Does temporarily handing artwork or mechanicals to a client's printer for reproduction turn a designer's exempt service into a taxable sale of tangible personal property?

Plain-English summary

Chermayeff and Geismar Associates is a New York design partnership. It develops the creative concept for a project — exhibitions, logos/graphic-identity programs, annual reports and brochures, and signage for architectural projects — and prepares visual presentations (paste-ups, mechanicals, layouts, models, diagrams, drawings, specifications) that define and communicate those concepts. These materials remain the designer's property and never become the client's, but are temporarily transferred to the client (or the client's printer/contractor) only to reproduce the design accurately — with no right to alter or retouch the work — and are returned afterward. The firm asked whether this temporary transfer converts its exempt design service into a taxable retail sale under § 1105(a).

The Department held it does not — there is no taxable sale.

• A right to reproduce is not a sale or a license. Under 20 NYCRR 526.7(f)(1)–(2), granting a right to reproduce is not a license to use or a sale and is not taxable, and "mere temporary possession or custody for the purpose of making a reproduction" is not a transfer of possession that would convert the reproduction right into a taxable license to use (citing Frissell v. McGoldrick, 300 N.Y. 370 (1950)).
• Prior Commission precedent is directly on point. In Matter of Vignelli Associates, Ltd., TSB-H-81(26)S (Feb. 11, 1981), the State Tax Commission held that because transfers of graphic presentations of design concepts were temporary, for reproduction only, without the right to alter or retouch, with title remaining in the designer, they did not constitute taxable sales.
• Result. The transfer of Chermayeff and Geismar's visual presentations to its clients for reproduction, under these facts, is not a taxable sale of tangible personal property under § 1105(a).

What this means for you

Loaning artwork for reproduction is not a taxable sale of goods. If you're a designer or agency and you hand over mechanicals, art, or films only so a printer can reproduce them — you keep title, and the printer can't alter the work — that hand-off doesn't make your design fee a taxable sale of tangible personal property.

Keep the three facts that made this work: the transfer is temporary, it's for reproduction only (a right to reproduce), and title stays with you with no right to alter or retouch. Change those — e.g., you sell the client the finished artwork to keep and use — and the analysis can flip to a taxable transfer.

This is about the service-vs-sale line. New York doesn't tax the design service itself; the risk is that transferring physical artwork looks like selling goods. The reproduction-right rule keeps genuine design services on the nontaxable side.

Common questions

Q: We give our client's printer the mechanicals to print from. Is that a taxable sale?
A: No, not if the transfer is temporary, for reproduction only, you keep title, and the printer can't alter the work. That's a right to reproduce, which isn't a sale or license.

Q: What if the client keeps the artwork afterward?
A: This opinion rests on the materials being returned and title remaining with the designer. A permanent transfer of the physical artwork for the client to own and use is a different situation and could be taxable.

Q: Does it matter that a printer, not the client, physically holds the art?
A: No. Temporary custody by the client's printer solely to make the reproduction isn't a taxable transfer of possession.

Citations and references

Statute:

• Tax Law § 1105(a) — tax on receipts from every retail sale of tangible personal property

Regulation:

• 20 NYCRR 526.7(f)(1)–(2) — granting a right to reproduce is not a license to use or a sale; temporary possession or custody for making a reproduction is not a taxable transfer of possession

Authorities cited:

• Matter of Vignelli Associates, Ltd., State Tax Commission, TSB-H-81(26)S (Feb. 11, 1981) — temporary transfer of design presentations for reproduction only, title retained, is not a taxable sale
• Frissell v. McGoldrick, 300 N.Y. 370 (1950) — temporary custody for reproduction is not a transfer of possession

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_11s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(11)S
Sales Tax
May 20, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S830308A

On March 8, 1983 a Petition for Advisory Opinion was received from Chermayeff and
Geismar Associates, 830 Third Avenue, New York, New York 10022.
The issue raised is whether, in conjunction with the performance of Petitioner's service, the
temporary transfer of certain items of tangible personal property by Petitioner to its client will
convert the transaction from the status of an exempt service to a retail sale of tangible personal
property subject to tax under section 1105(a) of the Tax Law.
Petitioner is a New York partnership engaged in the business of providing design services.
Petitioner provides professional services to its clients in connection with designs for (1) exhibitions
for museums, government agencies, and other clients; (2) graphic identification programs, for a
variety of institutions, including trademarks and logos and guidelines for their application to signs,
packages, letterheads, etc.; (3) financial reports to shareholders of corporations, brochures, posters,
and other graphic materials; and (4) signs, colors and forms to be incorporated into architectural
projects.
Petitioner develops the creative and conceptual framework for each design project and
supervises the preparation of items that illustrate and define the design. Petitioner does some of its
own technical work, but also retains others to assist in the preparation of visual presentations such
as paste-ups, layouts, mechanicals, models, diagrams, photographs, architectural drawings, specifica­
tions, etc., which accurately present and define Petitioner's design concepts so that these concepts
will be accurately communicated to the client and others who must produce the final product.
Petitioner states that such visual presentations (including paste-ups, mechanicals, layouts,
etc.) remain the property of Petitioner and never become the property of the client but may be
temporarily transferred to the client or an independent contractor for the limited purpose of having
the contractor accurately produce the design concept. In the case of financial reports and other
graphics projects, artwork and mechanicals are usually temporarily transferred to a printer contracted
by the client to be photographed or otherwise converted to printing plates. After printing, the
artwork and mechanicals are returned to Petitioner. The printer has no right to alter or in any way
retouch the work that Petitioner has done.
The taxability of temporary transfers of tangible personal property under circumstances
similar to Petitioner's has been addressed in Matter of Vignelli Associates, Ltd., et. al. State Tax
Commission, February 11, 1981, TSB-H-81(26)S. Therein the State Tax Commission determined
"That since the transfers of possession of graphic presentations of design concepts were temporary

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85(11)S
Sales Tax
May 20, 1985

for the purpose of reproduction only, without the right to alter or retouch the same, title thereto at
all times remaining in Vignelli Associates, Ltd., they did not constitute taxable sales."
Pursuant to 20 NYCRR 526.7(f)(1) and (2), the granting of a right to reproduce is not a
license to use or a sale and is not taxable. Mere temporary possession or custody for the purpose of
making a reproduction is not deemed to be a transfer of possession which would convert the
reproduction right to a license to use. (Matter of Frissell v. Mc Goldrick, 300 N.Y. 370; 88 N.Y.S.
2d 896; 91 N.E. 2d 305 (1950).)
Accordingly, the transfer of design concepts by Petitioner to its customers in the form of
visual presentations under the circumstances described herein does not constitute the sale of tangible
personal property taxable under section 1105(a) of the Tax Law.

DATED: April 30, 1985

FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth and is
subject to verification on audit.