Is a fireworks-display contract taxable, and is selling fireworks outright to an exempt organization that runs its own display taxable?

Plain-English summary

Auburn Fireworks, Inc., a licensed New York fireworks company, does business two ways and asked how each is taxed:

• Method 1 — outright sale: it sells the fireworks material to a purchaser (who provides a license number showing it may possess the fireworks), and the purchaser runs its own display.
• Method 2 — display contract: it contracts to put on the display itself, bringing the explosives and crew to the site, where the customer's representative may inspect the materials but the customer does not keep them. Auburn's standard contract is a "guaranteed display of fireworks" — free if the sponsor isn't satisfied — with no down payment and payment due at the conclusion of the display.

The Department's holdings:

• Conducting a display is a nontaxable service. Under the display contract, Auburn provides pyrotechnic materials, personnel, and public-liability insurance; the customer does not take title or possession of the fireworks, so there is no sale of tangible personal property under Tax Law § 1101(b)(5). Conducting a fireworks display is not one of the enumerated services taxed under § 1105(c), so the display fee is not subject to sales or use tax (following Bay Fireworks Co., TSB-A-91(46)S).
• The operator owes use tax on its materials. Because Auburn is providing a service and not reselling the fireworks, the pyrotechnics it buys are not purchased for resale. If Auburn didn't pay sales tax when it bought them, it owes compensating use tax under § 1110.
• A true outright sale is a sale for resale, then a taxable sale. If Auburn simply sells the materials without providing display services, it is buying them for resale (no tax on its purchase) and must collect applicable state and local sales tax on the sale to the customer.
• Sales to exempt organizations. If that outright sale is to an organization exempt under § 1116(a), the sale is not taxable — but Auburn must obtain a properly completed Exempt Organization Certificate or government purchase order.

What this means for you

Selling the goods vs. performing a show are taxed very differently

The pivotal question is whether title or possession of the fireworks passes to the customer. If you hand over the product, that's a sale of tangible personal property. If you keep the product and simply stage a display, you're selling a service — and conducting a fireworks show isn't on New York's list of taxable services.

If you perform the display, you pay tax on your own materials

A service provider is the end user of the goods it consumes. Because the display fee isn't taxable and the materials aren't resold, the operator owes use tax on the pyrotechnics (unless sales tax was already paid at purchase). Don't buy the materials tax-free "for resale" if you're really going to burn them in a show you run.

If you sell the goods, collect tax — unless the buyer is exempt

An outright sale of fireworks to a customer who runs its own display is a taxable retail sale; collect state and local tax. The exception is a sale to a § 1116(a) exempt organization (e.g., a government body or qualifying nonprofit), which is exempt only if you get a properly completed Exempt Organization Certificate or government purchase order on file.

Common questions

Q: We hire a pyrotechnics company to put on our July 4th show. Is that taxable?
A: No. Staging a fireworks display is a nontaxable service — the customer never takes possession of the fireworks, and the display isn't an enumerated taxable service (§ 1105(c); Bay Fireworks TSB-A-91(46)S).

Q: We're a fireworks company. Do we owe tax on the shells we shoot in a show we run?
A: Yes — as use tax, if you didn't pay sales tax when buying them. Providing a display is a service, so the materials aren't purchased for resale (§ 1110).

Q: We sell fireworks to a group that runs its own display. Do we charge tax?
A: Yes, unless the buyer is a § 1116(a) exempt organization and gives you a properly completed Exempt Organization Certificate or government purchase order. That's a genuine sale for resale on your end, then a taxable retail sale.

Citations and references

Statutes:

• Tax Law § 1101(b)(5) — defines "sale" as a transfer of title or possession; a fireworks display transfers neither.
• Tax Law § 1105(c) — lists the taxable services; conducting a fireworks display is not among them.
• Tax Law § 1110 — compensating use tax owed by the operator on pyrotechnics used in providing a display.
• Tax Law § 1116(a) — exempt organizations; an outright sale to one is exempt with a proper certificate or government purchase order.

Prior opinion applied:

• Bay Fireworks Co., TSB-A-91(46)S — a fireworks display is a nontaxable service, and an outright sale of the materials is a sale for resale/taxable retail sale.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_55s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91 (55)S
Sales Tax
August 12, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S910604A

On June 4, 1991, a Petition for Advisory Opinion was received from Auburn Fireworks, Inc.,
691 A-1 Cayuga Road, RD 1, Cayuga, New York 13034.
The issues raised by Petitioner, Auburn Fireworks, Inc., are:
1.

Whether the sale of fireworks to exempt organizations, where the
exempt organization itself will display the fireworks, is subject to
sales or use tax.

2.

Whether a contractual arrangement with an exempt organization
whereby Petitioner displays the fireworks is subject to sales or use
tax.

Petitioner is a New York State corporation duly licensed and authorized to conduct firework
displays. It has two general methods of doing business. Under the first method, it sells outright to
prospective purchasers firework material which Petitioner has purchased from out of State. Under
the second, it enters into arrangements with persons or entities desirous of having firework displays
and under the terms of a typical arrangement Petitioner for a consideration sells the explosives to the
contracting party, with Petitioner exploding the fireworks at a stated time and place.
In the situation where the purchaser is to put on the display Petitioner requires, prior to
delivery of the fireworks, that the purchaser provide Petitioner with the license number which
authorizes the purchaser to have possession of the fireworks. Having received that information,
Petitioner then delivers and the purchaser takes possession of the fireworks.
Under the second method after the contract has been entered into and the other contracting
party had obtained the necessary licenses, Petitioner on the evening of the display goes to the
designated area where the display is to be conducted with the explosive materials necessary for the
display. By prior arrangement, the other party has an authorized representative at the site at the time
when Petitioner or its employees arrive. When Petitioner and its employees come to the display site,
the representative of the entity for whom Petitioner is putting on the display meets with the
employees of Petitioner and has the opportunity (although it is rarely taken advantage of) to examine
the explosives which are part of the contractual arrangement. In addition, Petitioner normally, in the
presence of the representative, satisfies itself that the conditions of security, safety and other relevant
considerations which the parties have agreed to has been complied with. In the normal course of
events the representative of the other contracting party does not stay on the field when the fireworks
are being exploded.

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TSB-A-91 (55)S
Sales Tax
August 12, 1991
Petitioner's standard contract with its customer provides, in part, that:
"This contract, dated
, day of
Fireworks, Incorporated, hereinafter AFI, and
guaranteed display of fireworks on the evening of
display sponsor and approved by AFI. . .
*

*

, 19
, 19

by and between Auburn
is an agreement for a
at a site selected by the

*

GUARANTEE If display sponsor is not satisfied with the display presentation, there will be
NO CHARGES for the display. The display will be FREE.
PAYMENT No down payment is requested or required. Display Sponsor agrees to pay AFI
or their representative at the conclusion of the display, the amount of:
dollars."
Section 1116(a) of the Tax Law provides as follows:
Sec. 1116. Exempt organizations.--(a) Except as otherwise provided in this
section, and sale or amusement charge by or to any of the following or any use or
occupancy by any of the following shall not be subject to the sales and compensating
use taxes imposed under this article:
(1) The state of New York, or any of its agencies, instrumentalities, public
corporations (including a public corporation created pursuant to agreement or
compact with another state or Canada) or political subdivisions where it is the
purchaser, user or consumer, or where it is a vendor of services or property of a kind
not ordinarily sold by private persons;
(2) The United State of America, and any of its agencies and
instrumentalities, insofar as it is immune from taxation where it is the purchaser, user
or consumer, or where it sells services or property of a kind not ordinarily sold by
private persons;
(3) The United Nations or any international organization of which the United
States of America is a member where it is the purchaser, user or consumer, or where
it sells services or property of a kind not ordinarily sold by private persons;
(4) Any corporation, association, trust, or community chest, fund or
foundation, organized and operated exclusively for religious, charitable, scientific,
testing for public safety, literary or educational purposes, or to foster national or
international amateur sports competition (but only if no part of its activities involve
the provision of athletic facilities or equipment), or for the prevention of cruelty
to children or animals, no part of the net earnings of which inures to the benefit of

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TSB-A-91 (55)S
Sales Tax
August 12, 1991
any private shareholder or individual, no substantial part of the activities of which
is carrying on propaganda, or otherwise attempting to influence legislation, (except
as otherwise provided in subsection (h) of section five hundred one of the United
States internal revenue code of nineteen hundred fifty-four, as amended) and which
does not participate in, or intervene in (including the publishing or distributing of
statements), any political campaign on behalf of any candidate for public office;
(5) A post or organization of past or present members of the armed forces of
the United States, or an auxiliary unit or society of, or a trust or foundation for, any
such post or organization:
(A) organized in this state,
(B) at least seventy-five percent of the members of which are past or present
members of the armed forces of the United States and substantially all of the other
members of which are individuals who are cadets or are spouses, widows or
widowers of past or present members of the armed forces of the United States or of
cadets, and
(C) no part of the net earnings of which insures to the benefit of any private
shareholder or individual; and
(6) The following Indian nations or tribes residing in New York state:
Cayuga, Oneida, Onondaga, Poospatuck, Saint Regis Mohawk, Seneca, Shinnecock,
Tonawanda and Tuscarora, where it is the purchaser, user or consumer.
(7) A not-for-profit corporation operating as a health maintenance
organization subject to the provisions of article forty-four of the public health law.
(8) Cooperative and foreign corporations doing business in this state pursuant
to the rural electric cooperative law.
Section 1101(b)(5) of the Tax Law defines sale as:
(5) Sale, selling or purchase. Any transfer of title or possession or both, exchange
or barter, 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,
including the rendering of any service, taxable under this article, for a consideration
or any agreement therefor. (Emphasis supplied)
In addition, Section 1105(c) of the Tax Law imposes tax upon the receipts from every sale,
except for resale, of certain enumerated services. The conducting of a firework display is not a
service enumerated under Section 1105(c) of the Tax Law and, therefore, the fee paid for such
service is not subject to sales or use tax.

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TSB-A-91 (55)S
Sales Tax
August 12, 1991
Pursuant to Petitioner's contract with its customer it is selling a "display of fireworks" by
providing all pyrotechnic materials, all personnel necessary to execute the fireworks exhibition and
public liability insurance. Petitioner's customer does not take title or possession of the fireworks and
thus does not purchase tangible personal property as defined by Section 1101(b)(5) of the Tax Law.
What the customer is purchasing is a fireworks exhibition which is not one of the services subject
to tax under Section 1105(c) of the Tax Law. Bay Fireworks Co., Adv Op Comm T & F, June 21,
1991, TSB-A-91(46)S.
Since Petitioner is providing a service and not selling tangible personal property, therefore
the materials purchased by Petitioner for use in providing the firework displays are not purchased
for resale.
If Petitioner did not pay sales tax on its pyrotechnic materials at the time of purchase, it is
required to pay the compensating use tax on such purchases as provided by Section 1110 of the Tax
Law.
It is noted that if the Petitioner sells the pyrotechnic materials to a customer without
providing any other services in connection with the sale then it would be purchasing said materials
for resale and would not be required to pay sales or use tax on said purchases, but would be required
to collect applicable State and local sales tax on the sale. Bay Fireworks Co., supra
If Petitioner's sale of the pyrotechnic materials in such circumstances is to an exempt
organization enumerated in Section 1116(a) of the Tax Law, such sale is not subject to the
imposition of sales tax. However, Petitioner is required to obtain a properly completed Exempt
Organization Certificate or government purchase order from its customer.

DATED: August 12, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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