I sell customized emergency-preparedness plans, training videos, brochures, and live drills to schools and businesses -- which parts of my invoice owe New York sales tax?

Plain-English summary

AK Productions LLC, headquartered in Seattle, Washington and registered for sales tax in New York State, provides customized fire, life-safety, and emergency-preparedness plans and training programs to schools, government organizations, corporations, and commercial office buildings. Customers pick which topics to cover — fire, power failure, building safety systems, medical emergency, bomb threat, building evacuation, explosion, natural disaster, and the like. AK Productions' personnel travel to each customer's location to develop custom evacuation maps, brochures, and training programs, film training videos on-site instructing tenants, employees, warden teams, and staff how to respond to emergencies, and run an online system that delivers those customized videos to tenants and staff at each client location. About half the content of the training materials is standard, proprietary core material, and about half is customized per project. AK Productions also conducts on-site drills and live training for customer personnel, tailored to that facility's safety systems, egress routes, and reassembly points. Building floor plan diagrams, emergency signage, and emergency response plans are fully customized to each facility. All of these products can be purchased separately, a la carte, with charges separately stated on AK Productions' contract, bill, or invoice.

AK Productions asked whether these sales of emergency-preparedness plans, training programs, and related products are subject to New York sales tax.

The Department's answer split the offering into pieces. Physical products are taxable tangible personal property. Videos sold as tapes or discs, brochures, evacuation maps, building floor plan diagrams, and emergency signage are all tangible personal property, so receipts from selling them are subject to sales tax under Tax Law §1105(a) — unless the customer is a government entity or qualifying exempt organization under §1116(a), in which case AK Productions doesn't need to collect tax if it obtains a properly completed Exempt Organization Exempt Purchase Certificate (Form ST-119.1) or a governmental purchase order/contract, retained for three years.

Live instructional services are not taxable. On-site drills and live training programs are instructional services, and instructional services aren't among the services enumerated as taxable under §1105(c) of the Tax Law, so charges for them escape sales tax.

Customized emergency response plans can also escape tax, but only under conditions. A response plan developed for one specific customer, which can't be applied to other customers, could be viewed as an "information service" under §1105(c)(1) — but that section excludes information that is personal or individual in nature and not substantially incorporated into reports furnished to other customers. Because these plans are customer-specific, they qualify for that exclusion and aren't taxed, provided no tangible personal property is transferred to the customer in connection with the service. If, instead, the emergency-preparedness planning work results in the sale of tangible personal property (like a training video), the whole receipt becomes taxable as an expense of making that taxable sale — unless the planning service is contracted for separately from the contract to produce the video or other tangible item.

Bundling matters. Under Sales and Use Tax Regulations §527.1(b), if AK Productions charged one single price for everything — taxable goods and exempt services together — the entire receipt would be taxed. But because AK Productions sells each service separately from its tangible-property sales and bills them separately, only the tangible-property receipts are taxed (with the possible exception noted above for response plans bundled with a video).

Online-delivered training videos are untaxed intangible content, not software. Even though prewritten computer software delivered electronically is taxable under §§1101(b)(6) and 1105(a), the Department treats videos delivered to customers electronically over the internet — like music and photographs delivered electronically — as sales of an intangible, not sales of software, and therefore not subject to sales or compensating use tax under §1105(a) or §1110(a)(A).

What this means for you

Emergency-preparedness, safety-training, and similar bundled-offering businesses

If you sell a mix of physical materials (videos on disc, brochures, signage, maps) alongside live training, drills, and customized planning work, keep every component separately priced, separately contracted, and separately billed. Doing so confines sales tax to the tangible-property line items and keeps your instructional-service and truly customer-specific planning charges untaxed. Bundle everything into one price, and the whole thing becomes taxable.

Businesses delivering training content online

Delivering training videos electronically (streamed or downloaded) rather than on tape or disc is not automatically taxed as "prewritten software" just because it's digital — the Department treats video content delivered electronically the same as electronically delivered music or photographs: an untaxed intangible, distinct from taxable canned software.

