State Tax Rulings
Free state tax letter rulings and advisory opinions with plain-English summaries, full citations, and the original source on every page.
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Fourteen natural gas distribution and pipeline companies jointly create a single special-purpose 'project entity' to hold one gas-import contract with a Canadian exporter (instead of each company separately obtaining its own import permits and contracts), take momentary legal title to the imported gas at the US-Canada border, and immediately pass that title to the fourteen owner-companies at cost, with no profit or loss to the entity itself. Is this project entity subject to New York's section 186 franchise tax on gas companies, or its section 186-a tax on furnishing utility services?
Neither tax applies -- this project entity is not a taxable 'gas company.' Boundary Gas, Inc. was created by fourteen New York, New Jersey, and New England gas companies (thirteen distributors and one…
A company doesn't own any trucks itself -- it arranges for independent truckers to haul freight for an unrelated customer, collects the freight charges through that customer, keeps a 20% brokerage cut, and passes 80% along to the independent truckers who did the actual hauling. Is this company taxed as a trucking/transportation corporation under sections 183 and 184 (Article 9), or as an ordinary business corporation under Article 9-A?
Sections 183 and 184 (Article 9), not Article 9-A -- even though Petitioner never physically hauled anything itself. Cayuga Service, Inc.'s entire business consisted of arranging for independent truck…
Are a plumbing/heating contractor's bathroom, boiler, heating-system and water-heater installations 'capital improvements' to real property for New York sales tax purposes?
Yes — all eight jobs are capital improvements. William Jiskra Plumbing and Heating Contractor asked whether eight kinds of work count as 'capital improvements' for New York sales tax: (1) adding a new…
Can a picture-framer separately state its delivery charge for artwork so the delivery charge isn't subject to New York sales tax?
Not taxable, if separately stated and reasonable. James Linnehan, doing business as James Frames, frames works of art and delivers them; because the art is fragile, his delivery charge is substantiall…
Can a hazardous-waste disposal company claim New York's production-machinery exemption on the equipment it uses to transport, treat and dispose of other companies' chemical waste?
Taxable — the exemption is denied. Frontier Chemical Waste Process, Inc. transports, treats and disposes of hazardous chemical wastes for industrial and commercial customers, and does not itself produ…
When a printer delivers printed material to a customer in New York who later mails some of it out of state, is sales tax due on the whole charge at the delivery-point rate?
Taxable in full at the delivery-point rate. Meridian Graphics, Inc., a printer, delivered printed material to a customer in Albany County, New York. The customer argued that because it would mail some…
Are barges (scows) that earn more than 75% of their receipts moving cargo between states exempt 'commercial vessels' under New York sales tax, along with services performed on them?
Exempt — the scows and services on them qualify. Lone Star Industries, Inc. planned a new subsidiary to move aggregates (crushed stone, sand) by scow (barge) exclusively for an affiliated company, NYT…
Is installing linoleum with adhesive, or carpeting on a stairway, a tax-free capital improvement to real property?
Linoleum cemented down is always a capital improvement; carpet depends on the subfloor. S & Y Floor Covering asked whether installing linoleum with adhesive, and installing carpeting on a stairway tri…
Is building a new, independent roof over an existing roof a tax-free capital improvement to real property?
Yes — the new roof is a tax-free capital improvement. Orchard Park Veneer and Container Corporation had a new roof built over an existing structure: steel trusses spanning the old roof, supported by s…
A toy designer/marketer has its toys manufactured overseas by contractors using its own molds, dies, patents, and trademarks. Usually the company buys the finished toys from the contractor and resells them to customers itself. But for large customers with their own import capabilities, the company instead directs the contractor to sell and ship DIRECTLY to the customer at a price the company sets -- and the contractor remits to the company the difference between what the customer paid and what the company would have paid. What kind of receipt is that markup for Article 9-A allocation purposes -- a sale, a royalty, a commission, or something else?
The receipts are a hybrid of royalties and commissions, to be apportioned between the two categories for allocation purposes -- they are NOT simply sales receipts. Buddy L Corporation designed and mar…
Can a restaurant that gives no guest checks or receipts include sales tax in its stated prices instead of adding it separately?
Yes — the restaurant may use the 'unit price' (tax-included) method. Dowd's Beefalo Farms #2 operates a fast-food restaurant and issues no guest checks or other written receipts. It asked whether sale…
New York Advisory Opinion TSB-H-81(4)I: Must a New York resident beneficiary add his share of income taxes a nonresident trust paid to another state back into his New York adjusted gross income?
Yes. The Department held that a trust acts as a conduit, passing its items of income and required modifications through to its beneficiaries via the New York fiduciary adjustment. Because federal law …
New York Advisory Opinion TSB-H-81(3)I: Does transferring a qualified higher education fund (PASS account) directly from one trustee bank to another terminate the fund under Article 22 of the Tax Law?
No. The Department held that a PASS account terminates only when a 'distribution' is made other than to, or on behalf of, an eligible beneficiary for qualifying education expenses. A direct trustee-to…
New York Advisory Opinion TSB-H-81(2)I: Does buying a vacation home in New York make an out-of-state domiciliary a New York resident for personal income tax purposes?
Not by itself. The Department held that if the home is a mere camp or cottage suitable and used only for vacations, it isn't a 'permanent place of abode' at all, so it can't trigger statutory residenc…
New York Advisory Opinion TSB-H-81(1)I: Do 'piggyback trailers' owned through a partnership and leased to others qualify for New York's personal income tax investment credit?
No. The Department held that the investment credit under Tax Law section 606(a) requires the property to be principally used by the taxpayer in a qualifying production activity like manufacturing, and…
A New York corporation acts as a selling agent for an out-of-state manufacturer, using resident salesmen based in various states (plus dedicated sales offices in California and Illinois) who never come to the New York office; all orders are simply mailed to New York for processing, and all employees are paid from the New York administrative office. Can the company allocate its sales-commission income to whichever state each sale was actually made in, or does a different rule apply?
Neither -- commission income is sourced to New York only for salesmen actually attached to or working out of a New York office, regardless of where a given sale occurred or where the company's adminis…
An insurance company is building an eligible business facility and plans to claim New York's eligible business facility credit under section 1511(d), which is based partly on a 'property percentage' comparing eligible property to ALL of the company's New York-connected real and tangible property. Does real property the insurer acquired through mortgage foreclosure on defaulted loans count toward the denominator of that property percentage, diluting the credit?
Yes -- foreclosed real property must be included in the denominator of the property percentage, which dilutes (reduces) the credit. Security Mutual Life Insurance Company of New York, a domestic insur…
A fundraising-consulting company keeps a New York office (used mainly to see out-of-town clients) but its principal officers travel extensively to client universities around the country and spend little time in New York; it also hires project directors and solicitation staff stationed at the universities themselves, and sometimes uses the university's own staff. For a single lump-sum contract fee covering all this work, how should the company allocate its business income between New York and other states?
The lump-sum fee must be allocated between New York and other states based on the relative time spent or value of services actually performed in each location -- not treated as a single undifferentiat…
A national bank wants to spin off its equipment-leasing activities (conducted within and outside New York) into a new, wholly owned subsidiary, mainly for liability-protection reasons, structured under the federal banking rules that specifically govern bank equipment-leasing subsidiaries. Will that subsidiary qualify as a New York 'banking corporation' taxable under Article 32, and can the bank and the subsidiary file a single consolidated Article 32 return?
Yes to both, but formal permission for the consolidated return must still be separately applied for and granted after the subsidiary is actually created. Golden Pacific National Bank, with its main of…
Chase Manhattan Corporation wants to form a new, wholly owned financial-services subsidiary that will hold stock in out-of-state finance companies and 'industrial banks' making consumer and commercial loans across several states -- activities a New York bank or national bank could not itself conduct outside New York. Can that new subsidiary be included in Chase's existing consolidated Article 32 banking-corporation return?
No. Chase Manhattan Corporation (CMC), a bank holding company that already files a consolidated Article 32 return with its principal subsidiary, Chase Manhattan Bank, N.A., asked whether a new, wholly…
A Delaware holding company, wholly owned abroad, does nothing but hold the stock of two operating subsidiaries based in New York City. It has no salaried employees, pays its two officers nothing, and doesn't pay rent for the unpaid mailing-address space it uses at one subsidiary's New York office -- but it keeps its books and records in New York and has its taxes and administrative work handled there. Is that enough to make it subject to New York's Article 9-A franchise tax?
Yes. Noga Holding (USA), Inc. was a Delaware corporation, wholly owned by a non-U.S. parent, whose sole activity was holding 100% of the stock of two other Delaware subsidiaries doing business in New …
Are doughnuts sold in packages of 8-12 for off-premises consumption from a mobile trailer subject to New York's prepared-food sales tax?
Not taxable — the packaged doughnuts fall within the off-premises food exception. John P. Hoban, doing business as 'The Donut Man,' produces and sells doughnuts in packages of 8-12 from a small (7' x …
Is a subcontractor's sale of building materials to a construction manager acting as the owner's agent exempt from sales tax on a capital-improvement project?
Exempt — a sale to the owner's agent is a sale to the owner. An attorney asked whether tangible personal property to be incorporated as an integral component of a capital-improvement construction proj…
Is fuel oil a property owner buys to heat a city-owned building tax-exempt as a resale to the city or a purchase as the city's agent?
Taxable — it was neither a resale nor an agency purchase. Tamas Friedman owns a Brooklyn building whose furnace also heats an adjacent building owned by the New York City Housing Preservation and Deve…
Is roof repair and restoration work — flashing, new drains, remedial repairs, coating, and expansion joints — a tax-exempt capital improvement, or taxable repair and maintenance of real property?
It's taxable — the roof work is repair and maintenance of real property, not a capital improvement, so the contractors' charges are subject to sales tax. Fargo Manufacturing Company hired two contract…
Is a window quilt (an insulated window shade) taxable when sold, and is installing it a tax-free capital improvement?
Taxable both ways — as goods, and as an installed job. Nassau Solar Development, Inc. asked whether selling an uninstalled 'window quilt' is subject to sales tax, and whether selling one installed is …
Are charges for refinishing already-installed cabinets, including replacing cabinet doors, subject to New York sales tax?
Taxable — it's repair/maintenance, not a capital improvement. Old Craft Furniture Refinishing removes the existing finish from already-installed cabinets and applies a new finish, sometimes also selli…
New York Advisory Opinion TSB-H-80(521)I: Does a sole proprietor's real estate management business qualify as the practice of a profession, exempting its income from New York's unincorporated business tax?
No. The Department held that managing real property owned by others - collecting rents, arranging building maintenance, handling landlord-tenant matters, negotiating leases, and keeping income/expense…
New York Advisory Opinion TSB-H-80(520)I: Is income received for a restrictive covenant (non-compete agreement) entered into when selling an unincorporated business subject to New York's unincorporated business tax?
Yes. The Department held that a restrictive covenant given in connection with a business sale is the surrender of an intangible asset or property right directly connected with that sale, and because t…
New York Advisory Opinion TSB-H-80(519)I: How are constructive distributions to shareholder-officers characterized in the recipients' hands if a Department audit disallows claimed business expense deductions across several years with different earnings and profits levels?
It depends on the corporation's earnings and profits in each specific year. For years in which the corporation had no current or accumulated earnings and profits, any constructive distribution is trea…
When a photographer consigns student photos to a nonprofit PTA to sell to parents, who owes and collects the sales tax?
Taxable — the PTA is the photographer's agent and must collect the tax. Irvin Simon Photographers, Inc. 'sells' student photographs to parent-teacher associations on a consignment basis for resale to …
In deciding whether a shopping paper meets the 90%-advertising limit, is the area of inserted advertising supplements counted as part of the printed area?
As originally decided, yes — supplement area was counted (but this was later reversed). The New York State Publishers Association asked whether, in computing the percentage of a shopping paper's print…
In a chain of selling, leasing and using coin-operated lockers, which transactions are taxable and who collects the tax?
The manufacturer's sale is a tax-free resale; the subsidiary taxes its lease receipts. AVM Corporation manufactures coin-operated checking lockers, sells them to a wholly-owned subsidiary, which lease…
Is a SIDS apnea-monitor and resuscitator system exempt medical equipment, and is the intercom bundled with it also exempt?
The monitoring/rescue equipment is exempt; the intercom is taxable. Modern Medical Systems Co. sells or rents an infant apnea-monitor and resuscitator system used to detect and rescue an infant from a…
Is the installed sale of a modular home a taxable sale of goods when the home sits on land leased (not owned) by the buyer?
Taxable — it's a sale of goods, not a capital improvement, because the buyer only leases the land. Greenwood Village Planned Retirement Community, Inc. sells modular homes installed on lots it owns an…
Could a developer use a municipal utility district's exemption when fronting the cost of a fire truck built from components?
Yes, through a documented resale structure. The developer could buy the chassis and cab for resale, issue a resale certificate to the fabricator after obtaining a sales tax permit, and retain title as…
New York Advisory Opinion TSB-H-80(524)I: Can a taxpayer claim New York's personal income tax tuition modification for tuition paid on behalf of his spouse?
No. The Department held that the tuition subtraction under Tax Law section 612(c)(17) applies only to tuition paid on behalf of a 'dependent,' and Article 22 borrows the federal definition of that ter…
New York Advisory Opinion TSB-H-80(523)I: How is a distribution from an Individual Retirement Account taxed when the IRA was funded by a tax-free rollover of a New York State or local government pension?
The portion of the IRA distribution that represents a return of the rolled-over pension principal remains exempt from New York personal income tax, just as the original pension itself was exempt under…
New York Advisory Opinion TSB-H-80(522)I: Can a taxpayer claim a retroactive personal income tax modification for contributions to a qualified higher education fund (PASS account) that didn't exist and received no contributions during the years in question?
No. The Department held that the PASS-account subtraction under Tax Law section 612(c)(16) is available only for amounts actually contributed to a qualified higher education fund during the specific t…
A special-purpose finance company was formed solely to buy and lease nuclear fuel to an out-of-state utility, funded by notes issued to a group of banks that include New York lenders. It has no office or employees of its own anywhere; a New York affiliate handles all its administration, books, and records for a nominal fee, and its loan documents were executed in New York at the lenders' insistence. Does that make it subject to New York's Article 9-A franchise tax, even though the nuclear fuel itself never sits in New York?
Yes. Wolverine Energy Company was a foreign corporation formed solely to take title to nuclear fuel for Consumers Power Company (a Michigan public utility) and to finance the purchase of additional fu…
Was providing advertising on a sign trailer a taxable rental, and how were the trailer and sign taxed when bought or sold?
Providing advertising on a trailer was a service, not a rental, because customers lacked exclusive use or control; the provider collected neither rental-receipts tax nor limited sales tax on the servi…
A New York-based finance conduit borrows money by selling short-term commercial paper (or drawing on a bank credit line) and relends the proceeds to an out-of-state utility subsidiary to finance fuel purchases, earning only a nominal fee. Is that enough to make it subject to New York's Article 9-A franchise tax, and if so, can its short-term borrowings be deducted from its assets in figuring its taxable business capital?
Yes to both questions. Clipper Oil Corporation, a foreign corporation authorized to do business in New York, existed solely to (1) borrow money by selling commercial paper notes (270 days or less) or …
Our company is technically incorporated in New York, but we have no office, sales representatives, or any physical connection to the state at all -- we operate entirely out of New Jersey and just ship products to customers nationwide, including some in New York. Are we stuck paying only the $250 minimum Article 9-A tax, or could our New York shipments push us above that?
It may owe more than the $250 minimum. Victor Hasselblad, Inc. was a New York corporation that sat completely inactive from its 1956 formation through 1979. In January 1980, its Swedish camera-manufac…
Industrial development bonds issued under Article 18-A of the General Municipal Law are, by their own statute, exempt from taxation. Does that exemption mean interest earned on those bonds can be left out of a corporation's 'entire net income' when computing New York's Article 9-A or Article 32 franchise tax?
No -- despite the bonds' own tax-exempt status, the interest must be added back into entire net income for both Article 9-A and Article 32 purposes. General Municipal Law §§ 874(2) and 876 exempt indu…
Our 'Edge Act' international banking subsidiary has only ever operated out of a single New York office and reported all of its income as New York income. Now that federal rules let us open branches in other states without adding capital, how do we apportion interest expense between the New York home office and the new out-of-state branches for New York tax purposes?
It depends on whether the bank's own books and accounts actually reflect the true net income of each branch. United California Bank International was a wholly owned 'Edge Act' banking subsidiary of Un…
Is raising dogs and ferrets for labs and pets 'farming,' and is the feed a tax-free purchase for resale as part of the animals?
Taxable — it's not farming, and metabolized feed isn't bought for resale. Marshall Research Animals, Inc. commercially raises and feeds dogs and ferrets for sale to laboratories and as pets. It argued…
How did Texas historically classify mobile homes and trailers for tax before and after July 1, 1971?
Before April 1, 1970, mobile homes were taxed as motor vehicles. From April 1, 1970 through June 30, 1971, units wider than eight feet or longer than 36 feet were taxed under the Limited Sales, Excise…
When a store doubles a manufacturer's coupon, what amount is subject to sales tax?
Tax is due on the price paid plus the manufacturer's coupon value — the store's doubling is not taxed. Robert J. Seid asked what counts as taxable 'receipts' when a merchant redeems a manufacturer's c…
Is a company's sale and installation of a private telephone interconnect system on a customer's property a tax-exempt capital improvement, and must the installer collect a Certificate of Capital Improvement (ST-124)?
Yes — installing a private telephone interconnect system on the customer's own property is a capital improvement, so the charge is not taxed, and no ST-124 certificate is required. U.T.C. Group Inc. a…
Is the sale and installation of lockers bolted into wall alcoves a tax-exempt capital improvement, or a taxable sale and installation of tangible personal property?
The lockers are taxable — because they can be unbolted and removed without material damage, installing them is not a capital improvement, so both the sale and the installation are subject to sales tax…
Is sales tax due on a member-owned golf club's Certificate of Membership and a required Subordinate Debenture Bond, and is the tax refundable when the member later leaves and redeems the bond?
Both are taxable, and there's no refund. A member-owned golf club's Certificate of Membership and a required (even refundable) Subordinate Debenture Bond are both taxed as initiation fees, and later c…
Does a monthly consumer newsletter listing manufacturer refund offers qualify as a tax-exempt periodical, so its sales aren't subject to sales tax?
It's exempt — the monthly 'Consumer's Bulletin' meets the five-part test for a periodical, so its sales aren't taxed. Rose Marie Thompson asked whether she must collect sales tax on sales of her publi…
When an out-of-state seller registered in New York ships goods to a New York customer of its out-of-state buyer (a drop shipment), and no exemption certificate is given, is New York sales tax due?
Yes — because the goods were delivered in New York and no exemption certificate was provided, New York State and local sales tax is due. Banner Metals (a Pennsylvania company registered to collect New…
When did Texas tax a leased vehicle under the historical long-term lease rules, and were lease payments taxable?
A vehicle bought in Texas for lease drew sales tax, while one bought outside Texas drew use tax. Tax was paid at title or registration, or directly to the Comptroller for non-Texas registration includ…
Did Texas allow credit for tax paid to Mexico when an international-commerce vehicle entered Texas and obtained Texas registration?
No. The Comptroller's legal staff said a vehicle entering Texas from Mexico owed historical motor vehicle tax when the operator applied for Texas registration. Because the vehicle came from a foreign …
Is the rental of a crane taxable when the rental company supplies the operator but the customer supervises and directs the crane's use?
It's taxable — because the customer directs and controls how the crane is used, renting the crane (even with the rental company's operator) is a taxable lease of tangible personal property. Enercon Sy…
When a truck lease separately bills the lessee for interest expense (plus a profit markup), is that interest charge part of the taxable rental receipt?
Yes — the separately billed interest charges, including the 10% profit markup, are part of the taxable rental receipt and sales tax must be collected on them. Island Leasing Corp. leases trucks to New…
Does filing the required bulk-sale notice, by itself, relieve the purchaser of all liability for the seller's unpaid sales taxes — and does timing matter?
No — filing the bulk-sale notice by itself does not relieve the purchaser of all liability; it is the timely notice combined with withholding the purchase price that limits and protects the buyer. Kle…
Does the Kansas exemption for a vehicle or aircraft sold to an out-of-state resident cover trailers, and what must the dealer keep on file?
The K.S.A. 79-3606(k) exemption covers only a 'motor vehicle' or aircraft sold and delivered in Kansas to a bona fide resident of another state, not to be registered in Kansas and not remaining in the…
Was a manufacturer-built well service unit subject to Texas motor vehicle tax or limited sales tax?
The described well service unit was not subject to motor vehicle sales and use tax. Because the manufacturer built it entirely for a specialized function and it was not designed to carry a divisible h…
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