New York Advisory Opinion TSB-A-95(42)S: In CS First Boston's proposed NYC IDA headquarters-retention deal -- where the building owner, Metlife, pays for and owns most leasehold improvements for regulatory-capital reasons while the IDA holds legal title -- are the purchases of Eligible Personalty, the Improvements, Metlife's reimbursements, and CS First Boston's debt-service payments exempt from sales and use tax?

Plain-English summary

CS First Boston Corporation and its affiliates ("CSFB") proposed a roughly 20-year project with the New York City Industrial Development Agency (the "IDA") to induce CS First Boston to keep its headquarters and minimum employment levels in the city. CS First Boston's planned headquarters at 11 Madison Avenue (the "Building") is owned by Metropolitan Life Insurance Company ("Metlife"), which will condominiumize the Building and convey the premises CS First Boston will occupy (the "Project Premises") to the IDA for a nominal amount, giving the IDA legal title including any Improvements built there; the IDA then leases the space back to Metlife for nominal rent (the "Overlease"), while Metlife separately leases it to CS First Boston at fair market rent (the "Prime Lease"), and CS First Boston in turn subleases to the IDA and leases back from the IDA under a "Financing Lease" sized to repay IDA-issued bonds. The twist in this deal: because CS First Boston is a broker-dealer subject to NYSE/SEC regulatory capital rules, and owning the leasehold Improvements directly would reduce its regulatory capital (limiting its ability to do business), the parties arranged for Metlife to pay for and own MOST of the Improvements for financial-reporting and federal tax purposes, even though the IDA holds legal title. To accomplish this, CS First Boston is appointed the IDA's agent for purchasing materials for both the Improvements and separately for "Eligible Personalty" (furniture, machinery, trade fixtures, and other tangible personal property); CS First Boston can also designate Metlife as ITS sub-agent (i.e., a sub-agent of the IDA) so Metlife can fund certain Improvement purchases, but only through CS First Boston acting as Metlife's own contractor -- CS First Boston periodically invoices Metlife for reimbursement of amounts it spends purchasing Improvement materials in this dual capacity.

The Department answered each of CS First Boston's five questions. (A) Payments CS First Boston makes as the IDA's agent to purchase Eligible Personalty are exempt from state, city, and MCTD sales/use tax, as long as the IDA is the owner or lessor of that property. (B) Because an advisory opinion can't resolve factual disputes, and Petitioner's facts didn't establish whether the Improvements meet the statutory definition of a "capital improvement" (Tax Law § 1101(b)(9): substantially adds value or extends useful life, becomes part of the real property, and is intended as permanent), the Department laid out the answer under both possibilities. If the Improvements DO qualify as a capital improvement: materials purchased as the IDA's agent BEFORE the IDA takes title to the property are exempt under General Municipal Law § 874 (since the IDA is buying through its agent); materials purchased and incorporated into the real property AFTER the IDA already holds title are exempt under the separate Tax Law § 1115(a)(15) exemption for materials that become an integral part of an exempt organization's building, REGARDLESS of whether the purchaser is formally the IDA's agent, since the IDA itself qualifies as an exempt organization under § 1116(a)(1). If the Improvements DON'T qualify as a capital improvement, the exemption is available ONLY where the purchase is genuinely made as the IDA's agent. (C) The same two-track (capital-improvement vs. not) analysis applies where CS First Boston purchases materials acting in its DUAL capacity as both the IDA's agent and Metlife's agent -- with the added condition that Metlife must actually be properly designated a sub-agent of the IDA for those specific purchases. (D) Metlife's reimbursement payments to CS First Boston for materials CS First Boston purchased in that dual agent capacity are not subject to sales and use tax, provided the underlying purchases were genuinely made as the IDA's agent. (E) CS First Boston's debt-service rent payments to the IDA under the Financing Lease are not subject to sales and use tax, following the Department's own prior Prudential Securities Incorporated precedent for the same kind of IDA financing-lease rent.

What this means for you

Regulated broker-dealers structuring IDA-financed office buildouts

If regulatory capital rules discourage you from directly owning leasehold improvements, a landlord-funded/landlord-owned structure (with you still acting as the IDA's purchasing agent, and the landlord as your sub-agent) can preserve the sales-tax exemption on those improvements -- but expect the exemption's exact legal basis, and possibly the agent-status requirement, to hinge on whether the work legally qualifies as a "capital improvement," a fact-specific determination this kind of advisory opinion generally won't resolve for you in advance.

Building owners funding tenant improvements under an IDA deal

Your reimbursement payments to the tenant (or its contractor) for IDA-agent purchases can be structured as exempt from sales tax -- but you need to actually be validly designated as the IDA's sub-agent for those specific purchases, not just informally footing the bill.

Anyone relying on an advisory opinion for a capital-improvement classification

Don't expect a TSB-A to definitively classify your specific construction project as a "capital improvement" -- the Department will only apply the LAW to whatever facts you establish, and if the capital-improvement question itself is unresolved on the facts presented, the opinion will lay out conditional answers for both possibilities rather than pick one.

Common questions

Q: Why does it matter whether the Improvements are purchased before or after the IDA takes title to the property?
A: Because different exemption provisions apply at each stage -- General Municipal Law § 874 covers agency purchases the IDA makes (through its agent) before it holds title, while Tax Law § 1115(a)(15) separately exempts materials that become an integral part of an ALREADY-exempt organization's building, which only applies once the IDA actually holds title as that exempt organization.

Q: If the Improvements turn out not to be a capital improvement, does that kill the exemption entirely?
A: No -- it just narrows the basis for the exemption to the strict agency requirement: the purchase must genuinely be made by CS First Boston (or Metlife as its sub-agent) as the IDA's agent, with none of the broader capital-improvement-based exemptions (§ 1115(a)(15) or the pre-title § 874 exemption) available as a backstop.

Q: Is this the same Project as the later CS First Boston ruling involving Purchasing, Leasing, and the Group Agents?
A: This December 19, 1995 opinion addresses an earlier or related stage of essentially the same CS First Boston/Metlife headquarters retention deal (referenced by the later opinion, TSB-A-95(43)S, as having addressed the Owner Improvements title/reporting structure) -- though the later opinion describes a roughly 22-year deal term versus this opinion's approximately 20 years, so some deal terms evidently evolved between the two filings.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(5) (definition of sale/purchase)
• Tax Law § 1101(b)(9)(i) (definition of capital improvement)
• Tax Law § 1105 (imposition of sales tax)
• Tax Law § 1107 (additional NYC sales tax)
• Tax Law § 1109 (metropolitan commuter transportation district tax)
• Tax Law § 1110 (compensating use tax)
• Tax Law § 1115(a)(15) (materials for exempt organization's building/improvement)
• Tax Law § 1116(a)(1) (governmental entity/public corporation exemption)
• 20 NYCRR 529.2(a) (public corporation definition; IDAs included as an example)
• 20 NYCRR 541.3(a) (governmental contractor exemption documentation)
• General Municipal Law § 862 (one-third retail facilities restriction)
• General Municipal Law § 874 (IDA tax exemption)
• General Municipal Law § 917 (New York City Industrial Development Agency)

Prior rulings and cases referenced:

• Wegmans Food Markets v. Department of Taxation and Finance, 126 Misc. 2d 144, aff'd 115 A.D.2d 962, lv to app den 67 N.Y.2d 606
• Wegmans Food Markets v. The Department of Taxation and Finance of the State of N.Y., Sup. Ct., Monroe County, Jan. 10, 1992, Galloway, J.
• Prudential Securities Incorporated, Advisory Opinion, Commissioner of Taxation and Finance, April 28, 1993, TSB-A-93(68)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1995.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a95_42s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (42)S
Sales Tax
December 19, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950425A

On April 25, 1995 a Petition for Advisory Opinion was received from CS First Boston
Corporation, 55 East 52nd Street, Park Avenue Plaza, New York, New York 10022.
Petitioner, CS First Boston Corporation, states the issues as follows:
(A)

Whether Petitioner's payments, as agent of and on behalf of the IDA, to purchase Eligible
Personalty will be subject to sales and compensating use taxes.

(B)

Whether Petitioner's payments, as agent of and on behalf of the IDA, to purchase
Improvements will be subject to these taxes.

(C)

Whether Petitioner's payments, as agent of and on behalf of the IDA and also Metlife, to
purchase certain Improvements will be subject to these taxes.

(D)

Whether Metlife's payments to reimburse Petitioner for amounts Petitioner paid to purchase
materials used to construct certain Improvements will be subject to these taxes.

(E)

Whether Petitioner's Debt Service Payments to the IDA will be subject to these taxes.

Petitioner presents the following facts. The petition for an advisory opinion concerns a
proposed transaction (the "Project") between the New York City Industrial Development Agency (the
"IDA") and CS First Boston Corporation ("CS First Boston") and certain of its affiliates (together
with CS First Boston, "CSFB"). The Project is intended to induce CS First Boston to retain its
headquarters and maintain certain minimum levels of employment in New York City (the "City")
for approximately twenty (20) years and encompasses the acquisition of materials to be incorporated
into leasehold improvements which materials will become an integral component part of the
structure, building or real property (together, the real property) to which the IDA has title (the
"Improvements") at the premises to be occupied by CSFB as well as furniture, machinery, trade
fixtures and other tangible personal property (the "Eligible Personalty") for use by CSFB at premises
in the City over the term of the Project. The Project will not exceed the allowable 1/3 retail facilities
restriction of section 862 of the General Municipal Law.
In connection with the Project, the IDA will extend certain economic benefits to CSFB to
reduce CSFB's cost of retaining its headquarters and other operations in the City. Among these
benefits is an exemption from the New York State and New York City sales and use tax (the "Sales

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Tax") with respect to the Improvements and the Eligible Personalty. The exact terms under which
the Sales Tax exemption will be available will be set forth in a Project Agreement, a Sales Tax Letter
(the "Sales Tax Letter"), and other agreements to be entered into between the IDA and CSFB
(collectively, the "IDA Agreements").
a. Improvements. The structure pursuant to which it is proposed that Sales Tax benefits will
be available to CSFB in respect of the Improvements is as follows:
(1) The premises to be occupied by CSFB as its headquarters are owned by Metropolitan
Life Insurance Company ("Metlife") and are located at 11 Madison Avenue, New York, New York
(the "Building"). In order to facilitate CSFB's arrangement with the City, Metlife will
condominiumize the Building and convey title to the premises to be occupied by CSFB (the "Project
Premises") to the IDA for a nominal amount. This conveyance will give the IDA legal title to the
Project Premises, which by law will include the Improvements. The IDA will then lease the Project
Premises back to Metlife pursuant to a lease agreement for a nominal rent (the "Overlease"). Under
the Overlease, the Project Premises will include the Improvements as and when constructed.
(2) Metlife will have previously leased the Project Premises to CS First Boston under a lease
that is for a fair market value rent and reflects the parties' economic arrangement (the "Prime Lease").
Under the Prime Lease, the Project Premises will include the Improvements as and when
constructed.
(3) CS First Boston will then sublease the Project Premises to the IDA for nominal rent (the
"Facility Lease") and the IDA will lease back the Project Premises to CSFB pursuant to a lease
agreement (the "Financing Lease") for an amount sufficient to repay certain bonds, described below,
to be sold by the IDA to finance partially the Improvements as well as to finance partially the
Eligible Personalty. The Project Premises subject to the Facility Lease and the Financing Lease will
include the Improvements as and when constructed.
(4) CS First Boston is a broker-dealer subject to regulation by the New York Stock Exchange
and the Securities and Exchange Commission. Under the rules of these entities, CS First Boston is
subject to regulatory capital requirements under which CS First Boston's ability to conduct its
business as a broker-dealer is based upon the total amount of regulatory capital shown on its
financial statements. Pursuant to applicable rules, the Improvements, if owned by CS First Boston,
generally would have the effect of reducing CS First Boston's regulatory capital, thereby limiting its
ability to conduct its business. Accordingly, it has been determined that the cost of a majority of the
Improvements will be paid for by Metlife and that, for financial reporting and federal income tax
purposes, such Improvements will be owned by Metlife.
Although most of the Improvements will be constructed after the Building is subjected to the
condominium regime described above, some of the Improvements will be made prior to the creation
of the condominium units in accordance with the Sales Tax Letter and the structure described below.
The Improvements will be constructed in the following manner: Pursuant to the IDA Agreements,
(i) CSFB will be appointed as an agent of the IDA for the purpose of acquiring the materials to be

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incorporated into the Improvements (as well as for the purpose of acquiring the Eligible Personalty
,as discussed below), and (ii) CS First Boston will be authorized to designate Metlife as its sub-agent
of the IDA to permit Metlife to purchase materials to be incorporated into the Improvements as agent
of and on behalf of the IDA, provided that such purchases by Metlife shall only be permitted to be
effected through CS First Boston acting as contractor for Metlife. Pursuant to an Agreement of SubAgency, between CS First Boston as agent of the IDA and Metlife, Metlife will be designated a sub­
agent of CS First Boston in its capacity as agent of the IDA, and shall be permitted to make
purchases through CS First Boston as agent of the IDA and as general contractor for Metlife.
Pursuant to a Construction Agreement between Metlife and CS First Boston, CS First Boston will
be appointed by Metlife as its agent for purposes of constructing certain Improvements. CS First
Boston, (a) with respect to such Improvements which will be made by Metlife, acting in CS First
Boston's capacity as IDA agent as well as Metlife agent, and (b) with respect to other Improvements
which will be made by CS First Boston, acting in its capacity solely as IDA agent, will contract with
a general contractor or act as a general contractor to build the Improvements. Legal title to all such
Improvements will be held by the IDA. Upon the purchase of materials to be incorporated into the
Improvements, CS First Boston will present the Sales Tax Letter entitling it to an exemption from
Sales Tax for such materials and will make such purchase(s) as agent for the IDA.
In accordance with the Prime Lease, from time to time CS First Boston will submit to Metlife
an invoice detailing, and requesting reimbursement for, amounts paid by CS First Boston to purchase
the Improvements (including materials to be incorporated as an integral component part of real
property to which the IDA has title) made by CS First Boston, as agent of the IDA and as general
contractor of Metlife. Metlife will then reimburse CS First Boston for eligible amounts expended
by CS First Boston. The Prime Lease will provide that, for financial reporting and federal income
tax purposes, these Improvements for which Metlife makes such reimbursements will be owned by
Metlife. Legal title to all such Improvements, however, will be held by the IDA.
During the period before Metlife has converted the Building to condominium units (the
“Interim Period”), CSFB will sublease the Project Premises to the IDA for a nominal amount and
the IDA will sub-sublease the Project Premises back to CSFB. Construction of the Improvements
and purchase of materials to be incorporated as integral component parts of the real property will
commence during the Interim Period. Following Metlife's transfer of the condominium units to the
IDA, this sublease and sub-sublease will be amended and restated as the Facility Lease and the
Financing Lease, respectively, as described in paragraph number (3) above.
(5) With respect to the portion of the purchase price of the materials used to create the
Improvements, which materials will become an integral component part of the real property to which
the IDA has title, the IDA will from time to time issue special obligation revenue bonds (the
"Bonds"). The Bonds likely will be sold to an affiliate of CS First Boston but may also be sold to
independent third parties. Proceeds raised from the sale of the Bonds will be used to reimburse CS
First Boston for the purchase price (i) of the materials to be incorporated into the Improvements
(which purchase price will also be reimbursed by Metlife to CS First Boston with respect to those
materials paid for by CS First Boston acting in its dual capacity as agent of the IDA and general

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contractor of Metlife) and (ii) of the Eligible Personalty. The rent paid by CS First Boston to the
IDA under the Financing Lease will be sufficient to pay interest and principal on the Bonds (the
"Debt Service Payments").
b. Eligible Personalty. The structure pursuant to which it is proposed that Sales Tax benefits
will be available to CSFB with respect to the Eligible Personalty is as follows:
(1) One or more members of CSFB, acting pursuant to the IDA Agreements as agent of the
IDA, will purchase Eligible Personalty on behalf of the IDA for use at the Project Premises. The
IDA will have legal title to, or a leasehold interest in, the Eligible Personalty. In connection with
the purchases, the applicable member of CSFB will present the Sales Tax Letter to the supplier
indicating that the member is entitled to exemption from sales tax.
(2) The IDA will lease the Eligible Personalty to CSFB pursuant to the Financing Lease.
(3) As in the case of the Improvements, the IDA will sell Bonds to a CS First Boston affiliate
or to a third party and the proceeds of the sale of such Bonds will reimburse the applicable members
of CSFB for their cost to purchase the Eligible Personalty. The rent paid by members of CSFB to
the IDA under the Financing Lease will also be sufficient to pay the Debt Service Payments
attributable to the Eligible Personalty.
Applicable Law and Regulations
Section 1101(b)(5) of the Tax Law defines "[s]ale, selling or purchase" as: "[a]ny 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."
Section 1101 (b) (9) (i) of the Tax Law defines “capital improvement” as:
An addition or alteration to real property which:
(A) Substantially adds to the value of the real property, or appreciably
prolongs the useful life of the real property; and
(B) Becomes part of the real property or is permanently affixed to the
real property so that removal would cause material damage to the
property or article itself; and
(C) Is intended to become a permanent installation.
Section 1105 of the Tax Law provides, in relevant part:
Imposition of sales tax. - ... there is hereby imposed and there shall be paid a tax of
four percent upon:

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(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article...
(c) The receipts from every sale, except for resale, of the following services: ...
(3) Installing tangible personal property ... or maintaining, servicing or repairing
tangible personal property ... not held for sale in the regular course of business,
whether or not the services are performed directly ... or by any other means, and
whether or not any tangible personal property is transferred in conjunction therewith
except ... (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,
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; ... .
(5) Maintaining, servicing or repairing real property, property or land, as such terms
are defined in the real property tax law, whether the services are performed in or
outside of a building, as distinguished from adding to or improving such real
property, property or land, by a capital improvement as such term capital
improvement is defined in paragraph nine of subdivision (b) of section eleven
hundred one of this chapter ... .
Section 1107 of the Tax Law provides, in relevant part:
(a) General. On the first day of the first month following the month in which a
municipal assistance corporation is created under article ten of the public authorities
law for a city of one million or more, in addition to the taxes imposed by sections
eleven hundred five and eleven hundred ten, there is hereby imposed ..., within the
territorial limits of such city, and there shall be paid, additional taxes, at the rate of
four percent, which except as provided in subdivision (b) of this section, shall be
identical to the taxes imposed by sections eleven hundred five and eleven hundred
ten. Such sections and the other sections of this article, including the definition and
exemption provisions, shall apply for purposes of the taxes imposed by this section
in the same manner and with the same force and effect as if the language of those
sections had been incorporated in full into this section and had expressly referred to
the taxes imposed by this section.
Section 1109 of the Tax Law provides, in relevant part:
(a) General. In addition to the taxes imposed by sections eleven hundred five and
eleven hundred ten of this article, there is hereby imposed within ... the metropolitan
commuter transportation district ... and there shall be paid, additional taxes, at the
rate of one-quarter of one percent, which shall be identical to the taxes imposed by
sections eleven hundred five and eleven hundred ten of this article ... .
Section 1110 of the Tax Law provides, in relevant part:

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(a) Except to the extent that property or services have already been or will be subject
to sales tax under this article, there is hereby imposed on every person a use tax for
the use within this state ..., (A) of any tangible personal property purchased at retail,
(B) of any tangible personal property ... manufactured, processed or assembled by
the user, (i) if items of the same kind of tangible personal property are offered for
sale by him in the regular course of business or (ii) if items are used as such or
incorporated into a structure, building or real property by a contractor, subcontractor,
or repairman in erecting structures or buildings, or building on, or otherwise adding
to, altering, improving, maintaining, servicing, or repairing real property, property
or land, as the terms real property, property or land are defined in the real property
tax law, if items of the same kind are not offered for sale as such by such contractor,
subcontractor or repairman or other user in the regular course of business, (C) of any
the services described in [paragraph] (1) ... of subdivision (c) of section eleven
hundred five, (D) of any tangible personal property ... not acquired for purposes of
resale, upon which any of the services described in paragraphs (2), (3) and (7) of
subdivision (c) of section eleven hundred five have been performed ... .
Section 1115 of the Tax Law provides, in relevant part:
Exemptions from the sales and use taxes. -- (a) Receipts from the following shall be
exempt from the tax on retail sales imposed under subdivision (a) of section eleven
hundred five and the compensating use tax imposed under section eleven hundred
ten: ...
(15) Tangible personal property sold to a contractor, subcontractor or repairman for
use in erecting a structure or building of an organization described in subdivision (a)
of section eleven hundred sixteen, or adding to, altering or improving real property,
property or land of such an organization, as the terms real property, property or land
are defined in the real property tax law; provided, however, no exemption shall exist
under this paragraph unless such tangible personal property is to become an integral
component part of such structure, building or real property.
Section 1116 of the Tax Law provides, in relevant part:
(a) ... any sale ... by or to any of the following or any use ... 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 ... or political subdivisions where it is the purchaser, user or consumer,
or where is a vendor of services or property of a kind not ordinarily sold by private
persons ....

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Section 529.2(a) of the New York State Sales and Use Tax Regulations provides, in relevant
part:
(2) A public corporation as used in this section means any corporation created by an
act of the Legislature for a public purpose ...
Example:
... Industrial Development Agencies are public
corporations and may purchase tangible personal property exempt
from the sales and use taxes.
Section 541.3(a) of the New York State Sales and Use Tax Regulations provides, in relevant
part:
... When a contractor's customer is a governmental entity described in section
1116(a)(1) ... of the Tax Law, the contract signed by the government representative
and the prime contractor is sufficient proof of the exempt status of purchases made
for such contract.
(1) Such governmental entities include:
(i) ... (c) industrial development authorities ...
Section 862 of the General Municipal Laws provides, in relevant part:
Restrictions on funds of the agency

2. (a) Except as provided in paragraph (b) of this subdivision, no financial assistance
   of the agency shall be provided in respect of any project where facilities or property
   that are primarily used in making retail sales to customers who personally visit such
   facilities constitute more than one-third of the total project cost. For the purposes of
   this article, retail sales shall mean: (i) sales by a registered vendor under article
   twenty-eight of the tax law primarily engaged in the retail sale of tangible personal
   property, as defined in subparagraph (i) of paragraph four of subdivision (b) of
   section eleven hundred one of the tax law; or (ii) sales of a service to such customers.
   Except, however, that tourism destination projects and projects operated by not-for­
   profit corporations shall not be prohibited by this subdivision. For the purpose of this
   paragraph, "tourism destination" shall mean a location or facility which is likely to
   attract a significant number of visitors from outside the economic development
   region as established by section two hundred thirty of the economic development
   law, in which the project is located.
   (b) Notwithstanding the provisions of paragraph (a) of this subdivision, financial
   assistance may, however, be provided to a project where facilities or property that are
   primarily used in making retail sales of goods or services to customers who
   personally visit such facilities to obtain such goods or services constitute more than
   one-third of the total project cost, where (i) the project occupant would, but for the
   assistance provided by the agency, locate the related jobs outside the state, or (ii) the
   predominant purpose of the project would be to make available goods or services

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which would not, but for the project, be reasonably accessible to the residents of the
city, town, or village within which the proposed project would be located because of
a lack of reasonably accessible retail trade facilities offering such goods or services,
or (iii) the project is located in a highly distressed area.
(c) With respect to projects authorized pursuant to paragraph (b) of this subdivision,
no project shall be approved unless the agency shall find after the public hearing
required by section eight hundred fifty-nine of this chapter that undertaking the
project will serve the public purposes of this article by preserving permanent, private
sector jobs or increasing the overall number of permanent, private sector jobs in the
state. Where the agency makes such a finding, prior to providing financial assistance
to the project by the agency, the chief executive officer of the municipality for whose
benefit the agency was created shall confirm the proposed action of the agency.
Section 874 of the General Municipal Law provides, in relevant part:
Tax exemptions
(1) It is hereby determined that the creation of the agency and the carrying out of its
corporate purposes is in all respects for the benefit of the people of the state of New
York and is a public purpose, and the agency shall be regarded as performing a
governmental function in the exercise of the powers conferred upon it by this title
and shall be required to pay no taxes or assessments upon any of the property
acquired by it or under its jurisdiction or control or supervision or upon its activities.
(2) Any bonds or notes issued pursuant to this title, together with the income
therefrom, as well as the property of the agency, shall be exempt from taxation,
except for transfer and estate taxes.
Section 917 of the General Municipal Law establishes the New York City Industrial
Development Agency as an industrial development agency in general having the powers of industrial
development agencies under Article 18-A of the General Municipal Law.
Opinion
Based on the structures under which the IDA proposes to make sales tax benefits available
to CSFB with respect to Improvements and Eligible Personalty, as described by Petitioner in its
petition, in accordance with the sections of law and regulations cited above and the decisions in
Wegmans Food Markets v. Department of Taxation and Finance (126 Misc 2d 144, aff'd 115 AD2d
962, lv to app den 67 NY2d 606) and Wegmans Food Markets v The Department of Taxation and
Finance of the State of N.Y. (Sup Ct, Monroe County, Jan. 10, 1992, Galloway, J.), and provided
that all the terms and conditions of the relevant documents are complied with, and that these terms
and conditions are consistent with Petitioner's description of them as set forth above, in the instant
matter:

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(A) Petitioner's payments, as agent of and on behalf of the IDA, to purchase Eligible
Personalty will be exempt from sales and use taxes imposed under sections 1105, 1107, 1109 and
1110 of the Tax Law, provided that the IDA is the owner or lessor of such property.
(B) An advisory opinion does not determine factual issues. Petitioner's petition does not
indicate whether Petitioner’s Improvements constitute capital improvements as defined in section
1101(b)(9) of the Tax Law. Therefore, this opinion cannot conclude whether such Improvements
are capital improvements. If the Improvements do constitute capital improvements, then Petitioner's
payments for these capital improvements will not be subject to sales and use tax imposed under
sections 1105, 1107, 1109 and 1110 of the Tax Law. But a purchaser's payment of the purchase
price of materials used to construct capital improvements would be subject to tax (see section
1101(b)(4) of the Tax Law), unless otherwise exempt. In the instant case, if, before the IDA takes
title to the real property, Petitioner or another person such as a contractor purchases the materials for
the improvements, as agent of and on behalf of the IDA, the materials will be exempt from sales and
use taxes pursuant to section 874 of the General Municipal Law, since the IDA is purchasing the
materials through its agent. If, after the IDA takes title to the property, Petitioner or someone else
purchases the materials and they become an integral component part of the real property to which
the IDA has title, such purchases will also be exempt from these taxes pursuant to section
1115(a)(15) of the Tax Law, whether or not the purchaser is an agent of the IDA, since the IDA is
an exempt organization described in section 1116(a)(1) of the Tax Law.
If the Improvements do not constitute a capital improvement under section 1101(b)(9) of the
Tax Law, then the charges for such Improvements which do not constitute capital improvements will
be exempt from such taxes only if the purchaser is an agent of the IDA. Thus, the payments to
purchase Improvements which do not constitute capital improvements will be exempt from such
taxes only where Petitioner makes purchases as agent of and on behalf of the IDA.
(C) Likewise, if the Improvements constitute capital improvements under section 1101(b)(9)
of the Tax Law, Petitioner's payments to purchase such materials as agent of and on behalf of the
IDA, and also as agent of Metlife, are similarly exempt from sales and use taxes imposed under
sections 1105, 1107, 1109 and 1110 of the Tax Law, subject to the same analysis and caveats as
found in (B) above, and also provided that Metlife is a subagent of the IDA with respect to the
purchase of these materials and Improvements.
(D) Metlife's payments to reimburse Petitioner for amounts Petitioner paid to purchase
materials used to construct those Improvements with respect to which Petitioner acted as Metlife's
agent as described above by Petitioner will not be subject to the sales and use taxes imposed under
sections 1105, 1107, 1109, and 1110 of the Tax Law provided that Petitioner and Metlife purchased
the materials as agent of and on behalf of the IDA.

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TSB-A-95 (42)S
Sales Tax
December 19, 1995
(E) Petitioner's Debt Service Payments to the IDA will not be subject to sales and use taxes
imposed under sections 1105, 1107, 1109 and 1110 of the Tax Law. Prudential Securities
Incorporated, Adv. Op. Comm. T&F, April 28, 1993, TSB-A-93(68)S.

DATED: December 19, 1995

/s/
DORIS S. BAUMAN
Director
Technical Services Bureau

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