Are a lighting-design firm's services taxable when its work is incorporated into a licensed architect's or engineer's sealed drawings?

Plain-English summary

The petitioner is a firm that designs, lays out, and specifies architectural lighting systems, working as a subconsultant to architects and engineers: it prepares fixture layouts, recommends fixtures, runs lighting-level/energy-code calculations, writes technical specifications, and helps develop emergency-lighting strategy. Its work is incorporated into the architect's or engineer's signed and sealed drawings. None of its employees are licensed architects or engineers. It asked whether its lighting-design services are taxable (1) when hired by a licensed architect/engineer and (2) when hired directly by a building owner.

The Office of Counsel concluded the services are taxable interior design services in both cases.

• Taxable interior decorating/designing service. Tax Law 1105(c)(7) taxes interior decorating and designing services "by whomsoever performed." The firm performs design services for building interiors, so its receipts are taxable.
• The architect/engineer exclusion doesn't apply. 1105(c)(7) excludes the practice of architecture/engineering (Education Law 7301/7201) only when performed by a licensed architect or engineer. The firm isn't licensed, so the exclusion doesn't reach its work.
• Incorporation into sealed drawings is irrelevant. That the firm's work is folded into the professional's signed and sealed documents has no bearing on taxability. The exclusion covers a licensed professional's sale of architecture/engineering -- not their purchase of design services from a subconsultant.
• Resale exclusion doesn't help. The architect/engineer isn't itself reselling a taxable design service (its own sealed work is excluded), so the firm can't sell to them tax-free for resale.
• NYC break. New York City doesn't tax interior decorating/design (Tax Law 1210(a)(4)(iv); TSB-M-95(13)S). Services delivered in NYC owe State sales tax (including the MCTD tax) but not NYC tax; outside NYC, both State and local tax apply.

What this means for you

Design subconsultants (lighting, interiors, etc.)

If you're not a licensed architect or engineer, your design work is a taxable 1105(c)(7) service -- and you can't shelter it just because it gets sealed into a licensed professional's drawings, or because an architect (rather than the owner) hired you. The licensed-professional exclusion protects the licensed firm's own sealed services, not the unlicensed inputs they buy.

Architects and engineers buying design help

Expect to pay sales tax on design services you purchase from unlicensed subconsultants; you can't issue a resale certificate, because your own sealed architecture/engineering output isn't a taxable service being resold.

Projects in New York City

Interior design delivered in NYC carries State + MCTD tax but no NYC tax -- a meaningful difference from the rest of the state.

Common questions

Q: Our lighting design ends up in the architect's sealed drawings -- isn't it exempt architecture?
A: No. The exclusion applies only when a licensed architect/engineer performs the service. An unlicensed design firm's work is taxable regardless of where it's incorporated.

Q: Can the architect buy our service for resale tax-free?
A: No. The architect isn't reselling a taxable design service -- its own sealed work is excluded -- so the resale exclusion doesn't apply.

Q: Is it taxable in New York City?
A: NYC doesn't tax interior decorating/design, so NYC-delivered work owes State and MCTD tax but not NYC tax.

Citations and references

• Tax Law section 1105(c)(7) (interior decorating and designing services)
• Education Law section 7301 (practice of architecture) and section 7201 (practice of engineering)
• Tax Law section 1210(a)(4)(iv) (NYC exemption for interior decorating/design)
• TSB-M-95(13)S (repeal of NYC sales tax on interior decorating and design services)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2009.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a09_61s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(61)S
Sales Tax
October 15, 2009

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S081231A

On December 31, 2008, the Department of Taxation and Finance received a Petition for Advisory
Opinion from name and address redacted. Petitioner asks whether its lighting design services are subject to
sales tax (1) when Petitioner is hired by a licensed architect or engineer and Petitioner’s work is wholly
incorporated into the architect’s or engineer’s signed and sealed documents and (2) when a building owner
hires Petitioner and the architect or engineer separately with Petitioner’s work being fully incorporated into
the signed and sealed documents of such licensed professionals. Petitioner’s receipts for these services are
subject to sales tax under Tax Law § 1105(c)(7).
Facts
Petitioner is a firm dedicated to the design, layout, and specification of architectural lighting systems.
It acts as a subconsultant to architects and engineers under whose supervision Petitioner does the following:
1. prepares lighting fixture layouts on background drawings provided by the architect or engineer;
2. recommends lighting fixtures based on performance and safety standards as well as the aesthetic
concept for lighting established in conjunction with the architect and the client;
3. performs technical lighting level calculations to ensure the lighting meets the state and local
energy codes and the standards recommended by the American Society of Heating, Refrigerating
and Air-Conditioning Engineers for energy consumption. Calculations are also run to
demonstrate that the lighting to be provided meets the standards for “suitability to task” as
established by the Illuminating Engineering Society of North America;
4. prepares technical specifications for the general illumination lighting systems and lighting
control systems, which are an integral part of the overall building;
5. assists the electrical engineer in developing a strategy for emergency lighting within the
building.
Petitioner’s work is incorporated into the architect’s or engineer’s signed sealed drawings. These
drawings along with the specifications and general conditions form the contract documents to be used in the
bidding and construction for the building. Occasionally, Petitioner will work directly for a building owner.
In these cases, Petitioner’s work is still coordinated and monitored by the architect and forms part of the
architect’s contract documentation.
Analysis
Tax Law §1105(c)(7) imposes sales tax on receipts from the sale, except for resale, of interior
decorating and designing services (whether or not in conjunction with the sale of tangible personal property),
by whomsoever performed, including interior decorators and designers, architects or engineers. Such services

-2-

TSB-A-09(61)S
Sales Tax
October 15, 2009

shall not include services which consist of the practice of architecture, as defined in section 7301 of the
Education Law, or the practice of engineering, as defined in section 7201 of the Education Law, if the
services are performed by an architect or engineer having a license or permit under the Education Law.
Petitioner performs design services. None of its employees are licensed architects or engineers. Therefore,
the exclusion in section 1105(c)(7) for architectural or engineering services does not apply to Petitioner’s
work.
Petitioner’s receipts for providing interior design services (i.e., designs for the interior of a building)
to architects or engineers are subject to sales tax. The resale exclusion does not apply to Petitioner’s sale of
design services to architects or engineers because the architects and engineers are not themselves selling a
design service subject to sales tax. The incorporation of Petitioner’s design work into the architect’s or
engineer’s own signed and sealed designs has no bearing on the taxability of Petitioner’s service. The
statutory exclusion in section 1105(c)(7) applies only to the sale of architectural or engineering services by
licensed architects or engineers. It does not apply to the purchase of design services by them.
Petitioner’s receipts for providing design services to building owners who hire an architect or
engineer separately are also subject to sales tax. The incorporation of Petitioner’s design work into the
design performed by an architect or engineer does not affect the taxability of Petitioner’s service.
It should be noted that the local sales tax imposed by New York City does not apply to interior
decorating and designing services. See Tax Law §1210(a)(4)(iv) and Repeal of New York City’s Sales Tax
on Interior Decorating and Design Services, TSB-M-95(13)S. Accordingly, the charges for Petitioner’s
services delivered in New York City are subject to New York State sales tax (including the tax imposed on
behalf of the Metropolitan Commuter Transportation District), but are not subject to New York City sales
tax. Interior decorating and design services are subject to State and local sales taxes outside of New York
City.

DATED: October 15, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

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.