Are formal patent drawings taxable when delivered to attorney clients only in electronic form?

Plain-English summary

The petitioner makes formal patent drawings for patent attorneys to file with the U.S. Patent and Trademark Office, delivered solely by electronic means with no tangible copy. It asked whether those sales are taxable.

The Office of Counsel concluded the electronic drawings 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, photographs, and films (Tax Law 1101(b)(6); 20 NYCRR 526.8(a)). The result depends on how the drawings are delivered:
- Patent drawings delivered on paper are taxable tangible personal property (TSB-A-97(48)S).
- Patent drawings delivered electronically (e.g., as PDF files) are not tangible personal property and are not taxable (TSB-A-11(22)S).

Because the petitioner delivers its drawings only electronically, with no tangible format, the receipts are for the sale of intangible property and are not subject to sales tax.

What this means for you

Illustrators, drafters, designers, and creative-content sellers

In NY, the delivery medium decides taxability for items like drawings and images. Deliver a paper (tangible) copy and you're selling taxable tangible personal property; deliver the same work only electronically (no tangible copy) and it's intangible and not taxable. Be deliberate -- if any tangible copy is provided, the analysis can change.

Common questions

Q: Drawings are 'artistic items' -- aren't they always taxable?
A: Only when delivered in tangible form. The same drawings delivered solely electronically are intangible and not taxable.

Q: We email PDFs only -- is that taxable?
A: No. With no tangible copy, the receipts are for intangible property and aren't subject to sales tax.

Q: What if we also hand over a paper print?
A: A tangible copy makes it tangible personal property, which is taxable -- delivery form is the key fact.

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_27s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-12(27)S
Sales Tax
October 15, 2012

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

PETITION NO. S111020A

The Department of Taxation and Finance received a Petition for Advisory Opinion
from The Intellectual Illustration Group, LTD. Petitioner asks whether patent drawings
electronically delivered to its patent attorney clients are subject to sales tax. We conclude that
receipts from the sale of these electronic drawings are not subject to sales tax.
Facts
Petitioner provides formal patent drawings to attorneys for filing with the U.S. Patent
and Trademark Office. Delivery of the drawings is effectuated solely by electronic means
with no tangible format. Once received by the attorney clients, the drawings are filed with an
application for patent registration.
Analysis
Petitioner’s receipts from the sale of patent drawings in electronic form are not subject
to sales tax. The Tax Law imposes sales tax on the receipts from every retail sale of tangible
personal property, except as specifically excluded. See Tax Law § 1105(a); 20 NYCRR §
526.6(a). A retail sale is defined as “[a] sale of tangible personal 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 human
senses. It includes artistic items, such as sketches, paintings, photographs, moving motion
pictures, and recordings. See Tax Law § 1101(b)(6); 20 NYCRR § 526.8(a).
In a previous Advisory Opinion, TSB-A-97(48)S, the Petitioner was a patent
draftsman whose primary service was to create formal drawings for sale to attorneys. In that
Advisory Opinion, the drawings were delivered by mail as paper-print outs, and not delivered
electronically. The prior Advisory Opinion concluded that the receipts from the sales of the
patent drawings were subject to sales tax. In TSB-A-11(22)S, patent drawings were delivered
to the petitioner’s attorney clients as electronic PDF files. Because the drawings were
converted to PDF files, delivery of the drawings was done electronically. The drawings were
not tangible personal property as defined in Tax Law § 1101(b)(6), and therefore, were not
subject to tax.

-2-

TSB-A-12(27)S
Sales Tax
October 15, 2012

In this Petition, Petitioner’s patent drawings are not delivered in tangible form.
Accordingly, Petitioner’s receipts from the sale of these patent drawings are receipts for the
sale of intangible property that is not subject to sales tax.

DATED: October 15, 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.