Which parts of a 'turn-key' trade-show company's design, fabrication, rental, shipping, storage, and project-management charges are subject to New York sales tax?

Plain-English summary

A CPA, Garry T. Center, asked on behalf of a client (referred to as "A") that runs a "turn-key" trade show business out of New York State. "A" designs, fabricates, rents, ships, and stores exhibits and displays, occasionally sells an exhibit outright, and also offers project management services (budgeting, estimating, space reservations, on-site installation and dismantling, and supervision). Its customers and the trade shows themselves are located both in and outside New York, including internationally.

The Department broke the business into pieces. Because a rental counts as a "sale" under New York's Tax Law, "A" is treated as making retail sales of tangible personal property whenever it rents or sells an exhibit or display. Its design, fabrication, and shipping charges are considered part of the overall cost of providing that tangible property and get folded into the taxable receipt -- they aren't separately deductible expenses. New York applies a "destination tax" rule: the point where the property is delivered (not the customer's home state) controls whether tax applies. So "A" must collect New York sales tax on the full bundled receipt (including shipping) whenever delivery happens in New York, regardless of where the customer is based -- and owes no New York tax when delivery happens outside the state, again regardless of customer location.

Storage services are simpler: because "A's" storage facility is located in New York, storage charges are taxable there under § 1105(c)(4), period. Project management is the trickiest piece. If "A" separately charges for project management and its individual components (budgeting, estimating, etc.) are actually available for purchase on their own, most of those components aren't among New York's enumerated taxable services -- with one exception: on-site installation is a taxable service under § 1105(c)(3), taxable when delivered/performed in New York. But if project management isn't separately charged and sold on its own, it's treated as just part of the overall taxable rental or sale of the exhibit, and taxed along with everything else.

What this means for you

Trade show, event production, and exhibit companies

How you bill matters. Bundling design, fabrication, and shipping into your exhibit rental/sale charge means the whole thing is taxed based on delivery destination. If you want your project management services to escape tax (aside from on-site installation), bill them separately as genuinely stand-alone, individually purchasable services -- otherwise they get swept into the taxable exhibit charge.

Businesses hiring trade-show vendors

Where your exhibit is actually delivered -- not where your company is headquartered -- determines whether you'll be charged New York sales tax on rental/sale charges. A New York vendor shipping your exhibit to an out-of-state (or international) trade show shouldn't charge you New York tax on that transaction.

Accountants and tax professionals

This opinion is a useful multi-part model for classifying a bundled trade-show services business: destination-tax treatment for the tangible-property component, always-taxable in-state storage, and an unbundling test for project management that turns on whether components are separately charged and independently purchasable.

Common questions

Q: Is on-site installation always taxable, even if project management is otherwise untaxed?
A: Yes -- the opinion specifically carves out on-site installation as taxable under § 1105(c)(3) even when the rest of a separately-charged project management package escapes tax.

Q: Does the customer's home state matter for the exhibit rental/sale tax?
A: No -- only the delivery location controls under the destination-tax rule; a New York customer's exhibit delivered out of state isn't taxed, and an out-of-state customer's exhibit delivered in New York is.

Q: Can another trade show services company rely on this ruling?
A: No. This advisory opinion binds the Department only with respect to the specific petitioner's client and the exact billing structure described.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(3), (4), (5), (6) (definitions of receipt, retail sale, sale, tangible personal property)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c)(3) (tax on installing/maintaining/servicing/repairing tangible personal property)
• Tax Law § 1105(c)(4) (tax on storing tangible personal property)
• 20 NYCRR § 525.2(a)(3) (destination tax rule)
• 20 NYCRR § 526.5 (definition of receipt; nondeductible expenses; shipping/delivery charges)
• 20 NYCRR § 526.7(e) (transfer of possession; place of taxable sale)

Prior rulings and cases referenced:

• None cited in this opinion.

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_84s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (84) S
Sales Tax
December 26, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S941017B

On October 17, 1994, a Petition for Advisory Opinion was received from Garry T. Center,
CPA, 1721 Central Avenue, Albany, New York 12205.
The issues raised by Petitioner, Garry T. Center, are whether Petitioner's client's receipts from
the sale to customers of various trade show services enumerated herein are subject to State and local
sales taxes.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner's client (hereafter referred to as "A") operates a business located in New York State
which provides "turn-key" trade show services for various customers. "A's" business operation
consists of designing, fabricating, renting, shipping and storing of exhibits and displays for use in
trade shows. Additionally, "A" provides project management services relating to trade shows and
provides rentals of portables, furniture and accessories for use with exhibits and displays.
Occasionally, "A" will sell an exhibit or display to a customer.
"A's" customers are located in and outside of New York State. Trade shows also occur in and
outside of New York State, including trade shows in foreign countries.
"A's" trade show services are further described as follows:
1.
Design Services Performed at "A's" New York State Graphic design;
production layouts for the purpose of producing a final printed piece,
photographically generated piece or computer generated piece; scale floor plans and
elevations; and production drawings for the purpose of fabricating a finished product.

2. Construction/Fabrication Performed at "A's" New York State Location.
   In-house building, fabricating, and assembly of exhibits and displays for the purpose
   of trade show participation throughout the world.
3. Exhibit Rentals for "A's" Various Customers at the Trade Show Location.
   Rentals of custom designed exhibits, displays, portables, furniture, and accessories.
4. Project Management Services planned at "A's" New York State Location
   and Executed at the Trade Show Location. Coordination and management

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of events relating to trade show participation including: budgeting, estimating,
research, space or exhibit reservations, ordering trade show site services, on-site
installation and dismantling, and supervision.

