How is New York sales tax handled on films leased to TV networks — where delivery controls tax, whether split in/out-of-state broadcasts reduce the base, and which production purchases are exempt?

Plain-English summary

Richard A. Eisner and Company asked, for clients who produce films and lease them to television networks, about several sales-tax questions. The clients buy raw materials and rent props and technical equipment, may hire independent film developers, and retain ownership of the films, leasing networks the right to broadcast twice within two years — with broadcasts reaching viewers inside and outside New York.

The Department addressed three points: the tax on the lease, the base for split broadcasts, and the production purchases.

• Leasing films — a taxable sale, keyed to delivery. A lease is a "sale" (§ 1101(b)(5)), so leasing films is a retail sale. The sales tax is a destination tax: the point of delivery controls the tax and rate (20 NYCRR § 525.2(a)(3)). So the lease is taxable where the film is delivered in New York; delivery outside New York is untaxed; and where the purchaser holds a Direct Pay Permit and gives the vendor a copy, the vendor need not collect.
• Split in/out-of-state broadcast — tax on the full price. "Receipt" means the entire sale price (§ 1101(b)(3); 20 NYCRR § 526.5), and § 1132 requires collecting tax on all New York rental receipts unless a certificate is given. So when tax is due, it is on the full charge — whether the film airs wholly within, or partly within and partly without, New York — unless the purchaser provides a certificate (here, only the Direct Payment Permit applies).
• Production purchases — resale and the production exemption. Items that become a physical component of the finished films (e.g., raw film stock), and services performed on the films (processing, editing, sound mixing), are purchased for resale and not taxed — use Form ST-120 (Resale Certificate). Items used in production but not for resale may qualify for the production exemption for machinery, equipment, tools, and supplies used directly and predominantly in producing property for sale by manufacturing (§§ 1115(a)(12), 1105-B(a)) — e.g., cameras, movieolas, projectors, sound recorders, set lights, booms — using Form ST-121 (Exempt Use Certificate). That exemption covers the 4% State tax and the MCTD ¼% tax (§ 1109), but not the New York City tax (§ 1107); Yonkers (§ 1108) and local taxes (§ 1210) exempt such production property as well. (The exemption existed in a more limited form before March 1, 1981.)

What this means for you

A film lease is taxed where the film is delivered. New York's destination rule means the delivery point — not where the film is shot or where it airs — sets the tax and rate. Delivering outside New York avoids New York tax; a Direct Pay Permit shifts collection off the vendor.

Nationwide broadcast doesn't shrink the base. When New York tax applies, it's on the entire lease price. You can't allocate the charge down because some viewers are out of state — only a proper certificate (here, the Direct Payment Permit) changes the collection obligation.

Separate your production purchases into two buckets. Things that become part of the film, plus services performed on it, are resale (ST-120). Production machinery and equipment is exempt under the production exemption (ST-121) — but remember New York City tax is not covered.

Common questions

Q: I lease films to networks. When is the lease taxable in New York?
A: When the film is delivered to the customer in New York (destination tax). Delivery outside New York isn't taxed, and a customer's Direct Pay Permit relieves you from collecting.

Q: My film airs nationwide. Can I tax only the New York share of the price?
A: No. When tax applies, it's on the full lease price regardless of where it airs, unless the customer provides a certificate (here, the Direct Payment Permit).

Q: What can I buy tax-free to produce the film?
A: Physical components (like raw film stock) and services performed on the film are resale purchases (ST-120). Production machinery and equipment — cameras, projectors, recorders, lights, booms — is exempt under §§ 1115(a)(12)/1105-B (ST-121), except for New York City tax.

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on retail sales; a lease is a sale
• Tax Law § 1101(b)(3) — "receipt" is the entire sale price
• Tax Law § 1101(b)(5) — "sale" includes rental/lease/license for a consideration
• Tax Law §§ 1115(a)(12), 1105-B(a) — production exemption for machinery, equipment, tools, and supplies
• Tax Law §§ 1107, 1108, 1109, 1210 — New York City, Yonkers, MCTD, and local tax treatment of production property

Regulations / forms:

• 20 NYCRR § 525.2(a)(3) — sales tax is a destination tax; point of delivery controls
• Form ST-120 — Resale Certificate; Form ST-121 — Exempt Use Certificate; Direct Payment Permit

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_12s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(12)S
Sales Tax
March 29, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S811117A

