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A recent opinion has been issued by the New York Department of Taxation and Finance regarding how to treat tools, equipment, materials, supplies and services used in producing master recordings of movies, TV shows, and music on compact disc. The creation of these items is a production of tangible personal property for sale and the production company was allowed to take exemptions under rules geared towards manufacturers. Machinery and equipment used directly in the production process are exempt whether they are bought or leased. The manufacturer exemptions can also be used through the post-production process. Post-production can include the editing, dubbing and mixing elements as well as the equipment used in these processes such as computers, software, and equalizers. (Deloitte & Touche LLP (Advisory Opinion), New York Commissioner of Taxation and Finance, TSB-A-02(50)S, September 27, 2002)


Any contract stating a sale of a taxable item as a finished product should be considered taxable according to the New York Department of Taxation. Although design, engineering and project management services, if connected with a construction project, are not necessarily taxable individually. However, if a contract is agreed upon for selling a finished product, the receipts of the sale will be considered a single transaction, even if some items are separately stated (NY Department of Taxation Advisory Petition No. S001002C, 7/22/02)


The opinion states that a mail-order company in no longer required to be registered or to collect New York sales and use tax if the following guidelines are met. The company must not have any type of offices, employees, or independent contractors working to solicit sales for the company. The only presence the company can have is through catalogs, other promotional materials, and website access. Delivery of items sold must be through common carrier or electronically via the Internet. Mail-order companies that fit the description above are allowed to surrender their Certificate of Authority and file their last sales and use tax return. (New York Commissioner of Taxation And Finance Advisory Opinion, TSB-A-02(19)S, Petition No. S010619A, June 26, 2002)


This was the case, even though the petitioner subsequently relocated to California, because there was no claim or evidence that the tax was erroneously, illegally, or unconstitutionally collected or paid. California imposed California sales tax on the remaining lease payments and, according to the petition, would not honor the tax already prepaid to New York. The amount due under a lease agreement, for the entire period covered under the lease, is immediately subject to New York sales tax. There is no provision allowing a refund of sales tax paid on the lease of a vehicle when the lessee relocates to another state that may also require the lessee to pay tax. (Torquato, New York Division of Tax Appeals, Administrative Law JudgeUnit, DTA No. 816973, March 3, 2000.



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