Is microfilming blueprints and reports required for building permits a nontaxable capital improvement, or a taxable sale of tangible personal property?

Plain-English summary

Fred H. Geller & Co. asked whether microfilming blueprints, applications, and inspection reports for architects, engineers, and developers qualifies as a capital improvement. Its client works in New York City, where the building department requires such documents to be submitted on microfilm in a specified format; other city and state agencies also require microfilm submissions. Submitting the microfilm to the Department of Buildings lets the agencies issue the capital-improvement permits needed before construction work can begin.

The Department's answer, under Tax Law § 1105(a) and § 1105(c)(3)(iii):

• Microfilm is tangible personal property. Section 1105(a) taxes retail sales of tangible personal property, and Regulation § 528.6(b)(2), Example 4, treats microfilm as tangible personal property (a microfilm copy of a newspaper isn't a newspaper — its sale is a taxable sale of tangible personal property).
• It isn't a capital improvement. The capital-improvement exclusion in § 1105(c)(3)(iii) applies only when tangible personal property is installed as an addition or improvement to real property. The client's microfilm sales don't meet that test — the microfilm isn't installed into real property at all.
• Permits don't change the analysis. That the microfilm is submitted to obtain capital-improvement permits doesn't convert the microfilm itself into a capital improvement. So the client's sales of the microfilms are subject to sales tax under § 1105(a).

What this means for you

Microfilm (and similar copies) are taxable products

If you sell microfilm — or comparable reproductions of documents — you're selling tangible personal property, and those sales are generally subject to sales tax, regardless of what the documents depict.

"Used for a capital improvement" isn't the same as "is a capital improvement"

The capital-improvement exclusion is about property installed into real property. A product that merely supports a construction project — like permit paperwork or microfilm submitted to get permits — doesn't qualify just because a capital improvement follows.

Document-service providers should collect tax

Businesses that microfilm or reproduce blueprints, applications, and reports for design professionals should plan to collect sales tax on those charges.

Accountants and tax professionals

The opinion classifies microfilm as tangible personal property under Regulation § 528.6(b)(2), Example 4, and denies the § 1105(c)(3)(iii) capital-improvement exclusion because nothing is installed into real property; the downstream permit purpose is irrelevant.

Common questions

Q: Is microfilming blueprints and reports taxable in New York?
A: Yes. The sale of the microfilm is a taxable sale of tangible personal property under § 1105(a).

Q: The microfilm is required to get capital-improvement permits — doesn't that make it exempt?
A: No. The capital-improvement exclusion applies to property installed into real property. Microfilm used to obtain permits isn't itself a capital improvement.

Q: Why is microfilm treated as tangible personal property?
A: Regulation § 528.6(b)(2), Example 4, says a microfilm copy (e.g., of a newspaper) isn't the original document — its sale is a taxable sale of tangible personal property.

Q: Who collects the tax?
A: The microfilming business collects sales tax on its charges to the architects, engineers, and developers.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) (tax on receipts from every retail sale of tangible personal property)
• Sales and Use Tax Regulations § 528.6(b)(2), Example 4 (a microfilm copy is tangible personal property, and its sale is taxable)
• Tax Law § 1105(c)(3)(iii) (exclusion for installing property that becomes an addition or capital improvement to real property; capital improvement defined in Tax Law § 1101(b)(9))

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_33s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-92 (33) S
Sales Tax
April 6, 1992

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920206D

On February 6, 1992 a Petition for Advisory Opinion was received from Fred H. Geller &
Co., 290 Central Ave., Lawrence, N.Y. 11559.
The issue raised by Petitioner, Fred H. Geller & Co., is whether microfilming of blueprints,
applications and inspection reports for architects, engineers and developers qualifies as a capital
improvement.
Petitioner's client conducts its business in New York City. The City of New York through
its building department requires that architects, engineers and developers submit blueprints,
applications and inspection reports in a rigid specified manner. Any and all such documents must
be submitted on microfilm consistent with the rules for such submission by the building department.
In addition, various city and State agencies also require microfilming of certain documents consistent
with their rules for such submissions, the purpose of which is to approve, advise or issue necessary
capital improvement permits. Petitioner's client is in the business of providing microfilm of such
documents. The submission of such microfilm documents to the Department of Buildings allows the
issuance of permits and other necessary documentation to allow capital improvement work to begin.
Section 1105(a) of the Tax Law imposes a tax upon "[T]he receipts from every retail sale of
tangible personal property.
Section 528.6(b)(2) of the Sales and Use Tax Regulations at Example 4 defines microfilm
as tangible personal property as follows:
Example 4:

A microfilm copy of a newspaper
is not a newspaper and the sale
of such microfilm is the sale
of tangible personal property
subject to tax.

Section 1105(c)(3) of the Tax Law imposes sales tax upon every sale, except for resale of the
service of:
Installing tangible personal property excluding a mobile home, or maintaining, servicing or
repairing tangible personal property, including a mobile home, not held for sale in the regular course
of business, whether or not the services are performed directly or by means of coin-operated
equipment or by any other means, and whether or not any tangible personal property is transferred
in conjunction therewith, except:
TP-9 (9/88)

*

*

*

-2­
TSB-A-92 (33) S
Sales Tax
April 6, 1992

(iii) for installing property which, when installed, will constitute an addition or capital
improvement to real property, property or land, as the terms real property or land are defined
in the real property tax law as such term capital improvement is defined in paragraph nine
of subdivision (b) of section eleven hundred one of this chapter, and. . .(Emphasis supplied)
In order to meet the requirements for exclusion from sales tax as a capital improvement,
tangible personal property must be installed as an addition or capital improvement to real property
in accordance with the meaning and intent of Section 1105(c)(3)(iii) of the Tax Law. Since
Petitioner's client's sales of microfilms of blueprints, applications and inspection reports do not meet
this test they thus do not qualify as capital improvements. Moreover, the sales of such microfilms
by Petitioner's client are subject to sales tax in accordance with the provisions of Section 1105(a) of
the Tax Law and Section 528.6(b)(2) Example 4 of the Sales and Use Tax Regulations.

DATED: April 6, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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