NY TSB-A-11(22)S Sales Tax 2011-08-03

Are receipts from a patent draftsman's formal drawings, delivered solely electronically as PDFs, subject to NY sales tax?

Short answer: No. The draftsman creates formal patent drawings and delivers them solely electronically, as PDF files emailed to patent-attorney customers, with no paper copy. Sales tax applies to sales of tangible personal property, and an earlier opinion on identical facts (TSB-A-97(48)S) held that the same drawings delivered as paper printouts were taxable tangible property. But where drawings are delivered solely electronically with no tangible format, they are not corporeal (tangible) personal property, so the receipts are not subject to sales tax. The delivery medium -- not the content -- decides.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The petitioner is a patent draftsman whose main service is creating formal patent drawings for sale to patent attorneys, who then submit them electronically with patent applications. The drawings are delivered solely electronically -- as PDF files attached to emails, with no paper copy. The petitioner asked whether those sales are subject to sales tax.

The Office of Counsel concluded they are not taxable:

Sales tax reaches tangible personal property. Tax Law 1105(a) taxes retail sales of tangible personal property, defined as corporeal property "having a material existence and perceptibility to the human senses," which includes artistic items like sketches and drawings (1101(b)(6); 20 NYCRR 526.8(a)).
Paper version would be taxable. An earlier opinion on identical facts -- except the drawings were delivered as paper printouts -- held those drawings were taxable tangible personal property (TSB-A-97(48)S).
Electronic delivery isn't tangible. Here the drawings are delivered solely electronically, with no tangible format. Drawings delivered solely electronically are not corporeal personal property (TSB-A-09(20)S), so the receipts are not from the sale of tangible personal property and are not subject to sales tax.

The key is the delivery medium: the same drawings are taxable on paper and nontaxable as an emailed PDF.

What this means for you

Designers, draftsmen, and other creators delivering electronically

If you deliver your work product solely electronically -- emailed PDFs, downloads -- with no paper or physical copy, the sale generally is not subject to New York sales tax, because there's no tangible personal property. Deliver the same item on paper (or another physical medium), and it becomes taxable. So the format you ship in, not the content or the customer's eventual use, drives the tax. If you offer both, consider stating the delivery method on your invoices.

Buyers of design work

Whether you're charged tax can turn entirely on how the file is delivered. An electronic-only deliverable shouldn't carry sales tax; a paper deliverable typically will.

Common questions

Q: I email my drawings as PDFs with no paper copy -- do I charge sales tax?
A: No. Drawings delivered solely electronically aren't tangible personal property, so the sale isn't taxable.

Q: Would paper copies of the same drawings be taxable?
A: Yes. The same drawings delivered as paper printouts are taxable tangible personal property (TSB-A-97(48)S).

Q: Does it matter what the customer does with the drawings?
A: No. The delivery medium controls, not the content or end use.

Citations and references

Tax Law section 1105(a) (sales tax on tangible personal property)
Tax Law section 1101(b)(6) (definition of tangible personal property)
Tax Law section 1101(b)(4)(i) (retail sale)
20 NYCRR section 526.8(a) (tangible personal property)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2011.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a11_22s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-11(22)S
Sales Tax
August 3, 2011

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

PETITION NO S110601A

Petitioner name and address redacted, asks whether receipts from sales of patent
drawings delivered electronically to its patent attorney customers are subject to sales tax.
We conclude that the receipts from the electronic drawings are not subject to sales tax.
Facts
Petitioner is a patent draftsman whose primary service is to create formal drawings
for sale to patent attorneys. The drawings are delivered electronically as PDF files
attached to emails.
The attorney customers subsequently submit the drawings
electronically to the United States and foreign patent offices with applications for patents
for their clients.
Analysis
The Tax Law imposes sales tax on the receipts from every retail sale of tangible
personal property, except as specifically excluded. [Tax Law § 1105(a), 20 NYCRR §
526.6(a)] A retail sale is defined as a sale of tangible personal property to any person for
any purpose…. [Tax Law § 1101(b)(4)(i)] Tangible personal property is defined as
corporeal personal property of any nature having a material existence and perceptibility to
the human senses. It includes artistic items, such as sketches, paintings, photographs,
moving picture films, and recordings. [Tax Law § 1101(b)(6), 20 NYCRR § 526.8(a)]
In a previous opinion regarding patent drawings, [TSB-A-97(48)S], the facts
presented were identical to the facts in this petition, except that the drawings were
delivered to Petitioner’s attorney customers by mail as paper-print outs, and not
electronically as PDF files. The prior opinion held that Petitioner’s formal drawings to its
attorney customers constituted tangible personal property and receipts from Petitioner’s
sale of the drawings were subject to sales tax.
In this opinion, the drawings are furnished to Petitioner’s attorney customers by
electronic means as PDF files. Therefore it must be determined if the sale of electronic
drawings to Petitioner’s customers are tangible personal property within the meaning of
the Tax Law. Where drawings are delivered solely electronically with no tangible format,
the receipts from the sales of those drawings are not receipts from the sale of corporeal

-2-

TSB-A-11(22)S
Sales Tax
August 3, 2011

personal property [TSB-A-09(20)S]. Therefore, the receipts are not from the sale of
tangible personal property and are not subject to sales tax.

DATED: August 3, 2011

NOTE:

/S/
DEBORAH LIEBMAN
Deputy 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.