b) Production. (1) The activities listed in paragraph (a)(1) of this section are
classified as administration, production or distribution.
(i) Administration includes activities such as sales promotion, general office work,
credit and collection, purchasing, maintenance, transporting, receiving and testing of raw
materials and clerical work in production such as preparation of work, production and
time records.
(ii) Production includes the production line of the plant starting with the handling
and storage of raw materials at the plant site and continuing through the last step of
production where the product is finished and packaged for sale.
(iii) Distribution includes all operations subsequent to production, such as storing,
displaying, selling, loading and shipping finished products.
(2) The exemption applies only to machinery and equipment used directly and
predominantly in the production phase. Machinery and equipment partly used in the
administration and distribution phases does not qualify for the exemption, unless it is
used directly and predominantly in the production phase.
*

*

*

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(c) Directly and predominantly. (1) Directly means the machinery or equipment
must, during the production phase of a process:
(i) act upon or effect a change in material to form the product to be sold, or
(ii) have an active causal relationship in the production of the product to be sold,
or
(iii) be used in the handling, storage, or conveyance of materials or the product to
be sold, or
(iv) be used to place the product to be sold in the package in which it will enter
the stream of commerce.
(2) Usage in activities collateral to the actual production process is not deemed to
be used directly in production.
*

*

*

(4) Machinery or equipment is used predominantly in production, if over 50
percent of its use is directly in the production phase of a process.
Opinion
Company specializes in the production of video and audio advertising. Generally,
Company sells the advertisements in a tangible electronic format, such as video tapes, audio
tapes, CD-ROMs and the like which are transferred to its clients. Media placement is the
responsibility of Company’s clients. However Company will, pursuant to a separate agreement,
merely deliver the advertisements to a media outlet of the client’s choice.
Company’s sales of video tapes, audio tapes, CD-ROMs and the like are retail sales of
tangible personal property pursuant to section 1101(b)(4) of the Tax Law, and charges for such
tangible personal property are subject to sales tax pursuant to section 1105(a) of the Tax Law
when delivered to a location in New York State. Charges for music, audio recordings or artwork
delivered electronically pursuant to the contractual agreement are not sales of tangible personal
property and are thus not subject to sales tax. Although Company may separately state, on its bill
to its customer, charges for pre-production, script writing, shooting of film, production, etc.,
these charges are in conjunction with the sale of video tapes, audio tapes and/or CD-ROMs and
all such charges represent expenses incurred by Company in making a sale of tangible personal
property. Such charges are not deductible from the receipt subject to sales tax. See section
1101(b)(3) of the Tax Law and section 526.5(e) of the Sales and Use Tax Regulations.
Company’s purchases of tangible personal property and services which are used to
produce video (television) and audio (radio) advertisements may fall into the following
categories: 1) purchases of services not enumerated in Article 28 of the Tax Law; or 2) purchases

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of tangible personal property or services intended for resale; or 3) purchases of tangible personal
property or services used directly and predominantly in the production of tangible personal
property for sale; or 4) taxable purchases of tangible personal property or services. Any service
otherwise subject to sales tax is not taxable when performed for Company by its employees. See
section 526.7(a)(4) of the Sales and Use Tax Regulations.
Script writing and talent and voice over services (services provided by actors or
narrators) are not services enumerated as taxable under section 1105(c) of the Tax Law. See
Charles Mintz, Adv Op St Tx Comm, April 1, 1981, TSB-H-81(76)S; Crushing Enterprises,
Inc., Adv Op Comm T&F, October 10, 1990, TSB-A-90(30.1)S. Accordingly, Company’s
purchases of these services are not subject to sales tax. Make up and stylist services are not
subject to sales tax when performed outside of New York City. Such services are subject to sales
tax at the current local rate of 4c% when performed in New York City.
Company’s purchases of tangible personal property, and services to such tangible
personal property, that will become a component part of the product sold (tape, CD, film, etc.)
and are actually transferred to its customer as part of the sale are considered to be purchases for
resale and may be made without payment of sales tax. See section 1101(b)(4) of the Tax Law
and section 526.6(c)(1) of the Sales and Use Tax Regulations. Company should issue a properly
completed Resale Certificate (Form ST-120) to substantiate the exempt nature of the transaction.
See section 1132(c) of the Tax Law.
Company’s purchases of the services of shooting film or taping audio, film and audio
processing and transfer, editing, video and audio duplication services performed on blank tape
provided by Company, and purchases of tangible personal property such as film, dubs, video and
audio tape and digital media stock, will qualify as purchases for resale only when the film, tape
or other tangible personal property which is purchased, or on which the services are performed,
is actually transferred to Company’s customer as part of the finished product without prior use
by Company. For example, Company’s contract with its customer may provide for Company to
transfer a radio commercial to its customer on a CD. Company may use audio tape to record the
radio commercial. After editing and adding music and/or sound effects, Company transfers the
commercial to a CD for sale to the customer per its contract. Company may also give the
customer the audio tape of the commercial. The purchase of the blank CD by Company is a
purchase for resale. However, the purchase of the blank audio tape was for Company’s use in
creating the CD and, even though the tape was ultimately transferred to the customer, it was
purchased for Company’s use and not for resale. Though not eligible for the resale exemption,
since the tape is used in the production of the CD for sale, it may be eligible for the production
exemptions provided in section 1115 of the Tax Law as discussed below.
The creation of video tapes, audio tapes, and CD-ROMs is considered a manufacturing
activity that results in the production of tangible personal property. Purchases of tangible
personal property which is used directly and predominantly in the production of video tapes,
audio tapes and CD-ROMs for sale, and services to such property, may be exempt from all State
and local sales taxes pursuant to section 1115(a)(12), section 1105-B, section 1115(a)(39) or
section 1115(bb) of the Tax Law. The exemptions granted pursuant to these sections only apply

