Does New York sales tax apply when an artist sells or licenses a design rendering to an architect, interior designer, fashion house, or manufacturer?

Plain-English summary

The New York Society of Renderers -- artists who create copyrighted drawings and models for architects, interior designers, fashion houses, developers, and manufacturers -- asked the Department 23 detailed questions about when its members' work is subject to sales tax. The Department's answers turn on one core distinction throughout: is the renderer transferring an original artwork itself (a sale of tangible personal property), or only granting a temporary reproduction right that leaves title and the physical original with the renderer?

Selling the artwork, or letting the client alter or keep it, is taxable. If a renderer sells an original rendering outright -- or the client changes it, keeps it beyond a one-time reproduction, or uses it for something other than making a single copy -- the transaction is a taxable sale of tangible personal property under Tax Law § 1105(a), because tangible artwork is itself "corporeal personal property."

A true one-time reproduction license, with the original returned unaltered, is not taxable. New York's regulations treat the grant of a right to reproduce an original work as a nontaxable royalty, not a sale, as long as the client's possession is merely temporary and for the specific purpose of making the reproduction (20 NYCRR § 526.7(f)). If the client changes the rendering or keeps using it beyond that purpose, the nontaxable royalty converts into a taxable "license to use," and use tax becomes due.

Whether the client resells the artwork onward or uses it in an exempt service matters too. A rendering sold to a licensed architect for use in the architect's own (nontaxable) architectural services is a taxable retail sale to the architect, unless the architect gives the renderer a resale certificate because the architect is reselling the rendering as part of its own separately taxable design services. Renderings used directly and predominantly to produce tangible goods for sale (like a fabric design) can separately qualify for the manufacturing/production exemption, and renderings used to produce exempt printed promotional materials can qualify for that exemption too.

A few other rules the opinion works through: modifying an existing rendering that the client already owns is a taxable "processing" service; delivering a rendering purely electronically (no tangible disk) is a nontaxable transfer of an intangible; an out-of-state renderer who regularly delivers into New York or works here becomes a vendor required to collect New York tax; and sales to New York State or its agencies are exempt.

What this means for you

Artists, renderers, illustrators, and designers licensing their work

Structure your contracts around what actually happens to the physical or digital original. If you keep title, the client's possession is temporary, the use is limited to making one reproduction, and the original comes back unaltered, you likely have a nontaxable royalty. If the client keeps the artwork, alters it, or uses it beyond a single reproduction, you're looking at a taxable sale (or the client owes use tax on the conversion).

Architects, interior designers, developers, and manufacturers buying renderings

Whether you owe sales tax on a rendering you purchase depends on how you'll use it. If you'll use it in your own nontaxable professional service (like practicing licensed architecture), the purchase from the renderer is generally a taxable retail sale to you. If you're reselling the rendering (or a service built on it) to your own client and give the renderer a resale certificate, tax is deferred until your resale. If you'll use it directly to manufacture a product for sale, or to produce exempt promotional materials, ask about the production or promotional-materials exemptions.

Accountants and tax professionals

This ruling is a compact reference for the reproduction-rights doctrine under 20 NYCRR § 526.7(f) (citing Howitt v. Street and Smith Publications and Matter of Frissell v. McGoldrick) alongside the § 1105(c)(7) architect/engineer exclusion and the § 1115(a)(12) production exemption -- useful any time a client's fact pattern involves licensed artwork, plans, or design assets changing hands between creative professionals and their commercial clients.

Common questions

Q: Is selling the right to reproduce an artwork the same as selling the artwork?
A: No. A true reproduction-right license -- temporary possession, limited to making one reproduction, original returned unaltered -- is a nontaxable royalty. Transferring the original itself, or letting the client keep or alter it, is a taxable sale.

Q: If an architect buys a rendering to include in the design service it sells to its own client, is that taxable?
A: Yes, unless the architect gives the renderer a resale certificate because the rendering (or the taxable service built on it) will itself be resold to the client -- tax then applies when the architect resells it, not when the architect buys it.