On November 17, 1981, a Petition for Advisory Opinion was received from Richard A.
Eisner and Company, 380 Madison Avenue, New York, New York 10017.
Petitioner inquires as to the sales tax liabilities which would arise in the course of the
production and leasing of films to be broadcast on television.
Petitioner states that a number of its clients are contemplating the production of films to be
leased to television networks. Such clients would purchase raw materials to be consumed in
production. They would also purchase or rent various props and technical equipment necessary to
produce the films, and may engage the services of independent film developers. The completed films
would then be leased to various national television networks. The applicable agreements would give
the networks the right to broadcast the films over national television twice within a two-year period.
Petitioner's clients would retain ownership of the films at all times. It is anticipated that the broadcast
of the films will simultaneously reach viewers both within and without New York State.
Petitioner inquires, first, whether the receipts from the leasing of the films would be subject
to tax where the film is delivered to the customer either within or without New York.
Section 1105(a) of the Tax Law, contained in Article 28, imposes the State sales tax on the
receipts "from every retail sale of tangible personal property." A retail sale is one other than for
resale, or for certain uses in the performance of specified services. Tax Law, §1101(b)(4)(i). Section
1101(b)(5) of the Tax Law defines the term "sale" as "Any transfer of title or possession or both, .
. . rental, lease or license to use or consume, conditional or otherwise, in any manner, or by any
means whatsoever for a consideration or any agreement therefor. . . . " Finally, as stated in the Sales
and Use Tax Regulations, "The sales tax is a destination tax, that is, the point of delivery or point
at which possession is transferred by the vendor to the purchaser or designee controls both the tax
incident and the tax rate." 20 NYCRR 525.2(a)(3).
Accordingly, the leasing of films by Petitioner's clients will constitute retail sales the receipts
from which will be subject to tax in those instances where delivery of the film to the purchaser or
its designee takes place within New York. However, where the purchaser has been issued a Direct
Pay Permit by the State Tax Commission, and furnishes a copy of the same to the vendor, the vendor

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

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Sales Tax
March 29, 1982

is not required to collect the tax due. Where delivery takes place outside New York no tax will be
due.
Petitioner next inquires as to whether, where tax is due but where the film is to be broadcast
simultaneously to viewers within and without New York, the purchaser's tax liability is to be
computed on the entire price.
The tax imposed under section 1105(a) of the Tax Law is on the "receipts" from retail sales
of tangible personal property. The term "receipt" is defined as the "amount of the sale price of any
property", by which is meant the entire charge (with certain exclusions not applicable here). Tax
Law, §1101(b)(3); 20 NYCRR 526.5. Section 1132 of the Tax Law requires vendors to collect tax
on all receipts from the rental of tangible personal property in New York, except where the purchaser
provides the vendor with any of certain certificates prescribed by the Tax Commission. In the present
instance, then, Petitioner's clients would be required to collect tax on the full charge, irrespective of
whether the film is to be broadcast wholly within, or partly within and partly without, New York,
unless proffered such a certificate. It would appear from the facts presented by Petitioner that the
only applicable such certificate would be the Direct Payment Permit. The foregoing conclusions are
equally applicable to all State and local sales and compensating use taxes imposed under or pursuant
to the authority of Articles 28 and 29 of the Tax Law.
Finally, Petitioner inquires as to whether its clients would be required to pay tax on the
purchase or rental of property and services used in the production of the films. Purchases of tangible
personal property which become an actual physical component part of the completed films which
are intended to be rented constitute purchases for resale and are accordingly not subject to tax. This
would include purchases of such items as raw film stock. The same applies to the purchase of
services, such as processing, editing and sound mixing, which are performed on such films. In order
to relieve the vendor of its obligation to collect tax in such instances the purchaser must furnish the
vendor with a properly completed Form ST-120, Resale Certificate. As to items used in the
production of the films but not purchased for resale, the Tax Law contains an exemption with respect
to receipts from the sale of machinery and equipment, including parts, tools and supplies "for use
or consumption directly and predominantly in the production of tangible personal property . . . for
sale, by manufacturing . . . . "Tax Law, §§1115(a)(12), 1105-B(a). It is to be noted that this
exemption existed in a more limited form prior to March 1, 1981. Further, this exemption is
applicable not only to the 4% State sales and compensating use taxes imposed under sections 1105
and 1110 of the Tax Law, but to the additional 1/4% taxes imposed in the Metropolitan Commuter
Transportation District by section 1109 of the Tax Law. It is not applicable to the 4% New York City
sales and compensating use taxes imposed under section 1107 of the Tax Law. Locally imposed
general sales and compensating use taxes and the 4% taxes imposed under section 1108 of the Tax
Law (applicable in Yonkers) exempt all sales and uses of "tangible personal property" used or
consumed in production in the manner described above with reference to section 1115(a)(12) of the
Tax Law. Tax Law, §§1108(b)(1), 1210(a)(1). The exemption provisions here described would apply
only to items purchased for direct and predominant use in the production of the films to be leased,

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Sales Tax
March 29, 1982

such as cameras, movieolas, projectors, sound recorders, set lights, booms and similar equipment.
In order to avail itself of the production exemption the purchaser in each instance would have to
provide the vendor with a properly completed Form ST-121, Exempt Use Certificate.

DATED: March 9, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau