Are 'ad slicks' a retailer buys to send to newspapers exempt from sales tax as production machinery and equipment?

Plain-English summary

National Auto Stores Corp. prepares advertisement layouts and sends them to a publishing company, which sets the type, sizes the artwork, and prints "ad slicks." The company is invoiced for the ad slicks, then mails them to various newspapers to run its ads. It asked whether its purchases of ad slicks are subject to sales tax.

The Department held the ad slicks are exempt — with a New York City exception.

• The production exemption. Section § 1105(a) taxes retail sales of tangible personal property, but § 1115(a)(12) exempts machinery and equipment used "directly and predominantly in the production of tangible personal property . . . for sale, by manufacturing."
• Ad slicks count as "machinery and equipment." Under Department policy (TSB-M-79(7.1)S), artwork, illustrations, layouts, drawings, paintings, mechanicals, overlays, designs, photographs, and paste-ups are treated as "machinery and equipment" within § 1115(a)(12). The memorandum's example — typography used in an ad that will run in a publication to be sold — is exempt statewide and locally outside New York City. The ad slicks here are used to produce advertisements published in newspapers that will be sold, so they qualify.
• Which taxes the exemption reaches. It applies to the statewide tax, the state compensating use tax (§ 1110), the MCTD ¼% taxes (§ 1109), local sales taxes, and the Yonkers taxes (§ 1108). It does not apply to the 4% New York City sales and compensating use taxes (§ 1107).
• How to claim it. Give the vendor a completed Exempt Use Certificate (Form ST-121) at the time of purchase. If no certificate is supplied, pay the tax and file a refund claim.

What this means for you

Advertising production materials can be exempt production "equipment." New York treats art, layouts, mechanicals, photos, and ad slicks used to produce a saleable publication as production machinery and equipment under § 1115(a)(12) — even though they're printed paper, not a machine in the ordinary sense.

The New York City carve-out is the trap. The statewide production exemption does not reach New York City's 4% tax. If your ad slicks are delivered or used in New York City for the purchaser, the City tax still applies.

Use Form ST-121 at purchase. The exemption runs on the Exempt Use Certificate. Provide it up front; if you miss that, you'll have to pay and then claim a refund.

Common questions

Q: Are ad slicks I buy to place newspaper ads exempt from New York sales tax?
A: Yes, outside New York City. They're treated as production machinery and equipment under § 1115(a)(12) because they help produce a newspaper that will be sold.

Q: Does the exemption apply in New York City?
A: No. The 4% New York City sales and use tax (§ 1107) has no production exemption, so City tax applies where the ad slicks are delivered or used in the City for the purchaser.

Q: What paperwork do I need?
A: A completed Exempt Use Certificate (Form ST-121) at the time of purchase. If you don't provide it, pay the tax and file a refund claim.

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on receipts from retail sales of tangible personal property
• Tax Law § 1115(a)(12) — exemption for machinery and equipment used directly and predominantly in producing tangible personal property for sale
• Tax Law § 1107 — New York City sales and use tax (no production exemption); §§ 1108 (Yonkers), 1109 (MCTD), 1110 (state use tax) referenced for scope

Authority cited:

• Technical Services Bureau Memorandum TSB-M-79(7.1)S — artwork, layouts, mechanicals, photographs, and similar items are "machinery and equipment" under § 1115(a)(12), with a typography example

Forms referenced:

• Form ST-121 — Exempt Use Certificate

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_37s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(37)S
Sales Tax
October 27, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810722B

On July 22, 1981 a Petition for Advisory Opinion was received from National Auto Stores
Corp., 1821 Broad Street, Utica, New York 13501.
The issue raised is whether Petitioner's purchases of ad slicks are subject to sales tax.
Petitioner prepares layouts of advertisements and sends such layouts to a publishing
company. The publishing company sets the type, uses its camera to enlarge or reduce the artwork and
prints ad slicks. The ad slicks are then transmitted to Petitioner, which is invoiced for the same.
Petitioner mails the ad slicks to various newspapers for the printing of its ads.
Section 1105(a) of the Tax Law imposes a tax on the "receipts from every retail sale of
tangible personal property, except as otherwise provided in this article." Such an exemption is
provided with respect to machinery and equipment purchased "for use or consumption directly and
predominantly in the production of tangible personal property . . . for sale, by manufacturing . . . .
" Tax Law, §1115(a)(12). Such an exemption is also applicable to the State compensating use tax
imposed under section 1110 of the Tax Law, and to the ¼% sales and compensating use taxes
imposed in the Metropolitan Commuter Transportation District under section 1109 of the Tax Law.
Locally imposed sales taxes, as well as the sales and compensating use taxes imposed under section
1108 of the Tax Law (applicable in Yonkers), exempt the purchase of all "tangible personal
property" similarly used or consumed in production. There is no such production exemption
applicable to the 4% New York City sales and compensating use taxes imposed under section 1107
of the Tax Law.
Technical Services Bureau Memorandum TSB-M-79(7.1)S provides that artwork,
illustrations, layouts, drawings, paintings, mechanicals, overlays, designs, photographs, and paste­
ups constitute "machinery and equipment" with the meaning and intent of section 1115(a)(12) of the
Tax Law. Such memorandum contains an example, applicable to transactions occurring on and after
June 1, 1980, which is applicable to the present matter:
"An advertising agency purchases typography to be used in an
advertisement which will be published in a publication which will be
sold. Since the typography will be used in producing a publication for
sale, the typography is exempt from the statewide tax and any local
sales tax outside of New York City. The typography will be subject
to the 4% tax imposed in New York City if it is delivered to the
purchaser or his agent in New York City or is used in New York City
for the purchaser."

ROBERT W. BOUCHARD, ACTING COMMISSIONER
GABRIEL B. DiCERBO , DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)

-2­
TSB-A-82(37)S
Sales Tax
October 27, 1982

The purchase of ad slicks by Petitioner as here described constitutes the purchase of items
falling within the category of "machinery and equipment," inasmuch as the ad slicks will be used to
produce an advertisement which will be published in a publication which will be sold. Accordingly,
the exemptions described above are applicable to the receipts from the sale of the ad slicks to
Petitioner.
In order to avail itself of the production exemption Petitioner must, at the time of purchase,
supply its vendor with a properly completed Form ST-121, Exempt Use Certificate. If no such
certificate is supplied, Petitioner must pay tax but may subsequently file a claim for refund.

DATED: October 4, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau