New York Advisory Opinion TSB-H-81(57)I: Does the New York personal income tax investment credit apply to electronic equipment purchased to produce educational video tapes?

Plain-English summary

Richard H. Roberts owned Image Makers of Pittsford, a small business producing educational video tapes for industrial and commercial customers. The business took blank tapes and used a range of broadcast-grade electronic equipment - a color TV camera, editing recorders, a production studio switcher, a sync/test signal generator, an audio mixing console, color and waveform monitors, a character generator, an editor-programmer, a video signal processor, a distribution amplifier, and a camera pedestal - to record, edit, and duplicate visual and audio images onto the tapes. All of this equipment had a useful life of more than four years. Roberts asked whether purchasing this equipment qualified for the investment credit available under the personal income tax.

Tax Law section 606(a)(2) allows an investment credit for tangible personal property (and certain buildings) that is depreciable, has a useful life of four years or more, was acquired by purchase, has a New York situs, and is principally used by the taxpayer "in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing." The statute defines manufacturing as working raw materials into wares suitable for use, or giving new shape, quality, or combinations to already-processed matter, using machinery, tools, and similar equipment.

The Department concluded that recording, editing, and duplicating video and audio content onto blank tape - transforming raw blank tape into a finished, salable educational product using specialized machinery - fit squarely within that definition of "manufacturing." Because the equipment purchased satisfied the other statutory criteria (four-year-plus useful life, New York situs, principal use in the described process), the investment credit was available for it.

What this means for you

Video, audio, or media production businesses

Equipment used to record, edit, and duplicate content onto physical or recorded media can qualify as "manufacturing" equipment for New York's personal income tax investment credit, even though the end product is intangible content rather than a traditional physical good - as long as the equipment has a four-year-plus useful life, a New York situs, and is principally used in that production process.

Small-business owners buying production equipment

Don't assume the investment credit is limited to traditional factory machinery - New York's manufacturing definition turns on the transformative nature of the process (raw materials into a new, usable product), which can extend to specialized recording and editing equipment.

Accountants advising media or content-production clients

Confirm each piece of equipment's useful life and principal use before claiming the credit; the ruling's holding rests on the equipment being principally used in the described recording/editing/duplicating process, not on the fact that the end product is video content generally.

Common questions

Q: Does producing video tapes count as "manufacturing" for New York's investment credit?
A: Yes, under this ruling - taking blank tape and using cameras, editing, and duplicating equipment to create finished video content fits the statutory definition of manufacturing.

Q: What equipment qualified for the credit in this ruling?
A: A broadcast-quality color TV camera, editing recorders, a production studio switcher, sync/test signal generator, audio mixing console, color and waveform monitors, character generator, editor-programmer, video signal processor, distribution amplifier, and camera pedestal - all with a useful life over four years.

Q: Would equipment with a shorter useful life or used mostly for something else still qualify?
A: No - section 606(a)(2) requires a useful life of four years or more and that the property be principally used in the qualifying production process; equipment falling short of either requirement wouldn't qualify under this analysis.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/h81_57i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-H-81 (57)I
Income Tax
April 24, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. I801106A

On November 6, 1980 a Petition for Advisory Opinion was received from Richard H.
Roberts, 6 Wood Gate, Pittsford, New York 14534.
The issue raised is whether the investment credit provided for under the Personal Income Tax
imposed under Article 22 of the Tax Law is applicable to the purchase of certain equipment used in
the manufacture of educational video tapes.
Image Makers of Pittsford is a new small business owned by Petitioner. Image Makers of
Pittsford produces educational video tapes for industrial and commercial use. Image Makers of
Pittsford takes blank tapes and uses electronic equipment and machinery to place visual and audio
images on the tapes. Additional equipment is used to edit the results and duplicate the tapes for
distribution. The electronic equipment purchased consists of a broadcast quality color TV Camera,
editing recorders, production studio switcher, sync and test signal generator, audio mixing console,
tektronix color picture monitor, tektronix waveform monitor, character generator,
dynasciences/spectra-vision JBT-104A backspace editor-programmer, video signal processor, pulse
and video distribution amplifier, and pneumatic camera pedestal and cam head. All of these items
have a useful life in excess of four years.
Section 606(a)(2) of the Tax Law provides as follows: "A credit shall be allowed under this
subsection with respect to tangible personal property and other tangible property, including buildings
and structural components of buildings, which are depreciable pursuant to section one hundred sixty­
seven of the internal revenue code, have a useful life of four years or more, are acquired by purchase
as defined in section one hundred seventy-nine (d) of the internal revenue code, have a situs in this
state and are principally used by the taxpayer in the production of goods by manufacturing,
processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture,
viticulture or commercial fishing. For purposes of this paragraph, manufacturing shall mean the
process of working raw materials into wares suitable for use or which gives new shapes, new quality
or new combinations to matter which already has gone through some artificial process by the use of
machinery, tools, appliances and other similar equipment .... "
The operations described above constitute "manufacturing," within the meaning and intent
of section 606(a)(2) of the Tax Law. Further, the machinery and equipment purchased and used by
Petitioner in such processes satisfy the criteria set forth in such statutory provision. Accordingly, the
investment credit provided for under Article 22 of the Tax Law is applicable with respect to such
property where it is principally used in the described processes.

DATED: April 7, 1981

TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau