Does producing office furniture — cutting and welding steel parts, powder-coat painting, and upholstering chairs and panels — count as "manufacturing" for New York's investment tax credit and economic development zone tax credit?

Subject

Whether the proposed activities to be conducted by Artopex, Inc. or its subsidiary at a Troy, New York site will constitute "manufacturing" for purposes of the investment tax credit, the employment incentive tax credit, and/or the economic development zone investment tax credit.

Plain-English summary

Artopex Inc., a Canadian corporation, planned to open a plant through its U.S. subsidiary in Troy, New York — an area designated an economic development zone — to produce office furnishings: modular panels and two lines of office seating. Production would involve gathering raw materials from suppliers, cutting and welding steel parts for chairs and panels, painting parts in a custom powder-coating shop, and upholstering the finished chairs and panels. Artopex wanted to know whether this qualified as "manufacturing" so it could claim the investment tax credit, the economic development zone investment tax credit, and the employment incentive tax credit (which itself depends on first qualifying for the investment tax credit).

The Department ruled the described production process does constitute manufacturing. New York's statutory definition covers "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" — and the same definition applies for both the investment tax credit and the economic development zone investment tax credit. Cutting, welding, painting, and upholstering raw steel and materials into finished office chairs and panels squarely fits that definition. Because the employment incentive tax credit's threshold requirement is simply qualifying for the investment tax credit, meeting the manufacturing test here also clears that hurdle. The Department was careful to note that qualifying as "manufacturing" is only one requirement — Artopex still had to independently satisfy each credit's other statutory conditions.

What this means for you

Manufacturers evaluating New York tax credits

If your production process takes raw materials through cutting, forming, assembly, finishing (like painting), or similar physical transformation using machinery and tools, it likely meets New York's "manufacturing" definition for the investment tax credit and the economic development zone investment tax credit. But "manufacturing" is a threshold test, not the whole analysis — you still need to independently satisfy each credit's other requirements (placed-in-service dates, qualified property definitions, employment thresholds, zone certification, etc.).

Companies locating a new plant in an economic development zone

The manufacturing definition is identical across the standard investment tax credit and the EDZ investment tax credit, so a straightforward manufacturing operation like furniture production should qualify for both, assuming the EDZ location and other zone-specific requirements are also met.

Accountants and tax professionals

Note the credit-stacking structure: the employment incentive tax credit under § 210.12-D has no independent manufacturing definition because it borrows its qualification from the investment tax credit under § 210.12 — establishing manufacturing status once effectively clears the threshold for all three credits discussed here.

Common questions

Q: Does simply assembling purchased components count as manufacturing?
A: This ruling involved more than assembly — cutting and welding raw steel, custom powder-coat painting, and upholstering — which the Department found clearly met the "working raw materials into wares" / "new shapes" standard.

Q: Is qualifying as "manufacturing" enough to get the investment tax credit automatically?
A: No. The Department expressly noted the taxpayer must still meet all other statutory requirements for each credit separately.

Q: Can another furniture (or other) manufacturer rely on this ruling?
A: No. This advisory opinion binds the Department only for the taxpayer and facts presented, and cannot be relied on by anyone else.

Citations and references

Statutes and regulations:

• Tax Law § 210.12(b)(ii)(A) (investment tax credit, definition of "manufacturing")
• Tax Law § 210.12-B(b) (economic development zone investment tax credit, identical manufacturing definition)
• Tax Law § 210.12-D (employment incentive tax credit, dependent on investment tax credit qualification)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1989.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a89_12c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-89(12)C
Corporation Tax
October 17, 1989

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C890706A

On July 6, 1989, a Petition for Advisory Opinion was received from Artopex Inc., C.P., Box
435 St. Martin, Laval, Quebec, Canada H7S 1zg.
The issue raised is whether the proposed activities to be conducted by Petitioner, Artopex,
Inc., or its subsidiary at a Troy, New York site will constitute "manufacturing" pursuant to section
210.12 (b)(ii)(A) of the Tax Law, for purposes of qualifying for the investment tax credit, the
employment incentive tax credit, and/or the economic development zone investment tax credit.
Petitioner, Artopex Inc., is a Canadian corporation with a United States based subsidiary,
Artopex (U.S.) Inc. Artopex (U.S.) Inc. was incorporated in Illinois in 1982. Petitioner proposes to
open a plant in Troy, New York. The City of Troy has been declared an economic development zone
area. At such plant, Petitioner proposes to produce office furnishings, namely, modular panels and
two lines of office seats. Production at the Troy plant will consist of:
1.
2.
3.
4.

gathering raw materials from various suppliers;
cutting and welding steel parts for chairs and panels;
painting of some parts in a custom built powder coating paint
shop; and
upholstering the chairs and panels produced.

For purposes of the investment tax credit, section 210.12 (b)(ii)(A) of the Tax Law defines
"manufacturing" as "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".
For purposes of the economic development zone investment tax credit, section 210.12-B(b)
contains the definition of "manufacturing". Such definition is identical to the investment tax credit
definition of manufacturing.
The provisions of the employment incentive tax credit, under section 210.12-D of the Tax
Law, do not contain a definition of manufacturing. Such definition is not necessary because the first
requirement for qualifying for this credit is that the taxpayer is allowed an investment tax credit
under section 210.12 of the Tax Law. Therefore, the manufacturing test would be met under the
investment tax credit rules.
The production of the office chairs and modular panels described herein, constitutes
manufacturing as such term is defined for purposes of the investment tax credit under section
210.12(b)(ii)(A) of the Tax Law, and the economic development zone investment tax credit under
section 210.12-B(b) of the Tax Law.
TP-9 (9/88)

-2­
TSB-A-89(12)C
Corporation Tax
October 17, 1989

However, the Petitioner must meet the other statutory requirements for qualifying for the
investment tax credit computed pursuant to section 210.12 of the Tax Law; the employment
incentive tax credit computed pursuant to section 210.12-D of the Tax Law or the economic
development zone investment tax credit computed pursuant to section 210.12-B of the Tax Law.

DATED: October 17, 1989

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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