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An advisory opinion determined a taxpayer’s lighting design services were subject to New York sales tax. The taxpayer performs these services as a subconsultant to architects and engineers and occasionally, the actual building owner. New York imposes sales tax on the sale of interior decorating and designing services (whether or not in conjunction with the sale of tangible personal property), by anyone, including interior decorators and designers, architects or engineers. However, New York does provide an exclusion from tax for services that consist of the practice of architecture or engineering, if they are performed by a licensed architect or engineer. This exclusion applies to a licensed architects or engineers sale of architectural or engineering services and not their purchases of design services. Therefore, the taxpayer’s sale of interior design services to architects or engineers do not qualify for the resale exclusion because the architects and engineers are not themselves selling a design service subject to sales tax. The incorporation of the taxpayer's design work into the architect's or engineer's own signed and sealed designs has no bearing on the taxability of taxpayer's service. The exclusion also does not apply because the taxpayer is performing design services and none of its employees are licensed architects or engineers. The Department also determined that the taxpayer’s sale of design services to the building owners who hire an architect or engineer separately were also subject to sales tax. The incorporation of the taxpayer's design work into the design performed by an architect or engineer does not affect the taxability of Petitioner's service.

It was also noted that New York City sales tax does not apply to interior decorating and designing services. Therefore, the charges for the taxpayer's services delivered in New York City are subject to New York State sales tax (including the tax imposed on behalf of the Metropolitan Commuter Transportation District), but are not subject to New York City sales tax. Interior decorating and design services are subject to State and local sales taxes outside of New York City. (TSB-A-09(61)S, New York Commissioner of Taxation and Finance, October 15, 2009, released January 2010)


A taxpayer sale of a web-based report that allows retailers, shopping centers, and real estate developers to assess the potential success of specific retail brands for a given location was found subject to New York sales tax. The sale of information services, including the services of collecting, compiling or analyzing information and furnishing reports (excluding the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons) is subject to sales tax. Generally, if a common database is used to generate reports, the information sold is taxable even though the reports may be customized to meet the specific needs of customers. In this situation, although the report about a potential tenant for a specific site location may seem to constitute information that is personal or individual in nature, the demographic information delivered by the taxpayer is common data base information that is available to and offered to any other person requesting information about potential tenants (which may include the same tenants that were suggested to the first requestor). Therefore, the charges by the taxpayer to for its reports constitute taxable information services when delivered in New York. For sourcing purposes, it is the point of delivery that determines the imposition of tax. Services are taxed based upon the location to which they are delivered notwithstanding that the service may have been performed elsewhere. The reports delivered to the customer in New York are subject to sales tax regardless of whether the site location that is the subject matter of the report is within or without the state. (TSB-A-09(55)S, New York Commissioner of Taxation and Finance, December 7, 2009)


A taxpayer’s service of providing check verification, under which the taxpayer provides a recommendation to a merchant to either accept or reject a customer’s check in payment for goods or services, was not subject to New York sales tax as an information service. The taxpayer provided its clients with advice as whether or not to accept a customer’s checks by using sophisticated analysis techniques and built in-house risk scoring systems. Taxable information services include collecting, compiling or analyzing information of any kind and furnishing reports thereof to other persons. Thus, the taxpayer’s service was not considered an information service. Even if it was considered an information service, receipts from those services would not be taxable because the information was personal and individual in nature and could not be substantially incorporated in reports furnished to other persons (Telecheck Services, Inc., New York Division of Tax Appeals, Administrative Law Judge Unit, DTA No. 822275, November 5 ,2009).


On December 2, 2009, the New York legislature passed a tax amnesty measure to authorize an accounts receivable discount program. This program will allow eligible taxpayers to pay outstanding taxes, fees, or surcharges imposed by the state. This measure has been sent to Governor David A. Paterson for his signature. Under the accounts receivable discount program, fifty percent of the penalties will be waived for eligible tax liabilities issued after December 31, 2003 and on or before December 31, 2006. For tax liabilities issued on or before December 31, 2003, eighty percent of the penalties will be waived. It is expected that the limited forgiveness period would take place in the last quarter of 2009-10. (A.B. 21, Laws 2009, Fourth Special Session; Fact Sheet: $2.7 Billion Enacted Deficit Reduction Legislation, Office of New York Gov. David Paterson, December 3, 2009)


The New York Commissioner recently determined that a taxpayer’s sale of software licenses are subject to New York sales and use tax. The taxpayer licenses software that is further customized to meet the needs of the customer. The separately-stated customizations charges are billed to the customer as performed instead of spread out over the licensing period. Since, prewritten computer software is included within the definition of tangible personal property, the Taxpayer’s sale of the license to use its basic software is subject to sales tax to the extent the software is used in New York. If the locations in which the customer will use the software are both in and out of New York, the Taxpayer should collect tax based on the portion of the taxable receipts attributable to the customer's use in New York.

The Taxpayer's license of the software remains taxable, regardless of any modifications or customizations made by the Taxpayer. If there is a reasonable, separately-stated charge for customization of the basic program, the charge for the modification will not constitute a receipt from the sale of prewritten software and will not be subject to tax when performed for and sold to the customer who initially requested the custom modification. However, subsequent sales of the modified software to other purchasers would be subject to tax as the sale of prewritten software.

The Taxpayer also provides software support, which includes defect fixes, software updates, training and helpdesk support. Fees for software updates and patches to fix defects are subject to sales tax as the sale of prewritten software. Training and support fees are exempt from tax as long as they are separately-stated and reasonable. On the other hand, if a lump sum charge is made to a customer that includes training and support, or if the separate charge for training and support does not reasonably reflect the value of these items, then the entire charge will be taxable. Other software-related services are also discussed. (TSB-A-09(41)S, New York Commissioner of Taxation and Finance, September 22, 2009)



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