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to the purchase of property or services that are used or consumed directly and predominantly in
the production process. They do not apply to the purchase of property or services for use in
either administrative or distribution activities. See section 528.13(b) of the Sales and Use Tax
Regulations. When producing video tapes, audio tapes, CD-ROMs and the like for sale,
Company is, therefore, entitled to all of the exemptions available to manufacturers. Since
Company is registered as a New York State sales tax vendor, it may issue all appropriate
exemption certificates to its suppliers. Machinery or equipment, as well as parts, tools and
supplies, used or consumed directly and predominantly in the production of video tapes, audio
tapes, CD-ROMs and the like for sale may be purchased or leased exempt from State and local
sales and use taxes. Machinery or equipment is used predominantly in production if more than
50 percent of its use is directly in the production phase of a process. See section 528.13(c)(4) of
the Sales and Use Tax Regulations. Likewise, services of installing, repairing, maintaining or
servicing equipment used by Company directly and predominantly in the production of tangible
personal property for sale may be purchased exempt under section 1105-B(b) of the Tax Law.
Section 1115(a)(39) of the Tax Law provides that tangible personal property for use or
consumption directly and predominantly in the production, including editing, dubbing and
mixing, of a film for sale, regardless of the medium by means of which the film is conveyed to a
purchaser, is exempt from sales and use tax. Therefore, even if the video production is
transferred to the customer electronically (i.e., via the Internet), the producer still qualifies for the
exemptions granted pursuant to section 1115(a)(39) of the Tax Law. Section 1115(a)(39) of the
Tax Law defines the term film as feature films, documentary films, shorts, television films,
television commercials and similar productions.
Tangible personal property such as graphic artwork (digital elements used in conjunction
with footage), or music, furnished in a tangible format such as a tape or CD, props (wardrobe and
other objects used in creating sets), film, video tape and digital media stock which are not
actually transferred to Company’s customer but are used by Company directly and
predominantly in the production of film for sale will be exempt from sales and use tax pursuant
to sections 1115(a)(12) and 1115(a)(39) of the Tax Law. Services such as shooting film, film
processing and transfer, and film editing as well as repair or maintenance of cameras, video and
audio recorders and other equipment, are exempt from tax under section 1115(bb) of the Tax
Law when performed on qualifying property used in film production. The tax treatment of any
tangible personal property or services used in the production of video tapes, CD-ROMs and the
like for sale will be determined by its function in the production process. For example, story
boards which are created and used in the production of a film for sale qualify as exempt
equipment. Story boards for proposed commercials created by an advertising firm as part of the
bid process to win a client do not qualify as production equipment and are subject to tax.
Charges for studio time are charges for the rental of a recording studio and for the
equipment contained in the studio. Studio equipment is considered to be transferred to Company
(if included in the studio rental) since Company or its agents direct and control the use of the
equipment. See section 526.7(e)(6) of the Sales and Use Tax Regulations. The rental of real
property such as a sound studio is not subject to New York State and local sales and use taxes.
Therefore, the fees paid for studio time are not subject to New York State and local sales and use

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taxes if such fees are solely for the rental of real property. However, the rental of recording
equipment may be considered the sale of tangible personal property and, therefore, subject to
sales tax, unless it otherwise qualifies for exemption. The production exemption under section
1115(a)(12) or 1115(a)(39) of the Tax Law may apply if the equipment is used to produce
tangible personal property or a film (even if intangible) for sale. See section 528.13 of the Sales
and Use Tax Regulations. If the rental fee includes both the rental of a sound studio and the
rental of taxable equipment, the entire fee is taxable unless the nontaxable charges for the sound
studio rental are separately stated on the bill or invoice and are reasonably related to its true
value. Company may issue an Exempt Use Certificate (Form ST-121) to rent equipment without
the payment of sales tax provided such equipment is used directly and predominantly to produce
tangible personal property or a film for sale. See CAV Corp dba Soundtrack NY, Adv Op Comm
T&F, May 20, 1998, TSB-A-98(33)S.
It must be noted that sections 1115(a)(39) and 1115(bb) of the Tax Law do not apply to
the production of audio tapes or CDs for radio play. Section 1115(a)(12) of the Tax Law may
apply to purchases of tangible personal property and services in connection with the production
of such audio tapes or CDs. If an audio commercial is produced for delivery electronically (and
not as tangible personal property), not only are the provisions of section 1115(a)(39) inapplicable
to purchases used and consumed in the production of the audio commercial, but the provisions of
sections 1115(a)(12) and 1105-B of the Tax Law would likewise be inapplicable since no
tangible personal property has been produced for sale.
In order to make exempt purchases of tangible personal property used directly and
predominantly in the production of video tapes, audio tapes and CD-ROMs for sale, and services
to such property, Company should provide a properly completed Exempt Use Certificate (Form
ST-121) to its supplier.

DATED: November 22, 2004

NOTE

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.