Q: Does modifying an existing rendering trigger tax?
A: Yes. Revising a rendering the client already owns is a taxable "processing" service under Tax Law § 1105(c)(2), separate from any sale-of-artwork analysis.

Q: Does this ruling apply to my renderings business?
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. It shows how the Department reasons through many scenarios, but your facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4), (5), (6), (12) (retail sale; sale/selling/purchase; tangible personal property; promotional materials)
• Tax Law § 1105(a), (c)(2), (c)(7) (retail sales tax; processing services; interior decorating/design and architect-engineer exclusion)
• Tax Law § 1110(a) (compensating use tax)
• Tax Law § 1115(a)(12) (production machinery and equipment exemption)
• Tax Law § 1116(a)(1) (sales to New York State exempt)
• Education Law § 7301 (practice of architecture defined)
• 20 NYCRR § 526.7(f) (reproduction rights); § 526.8(a) (tangible personal property; artistic items); § 527.4(d) (processing defined); § 531.3(a)(2) (use tax on conversion of a reproduction right)
• TSB-M-97(6)S, dated August 20, 1997 (expanded promotional-materials exemption)

Prior rulings and cases referenced: Corporate Graphics, Inc., TSB-A-82(43)S; Alan/Anthony, Inc., TSB-A-92(60)S; Matter of Vignelli Associates, Ltd., TSB-H-81(26)S; Chermayeff and Geismar Associates, TSB-A-85(11)S; Jim Bush Photography, TSB-A-88(48)S; Zagoren Group, Inc., TSB-D-94(17)S; Lenon Sokolowski Models, TSB-D-92(70)S; The Design Council Ltd., TSB-A-95(23)S; Awad Architectural Models, Inc., TSB-A-86(9)S; Gentile, Wiener, Penta & Co. CPA's PC, TSB-A-96(91)S; Howitt v. Street and Smith Publications, Inc., 276 N.Y. 345; Matter of Frissell v. McGoldrick, 300 N.Y. 370.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_43s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(43)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S971114A

On November 14, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from the New York Society of Renderers, 201 West
21st Street, New York, NY 10011.
Petitioner’s members are renderers, i.e., artists who provide artistic
renderings to architects, clothing manufacturers, interior designers and others.
Their work is all copyrighted and cannot be reproduced without their permission.
Petitioner sets forth twenty-three questions concerning the application of the
New York State sales and use tax to the activities of its members.
Applicable Law and Regulations
Section 1101(b) of the Tax Law provides, in part:
When used in this article for 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:
*

*

*

(4) Retail sale. (i) A sale of tangible personal property to
any person for any purpose, other than (A) for resale as such or as
a physical component part of tangible personal property, or (B) for
use by that person in performing the services subject to tax under
paragraphs (1), (2), (3), (5), (7) and (8) of subdivision (c) of
section eleven hundred five where the property so sold becomes a
physical component part of the property upon which the services are
performed or where the property so sold is later actually
transferred to the purchaser of the service in conjunction with the
performance of the service subject to tax. . . .
(5) Sale, selling or purchase.
Any transfer of title or
possession or both, exchange or barter, rental, lease or license to
use or consume (including, with respect to computer software, merely
the right to reproduce), 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
. . .
(6) Tangible personal property.
of any nature. . . .

Corporeal personal property

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Section 1105 of the Tax Law states, in part:
Imposition of sales tax.-- . . . there is hereby imposed and
there shall be paid a tax of four percent upon:
(a) The receipts from every retail sale of tangible personal
property, except as otherwise provided in this article.
*
(c) The receipts from
following services:

every
*

*
sale,
*

*
except

for

resale,

of

the

*

(7) Interior decorating and designing services, (whether or
not in conjunction with the sale of tangible personal property), by
whomsoever performed, including interior decorators and designers,
architects or engineers; notwithstanding the foregoing, such
services shall not include services which consist of the practice of
architecture, as defined in section seventy-three hundred one of the
education law, or the practice of engineering, as defined in section
seventy-two hundred one of the education law, if the services are
performed by an architect or engineer having a license or permit
under the education law.
Section 1110(a) of the Tax Law provides, in part:
Except to the extent that property or services have already
been or will be subject to the sales tax under this article, there
is hereby imposed on every person a use tax for the use within this
state . . . of any tangible personal property purchased at retail.
. . .
Section 1115(a)(12) exempts from sales tax the receipts from the sale of
“[m]achinery or equipment for use or consumption directly and predominantly in
the production of tangible personal property . . . for sale, by manufacturing,
processing, generating, assembling, refining, mining or extracting . . . 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 of
the Tax Law provides for the elimination of the sales tax on receipts from sales
of parts with a useful life of one year or less, as well as tools and supplies,
for use or consumption directly and predominantly in the production of tangible
personal property for sale.
Section 7301 of the Education Law defines the practice of architecture as
follows:
The practice of the profession of architecture is defined as
rendering or offering to render services which require the
application of the art, science, and aesthetics of design and
construction of buildings, groups of buildings, including their
components and appurtenances and the spaces around them wherein the

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safeguarding of life, health, property, and public welfare is
concerned.
Such services include, but are not limited to
consultation, evaluation, planning, the provision of preliminary
studies, designs, construction documents, construction management,
and the administration of construction contracts.
Section 526.7(f) of the Sales and Use Tax Regulations provides, in part:
Reproduction rights. (1) The granting of a right to reproduce
an
original
painting,
illustration,
photograph,
sculpture,
manuscript or other similar work is not a license to use or a sale,
and is not taxable, where the payment made for such right is in the
nature of a royalty to the grantor under the laws relating to
artistic and literary property.
(2) Mere temporary possession or custody for the purpose of
making the reproduction is not deemed to be a transfer of possession
which would convert the reproduction right into a license to use.
(See Howitt v. Street and Smith Publications, Inc., 276 N.Y.345 and
Matter of Frissell v. McGoldrick, 300 N.Y. 370.)
(3) Where some use other than reproduction is made of the
original work, such as retouching or exhibiting a photograph, the
transaction is a license to use, which is taxable.
Section 526.8(a) of the Sales and Use Tax Regulations provides, in part:
... The term tangible personal property means corporeal
personal property of any nature having a material existence and
perceptibility to the human senses.
Tangible personal property
includes, without limitation:
*

*

*

(3) artistic items, such as sketches, paintings, photographs,
moving picture films and recordings . . .
Technical Services Bureau Memorandum, TSB-M-97(6)S, dated August 20, 1997,
entitled Expanded Sales and Compensating Use Tax Exemption for Promotional
Materials provides, in part:
Effective March 1, 1997, printed promotional materials mailed or
shipped to destinations in the state are exempt from tax when all of
the conditions listed below are met.

•

The printed promotional materials are ultimately mailed
or shipped to customers or prospective customers of the
purchaser of the printed promotional materials.

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•

The printed promotional materials are mailed or shipped
by the purchaser of the materials using a common
carrier, the U.S. Postal Service or a like delivery
service. (This requirement is also met if the mailing
or shipping is arranged by a third party [such as a
printer/mailer] on behalf of the purchaser of the
promotional materials).

•

There is no charge to the purchaser’s customer or
prospective customer (ultimate recipient) for the
promotional materials, or for mailing or shipping them.

•

The purchaser of the promotional materials gives a
properly completed Form ST-121.2, Certificate of
Exemption for Purchases of Promotional Materials, to the
seller of the promotional materials.

*
*
*
Purchases of tangible personal property used by the purchaser to
print its own promotional materials in-house, such as paper, ink,
and mechanicals, do not qualify for the exemptions available for
promotional materials delivered in the state.
Example 11. A company uses in-house printing equipment and
supplies (paper, ink, etc.) to produce its own promotional
materials. The promotional materials consist of advertising
brochures and catalogs. The company will ship the promotional
materials to customers and prospective customers via the U.S.
Postal Service, without charge to the customers. Since the
company is purchasing raw materials, and is not purchasing
promotional materials, these purchases are taxable. However,
if the company delivers any of the brochures or catalogs
outside the state for use outside the state, the company will
be entitled to a refund of any sales tax or use tax paid on
the raw materials incorporated into those brochures or
catalogs, as provided under section 1119(a)(4) of the Tax Law,
with respect only to property upon which fabricating,
processing, printing, or imprinting was performed.
Opinion
The following are the questions presented by Petitioner concerning its
activities and the appropriate answers (it is assumed in these questions that all
renderings are copyrighted):
1.

