New York Advisory Opinion TSB-A-96(11)S: When the Javits Convention Center becomes the sole employer of display and freight-handling workers and sells their labor to contractors at trade shows, is that a taxable sale of a service, and does it matter that the contractors resell the labor's output to exhibitors?

Plain-English summary

The New York Convention Center Operating Corporation is a public benefit corporation created by statute to operate the Jacob K. Javits Convention Center. Petitioner licenses space to "show managers" for exhibits and trade shows; those show managers and exhibitors typically hire contractors to erect/dismantle displays, exhibits, and booths and to lay rugs ("display labor"), and to deliver, unload, and rig freight and equipment ("freight handling labor"). Contractors used to supply their own labor for this work, but effective July 3, 1995, Petitioner became the sole employer of the people who perform display and freight-handling labor at the Javits Center. Under the new arrangement, contractors must order all such labor from Petitioner at prescribed rates; Petitioner pays all wages, benefits, and insurance for these workers, though the workers perform their tasks under the general direction of the contractor that requested them, using the contractor's own equipment and materials. Every contractor buying labor from Petitioner then uses it to perform services (billed in different ways depending on the service type) for show managers and exhibitors -- display labor billed per person/hour, rigging billed hourly including equipment/fuel, and freight handling ("drayage") billed by the hundredweight.

The Department applied its existing framework distinguishing employment agencies from "temporary service contractors" (TSB-M-87(13)S): because Petitioner is the actual employer, directly responsible for wages, taxes, and hiring/firing (not merely referring already-employed individuals), Petitioner functions as a temporary service contractor, and the fees contractors pay it aren't excluded "wages" under § 1105(c) -- they're the temporary service contractor's own taxable receipts to the extent the labor performs a taxable service. Under § 1105(c)(3) and 20 NYCRR § 527.5(a), erecting exhibits and setting them in place ("installing" tangible personal property) is a taxable service; freight handling/drayage, by contrast, is not among the enumerated taxable services and isn't taxed, and neither is the separate service of dismantling displays. As a public benefit corporation, Petitioner would ordinarily be exempt under § 1116(a)(1) -- but that exemption specifically excludes "services ... of a kind ordinarily sold by private persons," and temporary staffing/display-labor services are exactly that kind of ordinarily-privately-sold service, so the exemption doesn't help Petitioner here. The bottom line: Petitioner must collect sales tax from the contractor on the total charge for taxable (installation-type) services performed by its employees, UNLESS the contractor gives Petitioner a properly completed resale certificate (since the contractor is reselling that labor's output to the exhibitor) or capital improvement certificate within 90 days of the transaction. If a valid certificate is provided, collection responsibility shifts downstream: it becomes the CONTRACTOR's job to determine which of ITS OWN charges to the exhibitor are taxable and separately bill the taxable and nontaxable portions (installing vs. dismantling vs. freight handling) -- an unseparated bill makes the contractor's entire charge to the exhibitor taxable.

What this means for you

Convention centers and venues that directly employ event-support labor

If you become the employer of record for display, rigging, or similar event-support workers and sell their labor to contractors at your venue, you're generally acting as a "temporary service contractor" for sales tax purposes -- your public-benefit-corporation status won't exempt you from collecting tax on the taxable portion of that labor, since staffing services of this kind are ordinarily sold by private businesses too.

Trade-show and convention contractors buying labor from a venue operator

Give the labor seller a properly completed resale or capital-improvement certificate within 90 days if you're reselling that labor's output to your own exhibitor client -- otherwise you'll be charged sales tax on the labor purchase itself, on top of whatever you separately owe on your own downstream sale to the exhibitor.

Contractors billing exhibitors for installation, dismantling, and freight services

Bill installation/setup services separately from dismantling and freight-handling services on your invoices to exhibitors -- installation is taxable, dismantling and freight handling generally aren't, and bundling them into one unitemized charge makes the WHOLE charge taxable.

Common questions

Q: Why does display labor get taxed but freight handling and dismantling don't?
A: Because Tax Law § 1105(c)(3) specifically taxes "installing" tangible personal property (erecting and setting exhibits in place), while freight handling and dismantling simply aren't among the services the statute enumerates as taxable -- the tax reaches only the specific services the legislature listed.

Q: Does Petitioner's status as a public benefit corporation exempt any of this?
A: No -- while § 1116(a)(1) generally exempts governmental entities and public corporations, it carves out services "of a kind ordinarily sold by private persons," and staffing/labor services of the kind Petitioner sells fall squarely within that carve-out, so the exemption doesn't apply.

Q: What happens if a contractor doesn't provide a resale or capital improvement certificate within 90 days?
A: Petitioner remains responsible for collecting sales tax on the taxable portion of the labor charge and, absent a timely certificate, bears responsibility for any sales or compensating use tax due on the services performed by its employees.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c) (enumerated services tax; employee wages exclusion)
• Tax Law § 1105(c)(3) (installing tangible personal property)
• Tax Law § 1116(a)(1) (governmental entity exemption; services of a kind ordinarily sold by private persons excepted)
• 20 NYCRR 527.5(a) (installing/maintaining/servicing/repairing tax imposition)

Prior rulings and guidance referenced:

• Taxability of Services Provided by Temporary Service Contractors, TSB-M-87(13)S
• Wheatfield Properties, Tax Commission hearing decision (temporary personnel services charges sustained as taxable)
• I & D Inc., Advisory Opinion, Commissioner of Taxation and Finance, May 14, 1985, TSB-A-85(16)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_11s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (11)S
Sales Tax
February 29, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950804A

On August 4, 1995, a Petition for Advisory Opinion was received from New York
Convention Center Operating Corporation, 655 West 34th Street, New York, New York 10001.
The issues raised by Petitioner, New York Convention Center Operating Corporation, are:
(1) Whether the sale of temporary labor is the sale of a service under section 1105 of the Tax
Law and whether the answer depends on the nature of the service being rendered by the temporary
labor.
(2) In the event the answer to question (1) is either in whole or in part in the affirmative,
whether the fact that the contractors to whom the labor is sold utilize that labor to perform, for a fee,
services to a third party renders the transaction a "sale for resale," excluded from taxation under
section 1105 of the Tax Law.
Petitioner makes the following submission of facts.
Petitioner is a public benefit corporation created by statute for the purpose of operating and
maintaining the convention center known as the Jacob K. Javits Convention Center of New York
(the "Javits Center"). Petitioner enters into license agreements with various entities ("show
managers") entitling them to utilize space at the Javits Center for exhibits, trade shows and other
events. In the course of preparing for these events, the show managers and exhibitors typically retain
the services of contractors to erect and dismantle displays, exhibits, booths, and background and to
lay rugs (collectively "display labor"); and to deliver and unload freight and equipment, both by hand
and utilizing Hi-Lo machinery and to perform certain rigging (collectively "freight handling labor").
In the past the contractors have supplied their own labor to perform the display labor and the freight
handling labor.
Effective July 3, 1995, however, Petitioner became the sole employer of the persons required
to perform the display labor and the freight handling labor undertaken formerly by contractors at the
Javits Center. Under the new arrangement, contractors must order all the labor from Petitioner at
prescribed rates ("labor transaction"). Petitioner is solely responsible for paying all wages and
benefits to and for obtaining worker's compensation and state disability insurance for these
employees, but the employees will perform their functions under
TP-9 (9/88)

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the general direction of the contractor who has requested their services. The contractors supply the
equipment and materials used by the Petitioner's employees. The employees are instructed by
Petitioner to abide by the work and safety rules of both the contractor and the Javits Center.
Every contractor who purchases labor from Petitioner utilizes that labor to perform services
for show managers and exhibitors at the Javits Center. Those services are sold to the exhibitor or
show manager in a variety of ways, depending on the type of service performed. Thus, for example,
display labor is separately billed according to per person/per hour rates. Rigging services are charged
by the hour pursuant to a rate schedule which includes the cost of labor, equipment and fuel. Freight
handling or "drayage" is charged by the hundredweight according to a schedule which includes the
cost of labor, equipment and fuel. Pending issuance of the requested advisory opinion, Petitioner
requires every contractor purchasing labor from it to provide it with a Resale Certificate.
Section 1105(c) of the Tax Law imposes a sales tax upon, in part, the following:
(c)
The receipts from every sale, except for resale, of the
following services:
*
*
*
(3) 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: . . . . (emphasis added)
*
*
*
Wages, salaries and other compensation paid by an employer to an
employee for performing as an employee the services described in
paragraphs (1) through (9) of this subdivision (c) are not receipts
subject to the taxes imposed under such subdivision.
Section 1116(a)(1) of the Tax Law provides in part, as follows:
(a) Except as otherwise provided in this section, any 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;