Vendors selling to schools, government agencies, or nonprofits

Sales of your taxable tangible products to a §1116(a)-exempt customer don't require you to collect sales tax, but you must obtain and retain (for three years) a Form ST-119.1 Exempt Organization Exempt Purchase Certificate, or a signed governmental purchase order or contract, to substantiate the exemption.

Accountants and tax professionals

This opinion is a practical illustration of the §527.1(b) bundling rule and its Morton L. Coren, P.C. gloss: separately contracted, separately billed components are taxed (or not) on their own terms, but combine taxable tangible property with an otherwise-exempt service under one price and the whole charge becomes taxable. It's also useful precedent on the personal/individual information exclusion under §1105(c)(1) for customer-specific deliverables, and on electronically delivered video/audio/photo content being treated as intangible rather than taxable software.

Common questions

Q: Do I owe sales tax on training videos I sell on DVD or as physical media?
A: Yes — videos sold as tapes or discs are tangible personal property, taxable under Tax Law §1105(a), just like brochures, maps, and signage.

Q: Is my live, on-site training or drill session taxable?
A: No. Live instructional services and on-site drills aren't among the services enumerated as taxable under Tax Law §1105(c), so charges for them are not subject to sales tax.

Q: What about a fully customized plan I create for just one client?
A: It can qualify as exempt "personal or individual" information under §1105(c)(1), as long as it's genuinely customer-specific (not substantially reused for other customers) and no tangible personal property is transferred along with it. If the same engagement also produces a taxable item like a training video, bill the planning service under a separate contract, or the whole charge becomes taxable.

Q: Does delivering my training videos online instead of on disc avoid sales tax?
A: According to this opinion's reasoning, yes — video content delivered electronically over the internet is treated like electronically delivered music or photographs: an intangible, not taxable prewritten software, so it isn't subject to sales or compensating use tax.

Q: Can I rely on this ruling for my own emergency-preparedness or training business?
A: Not directly. This is an Advisory Opinion binding only on AK Productions LLC, based on the specific facts it described (separately priced a la carte products, separately billed services). A different bundling structure or different facts could change the analysis for another taxpayer.

Citations and references

Statutes and regulations:

• Tax Law §1101(b)(5) (definition of "sale, selling or purchase")
• Tax Law §1101(b)(6) (definition of "tangible personal property"; prewritten computer software)
• Tax Law §1105(a) (tax on retail sales of tangible personal property)
• Tax Law §1105(c)(1) (tax on furnishing information; personal/individual information exclusion)
• Tax Law §1105(c)(9)(i) (tax on entertainment/information services via telephony)
• Tax Law §1110(a)(A) (compensating use tax)
• Tax Law §1116(a) (exemption for governmental entities and exempt organizations)
• Sales and Use Tax Regulations §525.2(a)(3) (destination tax)
• Sales and Use Tax Regulations §527.1(b) (bundled taxable/exempt items taxed on total price)

Prior opinions and case law referenced:

• Morton L. Coren, P.C., TSB-A-90(33)S (bundled consulting services + training videotapes taxed as a whole unless separately contracted)
• Paul J. Carucci, TSB-A-90(54)S (separately billed services not taxed)
• PricewaterhouseCoopers LLP, TSB-A-03(11)S (bundling rule extended to services)
• Salomon & Leitgeb CPA's, LLP, TSB-A-97(44)S (bundling rule extended to services)
• Penfold v State Tax Commission, 114 AD2d 696 (1985)
• Canine Containment Distributing Company, TSB-A-06(2)S (instructional services not enumerated as taxable)
• Little Chefs, Ltd., TSB-A-02(34)S (instructional services not enumerated as taxable)
• Hodgson, Russ, Andrews, Woods and Goodyear, TSB-A-92(31)S (instructional services not enumerated as taxable)
• Economic Cycle Research Institute, Inc., TSB-A-97(42)S (instructional services not enumerated as taxable)
• Greenstone & Rabasca Advertising, Inc., TSB-A-86(35)S (personal/individual information exclusion)
• Universal Music Group, TSB-A-01(15)S (electronically delivered content not treated as software)
• Martin R. Timm, TSB-A-05(34)S (electronically delivered content not treated as software)
• Apple Computer, Inc., TSB-A-07(11)S (electronically delivered content not treated as software)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a08_41s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Taxpayer Guidance Division