Q.
A renderer provides, for a consideration, a rendering from an
architect’s plans to the architect and the architect hangs it in his
office. Is the price the renderer charges the architect for the rendering
subject to sales tax?

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A. Yes, if the transfer by the renderer, for consideration, includes all
rights to usage of the rendering, such transfer will constitute the sale
of tangible personal property subject to the sales tax imposed under
Section 1105(a) of the Tax Law.
2.

Q. A renderer provides a rendering of an interior designer’s plan to the
interior designer, and the interior designer shows it to his client; the
terms of the sale are not limited to the right to reproduce.
Is the
purchase of the rendering by the interior designer subject to sales tax?
A.
Yes, the renderer is engaged in making retail sales of tangible
personal property (completed designs) to the interior designer and is
accordingly required to collect the applicable sales tax (see Corporate
Graphics, Inc., Adv Op Comm T&F, November 17, 1982, TSB-A-82(43)S).

3.

Q. A renderer provides, for a consideration, a rendering of a proposed
building or development to a developer or an architect and the rendering
is published in a newspaper with a story about the possible development.
Is the transfer of the rendering from the renderer to the developer or the
architect subject to sales tax?
A. Pursuant to Section 526.7(f) of the Sales and Use Tax Regulations, the
granting of a right to reproduce an original rendering is not a taxable
license to use or a sale since the customer merely takes temporary
possession or custody of the rendering and payments for the right to
reproduce are made in the nature of a royalty.
The transfer of the
rendering by the renderer to the developer or the architect which will be
supplied to a newspaper for one-time reproduction only, where the
developer or the architect returns the rendering unchanged to the
renderer, would constitute the sale of a one-time reproduction right which
would not be subject to sales or use tax (see Alan/Anthony, Inc., Adv Op
Comm T&F, July 30, 1992, TSB-A-92(60)S).

4.

Q.
A renderer provides to a fashion house, for a consideration, a
rendering of a design which the fashion house reproduces without change
and shows to potential customers. Is the transfer of the rendering, which
is returned to the renderer, subject to sales tax?
A.
In those instances where the renderer temporarily transfers a
rendering to a fashion house which is to be reproduced, and the original
rendering must be returned to the renderer in its original form without
alterations, such transfers would not constitute sales of tangible
personal property as defined in Section 1101(b)(5) of the Tax Law.
Accordingly, the renderer’s charges to the fashion house would not be
subject to state or local sales tax (see Matter of Vignelli Associates,
Ltd., et.al., State Tax Commission, February 11, 1981, TSB-H-81(26)S;
Chermayeff and Geismar Associates, Adv Op Comm T&F, April 30, 1985,
TSB-A-85(11)S; Jim Bush Photography, Adv Op Comm T&F, September 20, 1988,
TSB-A-88(48)S).

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However, if a renderer’s design project results in the production of an
original rendering which is sold, rented or licensed by the renderer to
the fashion house, e.g., for the purpose of communicating design concepts
to potential customers, the transaction would be subject to tax under
Section 1105(a) of the Tax Law even if the renderer retains the rights to
the actual artwork (see Zagoren Group, Inc., Dec Tax App Trib, May 19,
1994, TSB-D-94(17)S). The sale from the renderer to the fashion house may
be exempt from tax if the artwork is used by the fashion house directly
and predominantly in the production of tangible personal property for
sale. See Section 1115(a)(12) of the Tax Law.
5.

Q.
A renderer provides to a fashion house, for a consideration, a
rendering of clothing which the fashion house is going to produce for
sale, and the fashion house sends the copyrighted rendering to a fashion
magazine. Is the transaction between the renderer and the fashion house
subject to sales tax?
A. If transfer of possession of the rendering by the renderer to the
fashion house is temporary and for the specific restricted purpose of
reproduction only, e.g., for one-time reproduction by a fashion magazine,
after which the original rendering is returned unaltered to the renderer,
the transaction between the renderer and the fashion house would not
constitute a taxable sale (Alan/Anthony, Inc., supra). Alternatively, the
transfer of designs from the renderer to the fashion house to be used by
the fashion house to produce clothing, unless exempt under Section
1115(a)(12) of the Tax Law, would be considered the sale of tangible
personal property subject to sales tax.

