Does a recording studio that rents studio time and equipment to record-company producers qualify for New York's investment tax credit and sales tax manufacturing exemptions, or is it treated as a rental/service business?

Plain-English summary

Sigma Sound Studios ran three New York City recording studios, an edit room, and a technical shop, renting studio time by the hour to record companies for mixing multi-track master tapes into a final stereo mix. The company asked three things: does it qualify for the Article 9-A investment tax credit and follow-on employment incentive credit on its recording/mixing equipment and studio buildouts, and are its equipment purchases exempt from sales tax as manufacturing production equipment?

The critical fact that decided the credit questions: more than half of the actual mixing work in all three studios was performed by producers and sound engineers employed by the record-company customers, not by Sigma's own staff. Because Sigma's employees weren't the ones doing the actual mixing/manufacturing, the Department concluded Sigma's principal business is renting out studio space and equipment (so producers can create the master tape), not manufacturing goods itself -- even though the mixing process is, in the abstract, a "manufacturing" activity (as an earlier ruling on video-tape production established). As a result, none of Sigma's technical equipment, tools, supplies, or studio buildout costs qualified for the six percent investment tax credit, and since there was no investment credit, there was also no follow-on employment incentive credit.

On sales tax, the Department separately confirmed that because Sigma's customers (not Sigma) direct the use of the equipment, Sigma is deemed to be renting tangible personal property, not performing a service or producing goods -- consistent with the credit analysis. Sigma's own purchases of studio/editing equipment are taxable unless the equipment is used directly and predominantly (over 50% of the time) by Sigma itself in production, or purchased exclusively for resale (i.e., rental) -- test-and-repair tools in the technical shop don't count as "direct" production use even under the shop's own 75% usage rate. When Sigma rents a studio to a producer who furnishes a proper Exempt Use Certificate (Form ST-121), the portion of the rental charge for the exempt production equipment (though not New York City's local tax) escapes sales tax -- but that exemption belongs to the producer's use, not to Sigma's own equipment purchases. On the extensive acoustic buildout of the studios (drywall, insulation, floor tiles, acoustic wall/ceiling treatments, HVAC, wiring), the Department held these are generally taxable: although they meet two of the three statutory tests for a tax-exempt "capital improvement," tenant-installed improvements in rented space are presumed not intended as permanent additions benefiting the landlord (the third required element), and the specific acoustic treatments here were more like removable trade fixtures than capital improvements -- so both materials and installation labor remained fully taxable. Separately billed studio-rental charges representing operator wages and reasonable room rent (not equipment) are not taxable at all, since real estate rental isn't subject to sales tax.

What this means for you

Recording studios, production facilities, and similar rental-plus-service businesses

Whether your business "manufactures" a product for investment-credit and sales-tax-exemption purposes can turn on who actually operates the equipment -- your own employees, or the customer's people using space/equipment you merely make available. If outside producers or technicians do the bulk of the hands-on work, the business is likely being treated as a rental operation rather than a manufacturer, even when a genuinely manufactured product (a master tape) results.

Businesses renovating rented space for specialized acoustic, technical, or environmental needs

Improvements to leased premises are presumptively NOT tax-exempt capital improvements, because a tenant is presumed not to intend a permanent benefit to the landlord -- that presumption can be rebutted by specific facts, but specialized, removable installations (like acoustic wall panels) tend to be treated as taxable trade fixtures rather than exempt capital improvements.

Businesses billing for equipment rental combined with an operator

Separately stating the operator's wages and reasonable room rent on the invoice can keep those specific charges out of the sales tax base for an equipment rental, even when the equipment itself is taxable -- but an invoice that doesn't break out the components risks having the whole bill taxed.

Common questions

Q: Does this mean recording studios can never get the investment tax credit?
A: No -- see the companion ruling TSB-A-87(24)C (Frankford/Wayne Mastering Labs), issued the same week to a company at the same address, where a mastering lab's own employees performed the manufacturing and DID qualify for the credit. The difference is whose employees do the actual production work.

Q: Can a studio's customer (the producer) get a sales tax exemption on the equipment rental?
A: Yes, if the customer is producing tangible personal property for sale and furnishes a properly completed Exempt Use Certificate (Form ST-121); that exemption doesn't extend to New York City's local sales tax, and it doesn't help the studio itself when it purchases the equipment.

Q: Can another studio rely on this specific ruling?
A: No. It binds the Department only for this petitioner's facts and can't be relied upon by other taxpayers, even similarly structured studios.

Citations and references

Statutes and regulations:

• Tax Law § 210.12 (investment tax credit); § 210.12-A, § 210.12-D (employment incentive credit)
• Tax Law § 1105(a); § 1101(b)(4), (5), (9) (resale/rental/capital improvement definitions)
• Tax Law § 1115(a)(12) (production machinery exemption); § 1115(c) (production electricity exemption)
• 20 NYCRR 526.7(e)(6), 526.8(c), 527.5, 527.7, 528.11, 528.13, 534.2, 541.2(g)(1)
• TSB-H-81(57)I (video tape production = manufacturing); Matter of Micheli Contracting Corp.; Matter of Building Contractors Association v. Tully; Matter of Frazer Jones Co., TSB-H-85(195)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a87_25c_39s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO: Z870223A

On February 23, 1987, a Petition for Advisory Opinion was received from Sigma Sound
Studios, 1697 Broadway, New York, New York 10019.
The issues raised are (1) whether for purposes of Article 9-A of the Tax Law Petitioner
qualifies for the investment tax credit provided in section 210.12 of the Tax Law; (2) whether for
purposes of Article 9-A of the Tax Law Petitioner qualifies for the employment incentive tax
credit provided in section 210.12-A of the Tax Law; and (3) whether certain exemptions from the
sales and use tax imposed under Articles 28 and 29 of the Tax Law apply to purchases of
equipment, material and services used by the Petitioner in providing space and equipment for the
recording of audio performances on magnetic tape.
Facts
Petitioner is an audio recording and mixing facility with offices in New York City and
Philadelphia. The New York City facility employs 24 people and has three studios that are
designed and equipped to "store" audio performances on magnetic tape. Each studio includes a
room in which the performance to be recorded takes place and a "control room" in which the
recording equipment and ancillary paraphernalia is placed and technical functions such as
"mixing" are undertaken. These two sections of a studio are adjacent to each other, separated by a
wall with a double soundproof glass window, thus permitting visual communication in either
direction between producer, engineer, artist and musicians.
The sections of the studios that are of main interest to the mixing process are the control
rooms. The control rooms vary in size depending on the amount of equipment in it and its
ultimate functions. Great care was devoted to the acoustics of each control room, since vital
decisions which will affect the final sound of the recording are made based on the sound
generated by the studio monitors as perceived by the producer in the control room.
In the control room, the console is the nucleus that controls the entire recording and
mixing chain. During the recording and mixing processes, various effects utilizing inboard as
well as outboard equipment (outboard equipment is interfaced through the console's patch bay)
can be introduced: equalizing, panning, reverb, digital delays, flanging, phasing, noise reduction,
compressing, limiting, filtering sound. Many mixing consoles are computer-automated so that all
adjustments made during the preliminary mixes are "remembered" and made automatically. The
monitor speakers are placed on either side of the console or above (different types and makes of
speakers) so that comparisons can be made before a decision is reached on the proper mix or
mixes.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

