Are the film and processing supplies used in coin-operated photo booths exempt from New York sales tax as production supplies?

Plain-English summary

An amusement park operates several automatic photo booths where customers pay a fee, step in, and receive photos of themselves. The park's accountant asked whether the film and processing supplies consumed inside those machines are subject to New York sales and use tax.

New York exempts machinery, equipment, and (since 1981) related parts, tools, and supplies that are used directly and predominantly in manufacturing or processing tangible personal property for sale. The Department found that the photo booths' process -- developing negatives from raw film and printing the resulting photographs -- is genuine production of tangible personal property (the finished photo) for sale to the customer, not merely an amusement service. Because the film and processing chemicals are consumed directly in that production process, the park can buy them exempt from sales and use tax, as long as it gives its supplier a properly completed exempt use certificate (Form ST-121) within ninety days of purchase.

What this means for you

Photo booth, kiosk, and similar self-service equipment operators

If your machine genuinely manufactures a physical product for the customer (developing film, printing photos) rather than just providing a service or amusement, the raw materials and supplies consumed in that production -- not just big production machinery -- can qualify for the same manufacturing exemption, provided you issue a proper exempt use certificate to your supplier.

Amusement parks and similar attraction operators

A photo booth or similar coin-operated production machine is analyzed the same way any other manufacturing operation would be -- the fact that it sits inside an amusement park, or that customers pay a small per-use fee, doesn't change the production-exemption analysis.

Accountants and tax professionals

This is a useful precedent for any coin-operated or self-service machine that manufactures a physical product on the spot (photo booths, engraving machines, and similar) -- the exemption reaches consumable supplies (film, chemicals) as well as the equipment itself, under the 1981 extension in Tax Law § 1105-B(a).

Common questions

Q: Are supplies used in a photo booth exempt the same way big factory equipment is?
A: Yes -- since 1981, New York's production exemption covers not just machinery but also parts, tools, and supplies (like film and processing chemicals) used directly and predominantly in production, as long as the process genuinely creates tangible personal property for sale.

Q: Do you need a special certificate to buy exempt production supplies?
A: Yes -- the purchaser must give its supplier a properly completed exempt use certificate (Form ST-121) within ninety days of the purchase.

Q: Does it matter that the photos are sold through a coin-operated machine in an amusement park?
A: No -- what matters is whether the machine's process genuinely manufactures tangible personal property (the photograph) for sale, which it does here since the machine develops the customer's own negatives and prints the finished photos.

Q: Does this ruling apply to my photo booth or similar production equipment?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Your equipment's specific process would need its own analysis.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_77s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(77)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970922A

On September 22, 1997, a Petition for Advisory Opinion was received from
Dermody Burke & Brown CPA PC, 555 French Road, New Hartford, New York 13413.
The issue raised by Petitioner, Dermody Burke & Brown CPA PC, is whether
film and processing supplies used in automatic photo machines are subject to
sales and use tax.
Petitioner submits the following facts.
Petitioner's client has several automatic photo machines in its amusement
park. Customers enter the photo booths, insert the required fee, and receive
photos of themselves. The sales from the photo machines are reported as taxable
on Petitioner's client's quarterly return.
Applicable Law and Regulations
Section 1105(a) of the Tax Law imposes a tax on the receipts from retail
sales of tangible personal property, except when purchased for resale.
Section 1115(a)(12) of the Tax Law exempts from tax:
Machinery or
equipment for use or consumption directly and
predominantly in the production of tangible personal property...
for sale, by manufacturing, processing . . . but not including parts
with a useful life of one year or less or tools or supplies used in
connection with such machinery, equipment or apparatus.
Section 1105-B(a) of the Tax Law provides, in part:
. . . receipts from the retail sales of parts with a useful life of
one year or less, tools, supplies for use or consumption directly
and predominantly in the production of tangible personal property...
for sale by manufacturing, processing . . . shall be . . . exempt
from such tax on and after March first, nineteen hundred eighty-one.
Section 528.13(c)(4) of the Sales and Use Tax Regulations provides:
Machinery or equipment is used predominantly in production, if over
50% of its use is directly in the production phase of a process.
Opinion
In this case, Petitioner's client develops negatives from its own film and
prints photographs. The entire process constitutes the production of tangible
personal property for sale. Accordingly, Petitioner's client may purchase the

-2­
TSB-A-97(77)S
Sales Tax

film and processing supplies used predominantly in the production of the
photographs exempt from sales and use tax, by issuing to its supplier a properly
completed exempt use certificate (Form ST-121) within ninety days of the date of
purchase.

DATED: December 4, 1997

NOTE:

/s/
JOHN W. BARTLETT
Deputy Director
Technical Services Bureau

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