Are design images taxable when delivered to customers only electronically as PDF files?

Plain-English summary

The petitioner creates electronic design images -- for submission to the U.S. Patent Office and for use in trials, hearings, mediations, and arbitrations -- delivered to customers only electronically, as PDF files attached to emails. It asked whether those sales are taxable.

The Office of Counsel concluded the electronically delivered images are not taxable. Sales tax applies to tangible personal property -- "corporeal personal property... having a material existence and perceptibility to the human senses," which includes artistic items such as sketches, paintings, and films (Tax Law 1101(b)(6); 20 NYCRR 526.8(a)). Delivery medium controls:
- Formal drawings delivered on paper are taxable tangible personal property (TSB-A-97(48)S).
- Drawings/images delivered solely electronically (no tangible format) are not corporeal property, so the receipts are not taxable (TSB-A-09(20)S).

Because the petitioner furnishes all its images electronically as PDFs, with no tangible copy, the receipts are not from the sale of tangible personal property and are not subject to sales tax.

What this means for you

Designers, illustrators, litigation-graphics and demonstrative-exhibit providers

The method of delivery decides taxability for images and drawings in NY. Electronic-only delivery (PDF, no tangible copy) is not taxable; providing a tangible print makes it taxable tangible personal property. This holds regardless of the end use (patent filing, courtroom exhibit, mediation). Keep delivery electronic if you intend the non-taxable treatment, and be aware any tangible deliverable can change the result. (Companion opinion: TSB-A-12(27)S, same result for electronic patent drawings.)

Common questions

Q: Our courtroom/patent images are emailed as PDFs -- taxable?
A: No. Delivered solely electronically with no tangible copy, they're intangible and not subject to sales tax.

Q: Would a paper version be taxable?
A: Yes. The same images delivered on paper are tangible personal property and taxable.

Q: Does the use (patent vs. trial) matter?
A: No. The taxability turns on tangible vs. electronic delivery, not on the 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)
• 20 NYCRR section 526.8(a) (tangible personal property includes artistic items)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a12_23s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-12(23)S
Sales Tax
September 20, 2012

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

PETITION NO S120127A

Petitioner, name and address redacted, asks whether receipts from sales of design
images delivered electronically to its customers are subject to sales tax. We conclude that the
receipts from the sales of electronically delivered drawings are not subject to sales tax.
Facts
Petitioner creates electronic images for submission to the United States Patent Office
as part of a patent application, for courtroom presentations during trials and hearings, and for
presentation at mediation and arbitrations. Petitioner delivers the drawings electronically as
PDF files attached to emails.
Analysis
The Tax Law imposes sales tax on the receipts from every retail sale of tangible
personal property, except as specifically exempted or excluded. See 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…. See 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. See 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 similar to some of the facts in this petition regarding submissions to the United States
Patent Office, except that the drawings were delivered to Petitioner’s customers by mail as
paper-print outs, and not electronically as PDF files. The prior opinion held that Petitioner’s
formal drawings to its customers constituted tangible personal property and receipts from
Petitioner’s sale of the drawings were subject to sales tax.
In this opinion, Petitioner furnishes all the drawings to its customers by electronic
means as PDF files. Therefore it must be determined if the electronic drawings delivered to
Petitioner’s customers are tangible personal property within the meaning of the Tax Law
section 1101(b)(6). 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

-2-

TSB-A-12(23)S
Sales Tax
September 20, 2012

corporeal personal property. See 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: September 20, 2012

NOTE:

/S/
DEBORAH R. 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. The information provided in
this document does not cover every situation and is not intended to replace the law
or change its meaning.