-2-

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

Mixing is the process of combining the recorded tracks of a multitrack master tape to a
more condensed format such as 2 tracks for stereo. The process of mixing allows the mix
engineer (mixer) to enhance the sound of each separate track by using special effects such as
equalization, reverberation, and echo delay, to achieve a final recording having the desired
overall sound.
A mix can be a complex and time consuming process, depending upon the personal tastes
of the mixer and producer and the degree to which they feel it necessary to ensure that the
intrinsic octave-to-octave/beat-to-beat, balance in the musical performances are emphasized or
deemphasized.
Mixing is done after the recording process is complete (i.e., after all the tracks have been
"laid down"). After recording, there is a tape containing 24, or whatever number of tracks have
been used. The term "track" refers to a channel of a multi-track recording. It is necessary to
transfer the sound on all of these separate tracks onto a "master-mix" tape - usually a half-track
stereo half-inch tape - to be used in its final form. At this point, the mixing process is complete
and the editing process commences.
In all three studios, sound architects have been called upon to design and create, from the
use of undulating wall surfaces (to generate reflection of sound waves) through the alternating of
areas on the walls that are reflective and absorptive (to prevent "hardness" and impart a "warmth"
and vice-versa) to varying room dimensions via sloping ceilings and angled walls, a series of
control rooms endowed with desired acoustics.
Of Petitioner's three studios, Studio 5 is used 70 percent in the process of mixing, Studio
7 is used 50 percent in the process of mixing and Studio 8 is used 95 percent in the process of
mixing. More than 50 percent of the mixing process conducted in all studios is engineered or
produced by persons who are not employees of Petitioner. Rather, the producers and engineers
are in the employ of the record companies which are the customers of Petitioner. Petitioner rents
its studios to such record companies on a per hour basis.
The assets at issue for each studio consist of the following:
Technical Equipment - used in the mixing process.
Tools and Parts - used in repair of technical equipment.
Supplies - used in the mixing process such as magnetic tape and floppy discs and used for
labeling such as pens and labels.
Renovation and Construction: control room only.
Design/Construction/Materials - architectural fees, labor,
building materials: dry wall, wood, doors, etc.
Finishing/Materials - trim strips, locksets, paints, etc (facades).
Acoustic Treatment/Materials - flooring, tiles, fabric, polyhedral diffusion arcs of sound,
insulation, sound proofing glass, etc.
Heating, Ventilation, Air Conditioning - air ducts, vents, air cooling unit, heating unit.

-3-

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

Power Distribution/Materials - cost of bringing power from service entrance of building
to breaker point and to control room.
Lighting - lighting fixtures, dimmer switches, etc.
Grounding - ground wire, etc.
Design of Signal and Control Cabling/Materials and Installation - electricity and power
needed to operate studio consisting of cables, labor, etc.
Repair Services - air conditioning service contract.
The editing post-production process is conducted in a room equipped with tape recorders
in various formats, some outboard equipment (i.e., equalizers and compressors), and a
monitoring system. Editing is the post-production function in which the original master tape is
"arranged" into a satisfactory performance format via "splicing" together sections of
performances to achieve a correct and cohesive musical sequence. The editing function
comprises cutting, rearranging, and reassembling the original master-mix tape into a different
sequence, as well as removal of unwanted performances or portions of performances. Once the
master tape is mixed, edited, sequenced, timed, head and tail leadered, containing test tones, it is
sent to a Mastering Lab for lacquer or subsequent tape mastering.
The edit room is used 100 percent in the mixing process and its assets at issue consist of
the following:
Technical Equipment - used for editing.
Tools and Parts - used for repair of the technical equipment.
Supplies - such as magnetic tape, tape labels, pens, etc.
Repair Services - air conditioning service contract.
A technical shop, manned by an in-house technical support team, offers service and spare
parts to all studio facilities. The shop room is used for maintaining, testing, evaluating and
enhancing the mixing and recording equipment and machinery.
The technical shop, used 75 percent to test, service, modify, and improve mixing
equipment work, is conducted by in-house technical staff. The assets at issue consist of the
following:
Technical Equipment
Tools and Parts
Supplies - such as cables, wire, lubricants, cleaning agents, etc.
Issue 1
For taxable years beginning prior to January 1, 1987, section 210.12 of the Tax Law
allows an investment tax credit against the tax imposed under Article 9-A of the Tax Law equal
to six percent of the cost or other basis for federal income tax purposes of tangible personal
property and other tangible property, including buildings and structural components of buildings
which:
(1)

are acquired, constructed, reconstructed or erected after June 30, 1982;

-4-

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

(2)

are depreciable pursuant to section 167 of the Internal Revenue Code or recovery property
with respect to which a deduction is allowable under section 168 of the Internal Revenue
Code;

(3)

have a useful life of four years or more;

(4)

are acquired by purchase as defined in section 179(d) of the Internal Revenue Code;

(5)

have a situs in New York State; and

(6)

are principally used by the taxpayer in the production of goods by manufacturing,
processing, assembling, refining, mining, extracting, farming, agriculture, horticulture,
floriculture, viticulture or commercial fishing.