6.

Q. A renderer provides, for a consideration, a rendering of clothing to
a fashion house, to be used in the production of advertising material
which will be mailed out along with its bills. When the fashion house
receives the rendering it sends it to the printer, either the fashion
house or the printer alters the drawing, then multiple copies are printed
for the mailing. Is the transfer of the rendering by the renderer to the
fashion house as described above subject to tax?
A. The renderer in this instance is selling tangible personal property
which is used to produce advertising (promotional) materials printed for
the fashion house by an outside printer. Such a sale is exempt from New
York State and local sales tax provided the fashion house gives the
renderer a properly completed Form ST-121.2, Certificate of Exemption for
Purchases of Promotional Materials, and provided the sale of the printed
promotional materials otherwise qualifies for exemption under Section
1115(n)(4) of the Tax Law (see TSB-M-97(6)S, supra).

7.

Q. a) A renderer is not a licensed architect, but he or she prepares and
provides, for a consideration, plans and renderings to an architect which
the architect includes in the service it sells to its client. Is the
transfer of the plans and renderings from the renderer to the architect
taxable?

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b) Is the transfer of plans and renderings by the renderer directly to
the architect’s client taxable if the plans have been stamped by an
architect?
A.
a) Tangible personal property purchased for use in performing a
service not subject to tax is not purchased for resale.
See Section
526.6(c)(7)of the Sales and Use Tax Regulations. Architectural service is
one of the services specifically excluded from tax under Section
1105(c)(7) of the Tax Law. If the architect as described above uses the
plans and renderings in providing architectural services to its clients,
sales of these items by the renderer to the architect are not sales for
resale but are retail sales of tangible personal property that are subject
to the tax imposed under section 1105(a) of the Tax Law (see Lenon
Sokolowski Models, Dec Tax App Trib, May 16, 1991, TSB-D-92(70)S). If the
architect purchases the items for resale to its client as such or as a
component part of services otherwise subject to tax and gives the renderer
a Resale Certificate, Form ST-120, the renderings are considered to be
purchased for resale and are not subject to tax until the time that the
property or services are resold to the client. See Section 1101(b)(4) of
the Tax Law.
b) Section 1105(c)(7) of the Tax Law imposes sales tax on receipts
from the sales of interior decorating and designing services, (whether or
not in conjunction with the sale of tangible personal property) even if
performed by or on behalf of a licensed architect. Excluded from sales
tax are design services which consist of the practice of architecture as
defined in Section 7301 of the Education Law, if performed by a licensed
architect. Generally, if the renderer is not a licensed architect and
sells plans or renderings directly to the client, even if the plans or
renderings have been stamped by a licensed architect, the sale is taxable.
It is noted, however, that certain exemptions and exclusions exist under
the Education Law for not requiring a license or permit for architectural
services. See Sections 7306 and 7307 of the Education Law. For example,
plans and specifications for farm buildings, residence buildings of
fifteen hundred square feet or less and alterations which meet certain
monetary thresholds may be prepared by unlicensed persons. If the service
provided by the renderer clearly constitutes the practice of architecture
as defined in Section 7301 of the Education Law, but is exempted or
excluded under the Education Law from licensing requirements, the
renderer’s service would not be taxable.
8.

Q. A renderer is hired by an architectural firm to provide renderings of
plans. Is the amount paid by the firm to the renderer for the renderings
taxable?
A.

9.

See 7a. above.

Q. A renderer prepares and provides to a contractor, for a consideration,
copyrighted renderings of interior design, and the contractor does its
work from these renderings. Is the transfer of the renderings by the
renderer to the contractor subject to sales tax?

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A. Yes, the renderings furnished by the renderer to the contractor are
used by the contractor and their sale constitutes the sale of tangible
personal property (Lenon Sokolowski Models, supra).
10.

Q. A rendering is provided to a customer, for a consideration, with a
computer disk, or a computer-generated disk, and the disk is returned to
the renderer. Is that transaction subject to sales tax?
A. If the transfer of the computer disk is in conjunction with the sale
of a reproduction right, for the sole purpose of making the reproduction,
the transfer would not be subject to tax. If the customer’s use of the
computer disk is not limited to reproduction purposes, then the transfer
of the disk to the customer for a consideration is considered a sale of
tangible personal property that may be subject to tax under Section
1105(a) of the Tax Law, depending on the customer’s end use of the disk
(see Gentile, Wiener, Penta & Co. CPA’s PC, Adv Op Comm T&F, December 27,
1996, TSB-A-96(91)S). The sale of the disk may be exempt from tax if the
disk is used by the customer directly and predominantly in the production
of tangible personal property for sale, or to produce tax-exempt printed
promotional materials. See Sections 1105-B, 1115(a)(12) and 1115(n) of
the Tax Law.

11.

Q. A rendering which shows a building to be constructed is prepared for
an architect or real estate developer for the purpose of printing leasing
brochures which are mailed to potential customers. Is the charge by the
renderer to the architect or real estate developer for the rendering
subject to sales tax?
A. If transfer of possession of the rendering by the renderer to the
architect or real estate developer is temporary and for the purpose of
reproduction only, after which the rendering is returned unaltered to the
renderer, the transfer would not constitute a taxable sale.
If the transfer of possession to the architect or real estate developer is
not for the sole purpose of reproduction and constitutes a rental or
license to use, the transaction may still be exempt from sales and
compensating use tax.
Section 1101(b)(12) of the Tax Law defines
“promotional materials” as “[a]ny advertising literature, other related
tangible personal property . . . and envelopes used exclusively to deliver
the same. Such other related tangible personal property includes, but is
not limited to free gifts, complimentary maps or other items given to
travel club members, applications, order forms and return envelopes with
respect to such advertising literature, annual reports, promotional
displays and Cheshire labels but does not include invoices, statements and
the like.” If the rendering in this case is used to produce promotional
materials printed for the architect or real estate developer by an outside
printer, such a sale would be exempt from New York State and local sales
tax, provided the architect or real estate developer gives the renderer a
properly completed Form ST-121.2, Certificate of Exemption for Purchases
of Promotional Materials, and provided the printed promotional materials
otherwise qualify for exemption under Section 1115(n) of the Tax Law. If,
however, the rendering is used by the architect or real estate developer

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to print its own promotional materials in-house, the purchase of the
rendering would be taxable since the architect or real estate developer
would be purchasing raw materials and would not be purchasing promotional
materials (see TSB-M-97(6)S, supra).
12.

Q. A renderer prepares drawings for a manufacturer or contractor to show
how an assembled product will look and transfers them to the manufacturer
or contractor for a consideration. Is the transfer of the drawings from
the renderer to the manufacturer or contractor subject to sales tax?
A. The transfer of original drawings from the renderer to a manufacturer
or a contractor which are used by the manufacturer or contractor in
rendering their services, e.g., to present a design to clients that
clarifies what a product will look like, will constitute the sale of
tangible personal property subject to sales tax pursuant to Section
1105(a) of the Tax Law.
However, if the transfer of the drawings by the renderer is for the sole
purpose of reproduction only, without the right of the manufacturer or
contractor to alter or retouch the same, e.g., a reproduction the
manufacturer or contractor would use as a planning device in the rendition
of its services, then the transfer will not constitute a taxable sale (see
Vignelli Associates, Ltd., supra).

13.

Q. Artwork is used as part of a fabric design. Would the transfer of
such a rendering from a renderer, for consideration, be subject to sales
tax?
A. Provided the artwork is used or consumed by the renderer’s customer
directly and predominantly to produce tangible personal property for sale,
such artwork will be deemed production equipment pursuant to Section
1115(a)(12) of the Tax Law and Section 528.13 of the Sales and Use Tax
Regulations and will not be subject to sales tax. The renderer would not
be required to collect sales tax provided it receives a properly completed
Form ST-121, Exempt Use Certificate, from its customer (see The Design
Council Ltd., Adv Op Comm T&F, June 28, 1995, TSB-A-95(23)S). If the
customer uses the artwork to produce tangible personal property which will
not be sold, the transaction will be subject to both state and local sales
tax and the renderer must collect the tax accordingly.

14.

Q. A renderer who works with computers is hired by a client to prepare a
so-called “3-D” (three-dimensional) computer model of a building or
interior, and a digital copy of the data is provided to the client, who
will extract information leading to stamped blueprints. Is the transfer of
such a rendering for a consideration subject to sales tax?
A. Yes. The use of the model (via the digital copy of data) by a client
who renders architectural or design services constitutes a sale of
tangible personal property that is subject to the tax imposed under
section 1105(a) of the Tax Law, provided the copy is in a tangible format
such as a disk (see Lenon Sokolowski Models, supra; Awad Architectural
Models, Inc., Adv Op Comm T&F, February 14, 1986, TSB-A-86(9)S).

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15.

Q. A digital copy of a rendering as described in #14 above is transferred
onto a disk and then returned to the renderer on the disk. Would such a
transfer of the rendering by the renderer to its customer, for a
consideration, be subject to sales tax?
A.

Yes, if the renderer is furnishing the disk.

See # 14 above.

However, fees received by the renderer for electronically providing a
rendering to a customer represent receipts from the sale of an intangible
and are not subject to sales tax. Payment of such fees would merely grant
the client the right to access the rendering via the digital copy.
16.

Q. Short-term or temporary staff are sometimes employed to work in an
architect’s office on design projects and produce perspective drawings,
interior designs, computer models and plans for the architect.
The
temporaries are not employees for purposes of federal law and are paid as
subcontractors. Are the services of the temporary staff performed for the
architect subject to sales tax?
A. If the services are performed for the architect by a temporary service
contractor and are not subject to tax under Section 1105(c) of the Tax
Law, e.g., services which consist of the practice of architecture as
defined in Section 7301 of the Education Law or clerical services, then no
tax is to be collected on the charge for these services.
However, in the event that drawings, interior designs, computer models or
plans are supplied and billed by the temporary service contractor pursuant
to a contract with the architect, the sale of such items is subject to
sales and compensating use taxes where, for instance, the architect uses
them in rendering architectural services to its clients.

17.

Q. A client furnishes to a renderer an existing rendering, which is owned
by the client, for revision.
The rendering may have been produced
previously by the same renderer or by a different renderer. Would the
performance of such revision by the renderer for the client be taxable?
A. Section 1105(c)(2) of the Tax Law imposes a tax on receipts from the
service of “[p]roducing, fabricating, processing, printing or imprinting
tangible personal property, performed for a person who directly or
indirectly furnishes the tangible personal property, not purchased by him
for resale, upon which services are performed.”
The term “processing” is defined in Section 527.4(d) of the Sales and Use
Tax Regulations as “the performance of any service on tangible personal
property for the owner which effects a change in the nature, shape, or
form of the property.”
In accordance with the foregoing, receipts from the sale by the renderer
for the service of modifying an existing rendering (owned by the purchaser
of the service) are subject to tax pursuant to Section 1105(c)(2) of the
Tax Law.

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18.

Q. A renderer produces a rendering for an architect and sells him the
limited right to reproduce for $1,000.00. Two years later, without the
renderer’s permission, the architect changes the rendering and reproduces
it. Would the rendering then be subject to sales tax?
A.
A right to reproduce will be deemed to exist only if all of the
requirements of Section 526.7(f) of the Sales and Use Tax Regulations are
met.
If the architect changes the original rendering, he or she has
converted the non-taxable reproduction right to a taxable license to use,
and compensating use tax is due from the architect upon the use of the
tangible personal property. See Section 531.3(a)(2) of the Sales and Use
Tax Regulations.

19.

Q. A renderer is hired by an architect who is producing designs for a New
York State agency. The architect will pay the renderer, but will pass the
bill on to the state agency for reimbursement. Is the transaction between
the renderer and the architect subject to sales tax?
A. The transfer of the designs from the renderer to the architect is
subject to sales tax (see 7(a) above), unless the architect purchases the
designs as an agent of the New York State agency. Any sale to or use by
New York State or any of its agencies is not subject to sales or
compensating use tax pursuant to Section 1116(a)(1) of the Tax Law. An
architect acting as an agent of New York State or any of its agencies
would likewise not be subject to sales or use tax on its purchases in
accordance with Sections 529.2(b) and 541.2(c) of the Sales and Use Tax
Regulations.

20.

Q. A New York architect hires a renderer who has no place of business in
New York State. The renderer’s work is delivered, either by hand or by
courier, to the architect’s office in New York State. Does the architect
have a responsibility to pay use tax on the purchase of the rendering?
A. Assuming that the renderer is not a person required to collect tax for
purposes of Article 28 of the Tax Law, the architect would be required to
pay compensating use tax on the purchase of the rendering.
However, if the renderer makes sales of its renderings, the use of which
are subject to tax, and regularly or systematically delivers such property
in New York State by means other than the United States mail or common
carrier, the renderer is a vendor pursuant to Sections 1101(b)(8)(i)(D)
and (iii) of the Tax Law and Section 526.10(a)(5) of the Sales and Use Tax
Regulations. As a vendor, the renderer would be personally liable for and
be required to collect the sales and use tax on its sales of tangible
personal property in this State (see Sections 1132 and 1133 of the Tax
Law) and would have to register for the collection of tax as required by
Section 1134 of the Tax Law. If the renderer failed to collect the sales
tax on the sale of the rendering, the architect would be required to file
a sales and use tax return and pay the appropriate tax due. See Section
1133(b) of the Tax Law.

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21.

In the above example, the renderer performs work in the New York
Q.
office of a client.
A. The out-of-state renderer, by working in New York, becomes a vendor
within the meaning of Section 1101(b)(8)(i)(A) of the Tax Law in this
scenario. The renderer is required to register and file sales tax returns
with the Department of Taxation and Finance and collect the appropriate
New York State or local sales and compensating use taxes on its sales of
tangible personal property. If the renderer does not so register and
collect sales tax, the client must file a sales and use tax return and pay
the appropriate tax due.

22.

Q. A rendering is sold to a client in a tax-exempt contract, that is, one
which is limited to reproduction rights, and then at a later date the
client decides to buy the rendering.
Are taxes owed only on the new
portion of the sale, or on the entire transaction?
A. The sales tax is a “transactions tax” and liability for the tax occurs
at the time of the transaction. The taxed transaction is an act resulting
in the receipt of consideration for the transfer of title and/or
possession to property from one person to another.
See Section
525.2(a)(2) of the Sales and Use Tax Regulations.
The sale of
reproduction rights by the renderer is not a sale within the meaning of
Sections 1101(b)(4)(i) and (5) of the Tax Law since there is no transfer
of title or possession (other than temporary) of the rendering from the
renderer to the client. Accordingly, no sales tax liability would arise
from such a transaction. However, where as part of the transaction title
or possession is transferred to the client for a consideration, i.e., the
original contract is modified, the entire transaction will constitute a
retail sale within the meaning of Sections 1101(b)(4)(i) and (5) of the
Tax Law and the receipts therefrom will be subject to tax under Section
1105(a) of the Tax Law.
If after the expiration of a tax-exempt contract the renderer and the
client enter into a new contract for the outright sale of the rendering,
such transaction is subject to sales tax imposed upon the amount of the
sales price specified in the new contract, pursuant to Sections 1105(a)
and 1101(b)(3) of the Tax Law.

23.

Q.
A nontaxable transfer of a rendering is made to a client under a
contract for the specific purpose of reproduction only.
It is later
discovered that the client changed the image and used it. Would that make
the transaction taxable?

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A. See Question 18. If the client changes the original rendering while
it is in his possession, he has converted the non-taxable reproduction
right to a taxable license to use, and compensating use tax is due upon
the use of the tangible personal property.

DATED: July 1, 1998

NOTE:

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

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