TSB-A-08(41)S
Sales Tax
September 10, 2008

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S071126A

On November 26, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from AK Productions LLC, 2517 Eastlake Avenue East, Suite 200, Seattle,
Washington 98102. Petitioner, AK Productions LLC, provided additional information pertaining
to the Petition on March 27, 2008.
The issue raised by Petitioner is whether its sales of emergency preparedness plans,
training programs, and related products as described below are subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is headquartered in Seattle, Washington and is registered for sales tax in
New York State. Petitioner provides customized fire, life safety, and emergency preparedness
plans and training programs consisting of videos, brochures, and live training. Petitioner
provides this service to schools, government organizations, corporations, and commercial office
buildings.
Customers choose the topics to be included in their plan and/or training program. Some
of the most common topics include fire, power failure, building safety systems, medical
emergency, bomb threat, building evacuation, explosion, and natural disaster.
Petitioner's personnel travel to the customers’ locations and develop custom evacuation
maps, brochures, and training programs. Petitioner films training videos at customer locations
that instruct tenants, employees, warden teams, and staff regarding the proper response to a
variety of emergency situations. Petitioner also provides an online training system that delivers
the customized emergency training videos to the tenants and staff in each client location.
The videos, brochures, and online training system are based on core materials proprietary
to Petitioner. These core materials are customized for each project. Generally, about half the
content of the training materials are standard, and half are custom.
Petitioner also conducts on-site drills and training programs for customer personnel and
customizes live training programs and drills to each facility. Tenants and staff are instructed on
the safety systems in place in that building, specific egress routes, reassembly points in the
neighborhood, and other details about the building’s emergency plan.
Building floor plan diagrams, emergency signage, and emergency response plans are
completely customized to each facility. Petitioner's products can be separately purchased on an

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a la carte basis and charges for such products are separately stated on its contract, bill, or invoice
to its customer.
Applicable law and regulations
Section 1101(b) of the Tax Law provides, in part:
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:
*

*

*

(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 . . . 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:
(1) The furnishing of information by printed, mimeographed or multigraphed
matter or by duplicating written or printed matter in any other manner, including the
services of collecting, compiling or analyzing information of any kind or nature and
furnishing reports thereof to other persons, but excluding the furnishing of information
which is personal or individual in nature and which is not or may not be substantially
incorporated in reports furnished to other persons, . . .

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*

*

*

(9)(i) The furnishing or provision of an entertainment service or of an information
service (but not an information service subject to tax under paragraph one of this
subdivision), which is furnished, provided, or delivered by means of telephony or
telegraphy or telephone or telegraph service (whether intrastate or interstate) of whatever
nature, such as entertainment or information services provided through 800 or 900
numbers or mass announcement services or interactive information network services.
Provided, however, that in no event (i) shall the furnishing or provision of an information
service be taxed under this paragraph unless it would otherwise be subject to taxation
under paragraph one of this subdivision if it were furnished by printed . . . matter or by
duplicating written or printed matter in any other manner. . . .
Section 1116(a) of the Tax Law provides for exemption from the sales and compensating
use taxes with respect to purchases by New York State governmental entities, United States
governmental entities, certain nonprofit organizations and other entities who have received
New York State sales tax exempt organization status.
Section 525.2(a)(3) of the Sales and Use Tax Regulations provides:
Except as specifically provided otherwise, the sales tax is a “destination tax.” The
point of delivery or point at which possession is transferred by the vendor to the
purchaser, or the purchaser’s designee, controls both the tax incidence and the tax rate.
Section 527.1(b) of the Sales and Use Tax Regulations provides:
Taxable and exempt items sold as a single unit. When tangible personal property,
composed of taxable and exempt items is sold as a single unit, the tax shall be collected
on the total price.
Opinion
Petitioner provides customized fire, life safety, and emergency preparedness plans and
training programs consisting of videos, brochures, and live training to schools, government
organizations, corporations, and commercial office buildings. Petitioner also provides an online
training system that delivers the customized emergency training videos to the tenants and staff in
each client location. Petitioner's products can be separately purchased on an a la carte basis.
The various products sold by Petitioner include tangible personal property (i.e., videos
when sold as tapes or discs, brochures, evacuation maps, building floor plan diagrams, and
emergency signage), instructional services (i.e., on-site drills, training programs, and emergency
response plans) and intangible property (i.e., video training delivered online).

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When tangible personal property composed of taxable and exempt items is sold as a
single unit, sales tax is collected on the total price. See section 527.1(b) of the Sales and Use
Tax Regulations. The rule has been extended to sales of taxable and exempt services and sales
of services with tangible personal property. See PricewaterhouseCoopers LLP, Adv Op Comm
T&F, March 25, 2003, TSB-A-03(11)S; Salomon & Leitgeb CPA’s, LLP, Adv Op Comm T&F,
July 23, 1997, TSB-A-97(44)S. In Morton L. Coren, P.C., Adv Op Comm T&F, June 29, 1990,
TSB-A-90(33)S, it was concluded that even though the components of a particular sale could be
separately stated, calculated or estimated, if such components could not be separately purchased,
the combination of items must be considered as one and, thus, subject to sales tax as a single
purchase. See also Penfold v State Tax Commission, 114 AD 2d 696 [1985].
Receipts from the sale of Petitioner’s videos when sold as tapes or discs, brochures,
evacuation maps, building floor plan diagrams, and emergency signage are subject to sales tax
pursuant to section 1105(a) of the Tax Law. Petitioner’s instructional services, with the possible
exception of emergency response plans discussed below, are not services enumerated in section
1105 of the Tax Law and charges for such services are generally not subject to sales tax. In
accordance with section 527.1(b) of the Sales and Use Tax Regulations, were Petitioner to
charge a single price for all of its products and services, the entire receipt would be subject to
sales tax. However, in the present case, Petitioner sells each of its services separately from its
sales of tangible personal property, and the charges for such services are billed separately from
the charges for tangible personal property. Thus, with the possible exception of emergency
response plans discussed below, only the receipts for the tangible personal property are subject to
sales tax. See Paul J. Carucci, Adv Op Comm T&F, October 24, 1990, TSB-A-90(54)S.
Petitioner's sales of videos, brochures, evacuation maps, building floor plan diagrams,
and emergency signage are sales of tangible personal property the receipts from which are
subject to sales tax under section 1105(a) of the Tax Law. If, however, Petitioner's customer is
an entity exempt from sales tax pursuant to section 1116(a) of the Tax Law, Petitioner need not
collect sales tax on these sales. In lieu of collecting the sales tax from such customers, Petitioner
should obtain a properly completed Exempt Organization Exempt Purchase Certificate (Form
ST-119.1), or, in the case of a governmental entity, a copy of a governmental purchase order or a
contract signed by an authorized governmental representative to substantiate the exempt nature
of the transaction. Petitioner must retain such documents with its sales records for a period of
three years from the due date of the sales tax return covering the sales tax reporting period in
which the sale was made, or the date such return was filed, whichever is later. See Parts 529 and
533 of the Sales and Use Tax Regulations.
Petitioner's provision of the services of conducting live training programs and on-site
drills constitute instructional services that are not enumerated as taxable in section 1105(c) of the
Tax Law. Therefore, the charges for these services are not subject to sales tax. See Canine
Containment Distributing Company, Adv Op Comm T & F, January 9, 2006, TSB-A-06(2)S;
Little Chefs, Ltd., Adv Op Comm T & F, July 25, 2002, TSB-A-02(34)S; Hodgson, Russ,