For taxable years beginning in 1987, 1988 and 1989, section 210.12(a) of the Tax Law
allows an investment tax credit against the tax imposed under Article 9-A with respect to
qualified tangible personal property and other tangible property, including buildings and
structural components of buildings, at the rate of five percent with respect to the first
$500,000,000 of the investment credit base and four percent with respect to the excess, except
that in the case of research and development property at the option of the taxpayer the rate is nine
percent. The investment credit base is the cost or other basis for federal income tax purposes of
qualified tangible personal property and other tangible property, including buildings and
structural components of buildings, less the amount of the nonqualified nonrecourse financing
with respect to such property to the extent such financing would be excludible from the credit
base pursuant to section 46(c)(8) of the Internal Revenue Code. Tangible personal property and
other tangible property, including buildings and structural components of buildings, is qualified
if it:
(1)

is acquired, constructed, reconstructed or erected during taxable years beginning
in 1987, 1988 or 1989;

(2)

is depreciable pursuant to section 167 of the Internal Revenue Code;

(3)

has a useful life of four years or more;

(4)

is acquired by purchase as defined in section 179(d) of the Internal Revenue Code;

(5)

has a situs in New York State; and

(6)

is (a) principally used by the taxpayer in the production of goods by
manufacturing, processing, assembling, refining, mining, extracting,
farming, agriculture, horticulture, floriculture, viticulture or commercial
fishing,
(b) industrial waste treatment facilities or air pollution control facilities, used
in the taxpayer's trade or business, or
(c) research and development property.

-5-

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

"Manufacturing" means the process of working raw materials into wares suitable for use
or which gives new shapes, new quality or new combinations to matter which already has gone
through some artificial process by the use of machinery, tools, appliances and other similar
equipment. Property used in production includes all facilities used in the production operation,
including storage of material to be used in production and of the products that are produced.
The credit is not allowed for any property which is leased by the taxpayer to any other
person or corporation.
The investment tax credit allowed is based on the cost or other basis for federal income
tax purposes or, for taxable years beginning in 1987, 1988 and 1989, the investment credit base
of tangible personal property that is principally used by the taxpayer in the production of goods
by manufacturing, processing, etc. The equipment used in the mixing process, whereby a master
tape is created, is considered to be used in the production of goods by manufacturing. Richard H.
Roberts, State Tax Commission Advisory Opinion, April 7, 1981, TSB-H-81(57)I. However, in
the instant case, more than 50 percent of the actual mixing process is engineered or produced by
persons who are not employees of Petitioner. Since Petitioner's employees are not performing the
actual mixing process, Petitioner is not principally engaged in the production of goods, but, in
essence, is principally engaged in providing a service, namely the renting of the studio and/or the
control room, whereby the master tape is created. Therefore, Petitioner's principal business
activities do not constitute the production of goods by manufacturing as contemplated by the
statute. Accordingly, Petitioner may not claim an investment tax credit based on the tangible
personal property contained in Studio 5, Studio 7, Studio 8, the Edit Room or the Technical
Shop.
Issue 2
Section 210.12-A of the Tax Law allows an employment incentive tax credit against the
tax imposed under Article 9-A of the Tax Law in each of the three years succeeding the taxable
year for which an investment tax credit has been allowed under section 210.12 of the Tax Law
with respect to property, the acquisition, construction, reconstruction or erection of which
commenced on or after January 1, 1976 and prior to January 1, 1987. The amount of the credit
allowed in each of the three years is fifty percent of the investment tax credit allowed.
Section 210.12-D of the Tax Law allows an employment incentive tax credit against the
tax imposed under Article 9-A of the Tax Law in each of the two years succeeding the taxable
year for which an investment tax credit, other than at the optional rate applicable to research and
development property, has been allowed under section 210.12 of the Tax Law with respect to
property, the acquisition, construction, reconstruction or erection of which commenced on or
after January 1, 1987. Where the investment tax credit was allowed for taxable years beginning
in 1987, 1988 or 1989 the amount of the employment incentive tax credit allowed in each of the
two succeeding years is the sum of two percent of the first $500,000,000 of the investment credit
base and two and one-half percent of the excess.

-6-

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

Since Petitioner does not qualify for the investment tax credit, Petitioner does not qualify
for the employment incentive tax credit.
Issue 3
A.

Purchases of equipment

Petitioner's studios and sound processing equipment are generally used by producers for
artists' recording sessions and subsequent sound mixing and editing of the magnetic tape.
Although one of Petitioner's employees is usually present at a recording session, the equipment is
mainly operated by employees or sound engineers engaged by the producer. Thus, since
Petitioner's client has the right to direct the use of the equipment, Petitioner is deemed to be
renting tangible personal property to its customers rather than providing a service or producing
tangible personal property. 20 NYCRR 526.7(e)(6).
The Tax Law (1105[a]) imposes tax on every retail sale of tangible personal property,
except as otherwise provided; the term "sale, selling or purchase" is deemed to include rentals,
leases, and the license to use tangible property (1101[b][5]). The term retail sale is deemed to
exclude sales of tangible personal property for resale as such (including rental of such property)
or as a physical component part of tangible personal property. (1101(b)(4)). However, to qualify
as a purchase for resale, a purchase must be exclusively for resale. The use of rental equipment
by its owner defeats the qualification of such equipment as equipment purchased exclusively for
resale. (Matter of Micheli Contracting Corporation v. New York State Tax Commission, 109
AD2d 957).
The final version of a tape recorded at Petitioner's studio is intended to become the source
of the master record, tape or compact disc produced by a mastering laboratory. This "master"
then is used for reproduction by the manufacturer of the marketable recordings. The source tape,
therefore, is itself "equipment" used and consumed in a continuous manufacturing process.
Section 1115(a)(12) of the Tax Law exempts from State and local (but not New York
City) sales taxes the receipts from sales of "[m]achinery or equipment for use or consumption
directly and predominantly in the production of tangible personal property . . . for sale by
manufacturing, processing . . . ."
The Sales and Use Tax Regulations define the term "directly" to mean the machinery and
equipment must, during the production process (i) act upon or effect a change in material to form
the product to be sold, or (ii) have an active causal relationship in the production of the product
to be sold, or (iii) be used in the handling, storage, or conveyance of materials or the product to
be sold, or (iv) be used to place the product to be sold in the package in which it will enter the
stream of commerce. Machinery or equipment used in activities collateral to the production
process is not deemed to be used directly in production.
Machinery or equipment is used "predominantly" in the production of tangible personal
property if it is so employed over 50% of the time. Machinery or equipment used to produce
other machinery or equipment for self use in production is considered to be used directly in
production. 20 NYCRR 528.13(c).

-7-

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

Accordingly, purchases of studio and editing equipment listed above are exempt from
state tax only to the extent that such equipment is used by Petitioner directly and predominantly
in production. If such equipment does not qualify as equipment used directly and predominantly
in production by Petitioner, it will nevertheless be exempt from State and New York City sales
tax if it is purchased by Petitioner exclusively for resale. If the equipment is neither used by
Petitioner directly and predominantly in production nor purchased by Petitioner exclusively for
resale, then such equipment is subject to sales tax when purchased by Petitioner.
Furthermore, whenever Petitioner rents one of its recording studios to a producer the
portion of the charge applicable to rental of production equipment will not be subject to sales tax
(except for New York City local tax) upon receipt of an Exempt Use Certificate (Form ST-121)
in proper form from the producer. However, tax exempt use may be claimed only by the person
producing tangible property for sale. The exemption does not extend to Petitioner's purchases of
such equipment when furnishing a studio for rental. The tax status of a piece of machinery or
equipment also applies to purchases of replacement parts and electric power to operate such
property.
Notwithstanding the Regulations provision (20 NYCRR 528.13[c], supra) exempting
from tax machinery used to produce other machinery, testing apparatus and tools used for repair
and maintenance in the technical shop and by technical support personnel are not considered to
be used directly in production. Such equipment is subject to State and local sales taxes, as is
electrical power consumed by shop operations. 20 NYCRR 528.13(e). However, Petitioner may
apply for a refund or credit of tax paid on spare parts or supplies purchased for shop inventory
which are subsequently used to maintain and operate equipment qualifying for the production
exemption. 20 NYCRR 534.2.
Charges arising from a service contract for Petitioner's air conditioning system are taxable
at the combined State and local rate.
B.

Construction and repairs

Services to real property are generally classified as either capital improvements or taxable
repair, maintenance or installation services, depending on the end result of the service. If the end
result of the services is repair or maintenance of real property, such services are taxable. If the
end result of the same service is a capital improvement to the real property, such services are not
taxable. [20 NYCRR 527.7(b)(4)]; Matter of Building Contractors Association, Inc. v. Tully, 87
A.D.2d 909.
Section 1101(b)(9) of the Tax Law defines "capital improvement" as any addition or
alteration to real property which meets ALL THREE of the following requirements:
1.