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Section 527.5(a) of the Sales and Use Tax Regulations provides, in pertinent part, as follows:
Imposition. (1) The tax is imposed on receipts from every sale of the services
of installing, maintaining, servicing or repairing tangible personal property,
by any means including coin-operated machines, whether or not any tangible
personal property is transferred in conjunction with the services.
(2) Installing means setting up tangible personal property or putting it in place
for use. (Emphasis added)
Taxability of Services Provided by Temporary Service Contractors, TSB-M-87(13)S,
provides the distinction between an employment agency and a temporary service contractor. TSB-M­
87(13)S provides as follows:
Temporary service contractors can be distinguished from employment
agencies in that the temporary service contractor, unlike the employment
agency, is the employer of its own staff and is directly responsible for the
salaries, withholding of taxes, and the hiring and firing of the individuals who
are rendering services to its clients. In addition, the temporary service
contractor controls to which of its clients the individual will be assigned.
An employment agency, on the other hand, provides individuals who become
the employees of the agency's client and who maintain no further relationship
with the agency. The individual does not report, directly or indirectly, to the
agency after being hired by the client, nor may the agency terminate the
services of the individual or otherwise affect the relationship between the
individual and the client. Since an employment agency merely refers
personnel, its charges to its clients are not subject to sales or use tax.
Temporary service contractors generally maintain a staff of employees who
possess varied expertise, such as engineers, draftsmen, technicians,
secretaries, typists, nurses, salesmen, data entry operators, etc., and will
determine the charge to their clients based upon those skills. For a fee
(usually an hourly charge), the temporary service contractor will provide its
client with trained and/or specialized individuals who have the specific job
skills requested by the client. These individuals may be assigned on a long or
short-term basis depending upon the needs and desire of the client. Since the
temporary service contractor is the employer of the individual performing the
service and is responsible for paying such individual's wages, the amounts
paid to the temporary service contractor by the client are not salaries or wages
within the meaning and intent of the exclusion from tax for employee
services contained in Section 1105(c) of the Tax Law.

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February 29, 1996

Section 1105(c) of the Tax Law imposes a tax on certain services .... When
a temporary service contractor provides personnel to perform such taxable
services for its client, the fee paid by the client for these services constitutes
a receipt subject to tax. Accordingly, the temporary service contractor is
required to collect sales tax on the fee charged to the client for such taxable
services, regardless of how the charge is arrived at or how much the
contractor is required to pay its personnel. The Tax Commission decision in
the hearing concerning Wheatfield Properties sustained the tax due in respect
to charges for temporary personnel services ....
If the services performed by the temporary service contractor's employee are
not subject to tax under Section 1105(c) of the Tax Law, then no tax is to be
collected on the charge for these services ....
Where the taxable service performed by the individual supplied by the
temporary service contractor to the client is purchased by the client for resale,
or results in a capital improvement to real property, such service is not
subject to tax under section 1105(c) of the Tax Law. The temporary service
contractor will not be required to collect a sales tax on the fee charged the
client if a properly completed exemption certificate is provided by the client
within 90 days of the date the services were performed. It should be noted
that when services of both a taxable and nontaxable nature are performed, tax
is required to be charged on the total amount of the bill unless the charges for
taxable and nontaxable services are separately stated.
In the present case, Petitioner acts as a temporary service contractor. As a public benefit
corporation, Petitioner constitutes an entity described in section 1116(a)(1) of the Tax Law. The
services which Petitioner sells, however, are services of a kind ordinarily sold by private persons.
Petitioner is therefore required to collect sales tax from the contractor on the total charge for taxable
services performed by Petitioner's employees. Petitioner will not have to collect tax if it receives
from the contractor a properly completed resale or capital improvement certificate, as the case may
be, within 90 days from the date of the transaction. Unless the exemption certificate is presented by
the contractor, Petitioner will be responsible for any sales or compensating use taxes due on services
performed by Petitioner's employees.
Once a properly completed resale or capital improvement certificate has been issued to
Petitioner, it is the responsibility of the contractor to determine from the exhibitor's contract which
services are taxable. If the services being performed by the contractor for the exhibitor are both
taxable and exempt, the contractor must separately bill the taxable and nontaxable portions of the
transaction, or else collect tax on the total charge. When contractors using the labor performed by
Petitioner's employees, provide the services of erecting exhibits and setting them in place at trade
shows or conventions, they are providing services taxable under section 1105(c)(3) of the Tax Law.
Freight handling services, per se, are not subject to tax.

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Additionally, the service of dismantling displays is not subject to sales tax since it is not one
of the services taxed under section 1105(c) of the Tax Law. Thus, the contractor is not required to
collect sales tax on its charges for dismantling services, provided those services are separately stated
on its bill to the exhibitor. If installing and dismantling services are charged on the same bill, but
they are not separately billed, the entire charge is subject to tax. See I & D Inc., Adv 0p Comm T&F,
May 14, 1985, TSB-A-85(16)S.

DATED: February 29, 1996

/s/
s/DORIS S. BAUMAN
Director
Technical Services Bureau

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