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Andrews, Woods and Goodyear, Adv Op Comm T&F, April 2, 1992, TSB-A-92(31)S; Economic
Cycle Research Institute, Inc., Adv Op Comm T & F, July 23, 1997, TSB-A-97(42)S.
Petitioner's emergency response plans that are developed for a specific customer and
cannot be applied to Petitioner's other customers do not appear, based on the facts provided in
this Opinion, to be taxable services under section 1105(c) of the Tax Law. Such services might
be considered an information service for purposes of section 1105(c)(1) of the Tax Law.
However, if these plans are designed for specific customers and are not applicable to other
customers, such service would appear to meet the exclusionary provision in section 1105(c)(1)
which excepts information which is personal and individual in nature and not substantially
incorporated into reports provided to other customers from the tax. Provided that no tangible
personal property is transferred to the customer in connection with this service, receipts from the
sale of the service would not be subject to sales tax. See Greenstone & Rabasca Advertising,
Inc., Adv Op St Tx Comm, September 9, 1986, TSB-A-86(35)S.
In Morton L. Coren, P.C., supra, the petitioner's client, a behavioral scientist, conducted
interviews with employees of his customers and developed strategies for training his customers'
employees. He prepared oral and/or written reports and discussed his recommendations with his
customers. In addition to the consulting services, the behavioral scientist produced videotapes
for his customers to be used for training employees in selling techniques, customer services, and
other matters. The cost of producing the tapes included both professional and production
services including consultation with customers. The advisory opinion concluded that the
behavioral scientist had to collect sales tax on his entire charge for the tapes, including any
portion of the charge for the tapes which represented the charge for consulting services that were
performed in connection with the preparation of the tapes. The advisory opinion indicated,
however, that if the consulting services were supplied and billed pursuant to a separate contract
or agreement apart from the contract or agreement for the sale of the tapes, then the charges for
the consulting services would not be subject to sales tax. However, the separately stated charge
for the tapes would still be subject to sales tax.
Accordingly, if Petitioner does not create or transfer any tangible personal property in
connection with providing emergency preparedness planning, Petitioner's charge for this service
will not be subject to sales and use taxes to the extent that the service is personal or individual in
nature and is not subject to tax under section 1105(c)(1) of the Tax Law. However, if the
provision of the service of emergency preparedness planning results in the sale of tangible
personal property such as a training video, such service is considered an expense of Petitioner in
making a sale of tangible personal property and the entire receipt is subject to sales tax under
section 1105(a) of the Tax Law unless the service is contracted separately from the contract to
produce the training video or other tangible personal property. See Morton L. Coren, P.C.,
supra.
Petitioner provides an online training system that delivers customized emergency training
videos to the tenants and staff in each client location. While receipts from the sale of prewritten

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software delivered electronically are subject to sales tax pursuant to sections 1101(b)(6) and
1105(a) of the Tax Law, sales of music and photographs delivered electronically are not
considered to be sales of software. In the same way that audio content (music) and visual
content (photographs) delivered electronically are not subject to sales tax, sales of videos that are
delivered to customers electronically over the Internet and downloaded for use on the customer's
computer or other device likewise are sales of an intangible and are not subject to sales or
compensating use tax under section 1105(a) or 1110(a)(A) of the Tax Law. See Universal Music
Group, Adv Op Comm T&F, April 18, 2001, TSB-A-01(15)S; Martin R. Timm, Adv Op Comm
T&F, September 27, 2005, TSB-A-05(34)S; Apple Computer, Inc., Adv Op Comm T&F, April
12, 2007, TSB-A-07(11)S.

DATED: September 10, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the
person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.