It substantially adds to the value of real property or appreciably prolongs the
useful life of real property, AND

-8-

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

2.

It becomes part of real property or is permanently affixed to real property so that
removal would cause material damage to the property or article itself, AND

3.

It is intended to become a permanent installation.

Services which keep real property in a condition of efficiency and safety or restore it to
such condition are considered taxable repair and maintenance services. 20 NYCRR 527.7(a)(1).
Nevertheless, a series of services to real property which, when viewed as a whole, constitute a
major renovation may qualify as a capital improvement. Matter of Frazer Jones Co., Decision of
the State Tax Commission, July 16, 1985, TSB-H-85(195)S.
Petitioner inquires about such studio construction costs as dry wall, insulation, doors,
windows, floor tiles, nonportable air conditioning and heating units and in-the-wall hot or cold
air ducts and electrical wiring. It is clear that such installations meet the criteria for capital
improvement quoted under 1 and 2 above. But, since Petitioner conducts its business in rented
premises, it is presumed that tenant-installed improvements are not made with an intention to
enhance the permanent or lasting value of the property and thus do not qualify as capital
improvements pursuant to Tax Law section 1101(b)(9). (People ex rel. 100 Park Ave., Inc. v.
Boyland, 144 NYS2d 88, mod on other grounds, 284 App Div 1033, revd on other grounds, 309
NY 685; see Tifft v. Horton, 53 NY 377.) However, the facts may serve to rebut such
presumption (Matter of Flah's of Syracuse, Inc. v. Tully, 89 AD2d 729).
Accordingly, the third criterion for qualification under Tax Law 1101(b)(9), supra, will be
met only if Petitioner does not hold or reserve the right to remove the improvement at any time
after construction and the title thereto passes to the owner of the premises upon construction or
the conclusion of Petitioner's lease.
The imposition of sales tax applies to capital improvements as follows: Building
materials are subject to all State and local taxes when purchased (with certain exemptions not
here applicable). When the property owner buys material for installation by employees or by
outside labor it must pay tax to the supplier; no tax is due on labor charges. If material and labor
is provided by a contractor, the property owner pays no tax, but the contractor must pay tax to the
supplier on materials and supplies. For details see Department of Taxation and Finance
Publication 862 (2/81), Classifications of Improvements and Repairs to Real Property.
Petitioner's studios are designed to achieve the proper acoustics through the installation of
angled or undulating panels or other reflective or absorptive materials on ceilings, walls and
floors. This room treatment, necessary for the purpose of Petitioner's business, is not for the
benefit of the landlord. Such installations are comparable to trade fixtures which are not
considered capital improvements because they are removable by the tenant without substantial
injury to the real property and therefore fail to satisfy the requirement of intended permanence.
People v. Boyland, supra; Antonowsky v. State of New York, 14 Misc. 2d 689.

-9-

TSB-A-87 (25) C
Corporation Tax
TSB-A-87 (39) S
Sales Tax
October 1, 1987

Thus, charges to the Petitioner, both for the purchase of the tangible personal and the
installation service are subject to all applicable State and local sales taxes; similarly, charges for
outside labor and for electrical supplies to hook up sound recording and editing equipment to the
electrical sources are taxable. 20 NYCRR 527.5.
A service contract for repair and maintenance of air conditioning is taxable pursuant to
Tax Law 1105(c)5. See also 20 NYCRR 527.7(b)(1), (3).
Fees charged by a sound architect for design services, which result in the preparation of
blueprints as the only tangible product of a design contract, are not taxable.
C.

Studio rental

It should be noted that when Petitioner charges for studio time and receives no Exempt
Use Certificate it must collect the applicable State and local sales taxes.
However, since real estate is not considered tangible personal property for purposes of the
sales tax, its rental is not taxable. 20 NYCRR 526.8(c). Furthermore, the wages of an equipment
operator may be excluded from the taxable receipt for equipment rental. 20 NYCRR 526.7(e)(6).
Consequently, Petitioner's charges for the portion of studio rental amounts representing
operator's wages and rent for the rooms (if reasonable in relation to prevailing wage and rent
rates) are not subject to tax, if shown separately from the taxable charge on the billing rendered.
If the invoice lacks sufficient detail for determining taxable and exempt charges, the total
amount billed will be subject to tax.

DATED: October 1, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.