5. Shipping to and from Trade Show Locations. Shipping of exhibits and
   display materials from the production facility to locations throughout the world, and
   the subsequent return of the exhibits and displays.
6. Storage at "A's" New York State Location. Warehousing and storage of
   exhibits and displays in New York State. Exhibits and displays are stored for more
   than 30 days.
   Applicable Law and Regulations
   Section ll01(b) of the Tax Law states, in part:
   When used in this article for the purposes of the taxes imposed by subdivisions (a),
   (b), (c) and (d) of section eleven hundred five and by section eleven hundred ten, the
   following terms shall mean:
   *

*

*

(3) Receipt. The amount of the sale price of any property and the charge for any
service taxable under this article ... and also including any charges by the vendor to the
purchaser for shipping or delivery regardless of whether such charges are separately stated
in the written contract, if any, or on the bill rendered to such purchaser and regardless of
whether such shipping or delivery is provided by such vendor or a third party ....
(4) Retail sale. (i) A sale of tangible personal property to any person for any purpose
....
(5) Sale, selling or purchase. Any transfer of title or possession or both, exchange
or barter, rental, lease or license to use or consume ... for a consideration ....
(6) Tangible personal property. Corporeal personal property of any nature ....
Section 1105 of the Tax Law imposes sales tax, in part, upon:
(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:

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*

*

*

(3) Installing tangible personal property ... or maintaining, servicing or
repairing tangible personal property ... not held for sale in the regular course of
business ... and whether or not any tangible personal property is transferred in
conjunction therewith ....
(4) Storing all tangible personal property not held for sale in the regular
course of business ....
Section 525.2(a)(3) of the Sales and Use Tax Regulations provides:
The sales tax is a "destination tax," that is, the point of delivery or point at
which possession is transferred by the vendor to the purchaser or designee controls
both the tax incident and the tax rate.
Section 526.5 of the regulations states, in part:
(a) Definition. The word receipt means the amount of the sale price of any
property and the charge for any service taxable under articles 28 and 29 of the Tax
Law, valued in money, whether received in money or otherwise. The following
subdivisions of this section discuss elements of a receipt.
*

*

*

(e) Expenses. All expenses, including telephone and telegraph and other
service charges, incurred by a vendor in making a sale, regardless of their taxable
status and regardless of whether they are billed to a customer are not deductible from
the receipts.
*

*

*

(g) Shipping or delivery. (1) Shipping or delivery charges by a vendor to its
customer for the cost of transporting tangible personal property to the customer are
part of the vendor's receipt subject to tax where the sale of the property is subject to
tax or where taxable services were performed on the property. This is so regardless
of whether the vendor separately states such charges in a written contract or on an
invoice and regardless of whether the vendor ships or delivers the property itself or
hires a third party to ship or deliver the property. Similarly, charges by a vendor to
its customer for picking up the customer's property upon which the vendor is to
perform taxable services are part of the vendor's receipt from the sale of the service
subject to tax.

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Section 526.7(e) of the regulations provides:
(e) Transfer of possession. (1) Except as otherwise provided in paragraph (3)
of this subdivision, a sale is taxable at the place where the tangible personal property
or service is delivered, or the point at which possession is transferred by the vendor
to the purchaser or his designee.
Opinion
"A's" trade show services of designing, fabricating and shipping of exhibits and displays to
and from trade show locations culminate in "A" renting and occasionally selling exhibits or displays
to its customers. Since a rental is included within the definition of "sale, selling or purchase," under
Section l101(b)(5) of the Tax Law, "A" is considered to be making retail sales of tangible personal
property pursuant to Section l101(b)(4) of the Tax Law. "A's" charges to customers for design,
fabrication and shipping services are considered to be expenses incurred by "A" in providing tangible
personal property to its customers. These expenses are part of the total charge to the customer for
the rental or occasional sale of an exhibit or display and are therefore considered to be part of the
total receipt from the sale of tangible personal property. Under the provisions of Section 526.5 of
the Sales and Use Tax Regulations, such expenses are not deductible from the taxable receipts.
Accordingly, "A" is liable for collecting and remitting State and local sales taxes on the total
receipts, including shipping charges, from its rentals and occasional sales of exhibits and displays,
portables, furniture and accessories in any transaction where delivery of the tangible personal
property occurs within New York State, regardless of whether the customers' business locations are
in or outside of New York State.
However, when delivery of the tangible personal property occurs outside New York State,
the total receipts from the rentals and sales of the exhibits, displays, portables, furniture and
accessories are not subject to State or local sales taxes as provided under Sections 525.2(a)(3) and
526.7(e) of the regulations, regardless of the customers' business locations.
The receipts from "A's" charges to customers for storage services are subject to the tax
imposed under Section 1105(c)(4) of the Tax Law since the storage services are provided at "A's"
storage facility located in New York State.
Section 1105(c) of the Tax Law imposes tax on receipts from the sale of certain enumerated
services. To the extent that "A" charges its customers separately for its project management services
and to the extent that the listed components of these services (e.g., budgeting, estimating, etc.) may
be individually purchased by customers, with the exception of on-site installations, these services
are not included among the enumerated services that are subject to tax. Accordingly, if separately
charged and available for sale, only the receipts from the sale of the on-site installations that are

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delivered in New York State are subject to sales tax (Tax Law, § 1105(c)(3)). If not separately
charged and available for sale, the project management services are considered incidental to "A's"
rentals and occasional sales of exhibits, displays, portables, furniture and accessories and are subject
to State and local sales taxes as previously described.

DATED: December 26, 1996

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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