N.Y. Comp. Codes R. & Regs. tit. 20 § 526.7

Current through Register Vol. 46, No. 45, November 2, 2024

Section 526.7 - Sale, selling or purchase

Tax Law, § 1101(b)(5)

(a)Definition.

(1) The words sale, selling or purchase mean any transaction in which there is a transfer of title or possession, or both, of tangible personal property for a consideration.

(2) Among the transactions included in the words sale, selling or purchase are exchanges, barters, rentals, leases or licenses to use or consume tangible personal property.

(3) The term sale also includes the transfer of tangible personal property in a repossession or foreclosure action. Such transfer may be effected in any manner, including, but not limited to voluntary relinquishment, assignment or seizure by the mortgagee. The transfer of tangible personal property in a repossession or foreclosure action by the mortgagees for the purpose of resale is not a taxable transaction. (See bulk transfer provisions, Part 537 of this Subchapter.)

(4) The term sale also includes the rendering of a service enumerated in subdivisions (b) and (c) of this section, and the transactions enumerated in subdivision (d), (e) or (f) of section 1105 of the Tax Law, except services taxed under section 1105(c) of the Tax Law when performed by an employee.

(5) The term sale does not apply to the transfer of tangible personal property to a carrier, repairman, warehouseman or insurer by the owner of the property after payment for damages thereto or loss thereof.

Example 1:

A carrier, while transporting tangible personal property for a customer, damages the property. The carrier then makes a cash payment to the customer for the amount the customer paid for the property, and retains the damaged property. The retention of the property by the carrier is not a sale.

Example 2:

A motor vehicle is damaged in an accident, and the insurer considers it a total loss. The insurer pays the owner cash, and takes the vehicle. The taking of the vehicle by the insurer is not a sale. The purchase of another vehicle by the owner of the damaged vehicle, with the proceeds of the insurance, is a retail sale.

(b)Consideration.

The term consideration includes monetary consideration, exchange, barter, the rendering of any service, or any agreement therefor. Monetary consideration includes assumption of liabilities, fees, rentals, royalties or any other charge that a purchaser, lessee or licensee is required to pay.

(c)Rentals, leases, licenses to use.

(1) The terms rental, lease and license to use refer to all transactions in which there is a transfer for a consideration of possession of tangible personal property without a transfer of title to the property. Whether a transaction is a "sale" or a "rental, lease or license to use" shall be determined in accordance with the provisions of the agreement. (See section 527.15 of this Title for special rules pertaining to certain leases of motor vehicles, vessels and noncommercial aircraft.)

(2) Where a lease (other than one described in section 527.15 of this Title) with an option to purchase has been entered into, and the option is exercised, the tax will be payable on the consideration given when the option is exercised, in addition to the taxes paid or payable on each lease payment.

(3) A lease which has been entered into merely as a security agreement, but which does not in fact represent a transaction in which there has been a transfer of possession from the lessor to the lessee, is not a "sale" within the meaning of the Tax Law.

Cross-reference:

See section 527.15 of this Title for special rules pertaining to certain leases of motor vehicles, vessels and noncommercial aircraft.

(d)Barters or exchanges.

The transfer of tangible personal property or services to a person in consideration for tangible personal property or services received is a "sale" under the Tax Law.

Cross-reference:

For trade-ins, see section 526.5(f) of this Part.

Example 1:

A and B exchange automobiles. The exchange is a sale under the Tax Law, and each party is liable for the payment of the tax measured by the current market value of the automobile received.

Example 2:

A carpenter agrees to repair real property for an automobile mechanic who in turn will repair the carpenter's truck. The exchange of services is a sale. Each party is required to collect the tax from the other, based upon his normal charge for such service.

Example 3:

A dentist performs a nontaxable service for a photographer who in turn takes a family portrait for the dentist. The dentist is required to pay the tax on the photograph, based upon the amount he would have charged the photographer for his service.

(e)Transfer of possession.

(1) Except as otherwise provided in paragraph (3) of this subdivision, a sale is taxable at the place where the tangible personal property or service is delivered, or the point at which possession is transferred by the vendor to the purchaser or his designee.

Example 1:

A person purchases tangible personal property in New York State, and takes delivery at the time of the purchase. As delivery occurred in New York State, the receipt from the sale is taxable.

Example 2:

A person, not a resident of New York State, purchases tangible personal property in New York State and has it delivered to his home out of state. The receipt from the sale is not taxable in New York State as delivery was made outside of New York State.

Example 3:

A New York State vendor ships tangible personal property, not for resale, to its customer in New York State, F.O.B. Chicago, Illinois. Delivery occurs in New York State. The receipt from the sale is taxable.

Example 4:

A common carrier purchases tangible personal property in New York State, takes delivery of it in New York State and transports it out of state for use at its out-of-state location. The receipt from the sale is taxable in New York State, as delivery occurred in the State, but the carrier may be eligible for a refund or credit under section 1119(a) of the Tax Law.

Example 5:

A New Jersey resident purchases woolens from a New York State supplier and requests that the woolens be shipped to a New York State dressmaker to produce wearing apparel not intended for resale. The dressmaker will ship the completed apparel to New Jersey. Since the delivery of the woolens occurred in New York State, the woolens are subject to tax. However, the charge for producing the wearing apparel is not subject to tax because delivery of the wearing apparel takes place in New Jersey.

(2) Except as otherwise provided in paragraph (3) of this subdivision, a sale of tangible personal property, in which the title to the property passes in New York State, but in which delivery occurs outside of New York State, is not subject to tax.

Example 6:

Corporation A and Corporation B have their headquarters in New York State, and agree that Corporation A will purchase all of the assets of an out-of-state division of Corporation B. Title to the assets passes in New York State. Corporation A starts to operate the division, and does not move any of the tangible personal property. As delivery of the property occurred out of state, the sale is not subject to tax.

(3) Where florists conduct transactions through a florist's telegraphic or telephonic delivery association, the following rules apply in the determination of tax liability on sales through such an association:

(i) A New York State florist who receives an order pursuant to which he gives telegraphic or telephonic instructions to a second florist for delivery of flowers is liable for collection of the tax at the rate in effect in the jurisdiction where the order is taken. It is immaterial whether the second florist is located in or outside of New York State, or whether delivery occurs in or outside of New York State. All service, telephone calls, relays and any other charges for the orders shall be considered to be a part of the selling price.

(ii) In cases where New York State florists receive telegraphic or telephonic instructions from other florists either inside or outside of New York State for delivery of flowers, the receiving florist is not required to collect tax with respect to any receipts which he may realize from the transaction.

Example 7:

A customer places an order for flowers with a florist located within New York State in an area in which the combined rate of State and local sales tax is seven percent. The flowers are to be delivered in Florida. Arrangements are made through a telegraphic delivery association by the New York State florist to have a florist in Florida make up the floral arrangement and deliver it. The New York florist is required to collect sales tax at the rate of seven percent on the total receipts paid by the customer.

Example 8:

A customer places an order for flowers with a florist located within an area of New York State in which the rate of sales tax is four percent. The flowers are to be delivered within an area of New York State in which the combined rate of State and local sales tax is seven percent. Arrangements are made by the florist through a telegraphic delivery association to have another florist fill the order and deliver the flowers. The florist who received the order from the customer is required to collect sales tax at the rate of four percent on the total receipts paid by the customer.

(iii) Sales made by florists which are not made through a florist's telegraphic or telephonic delivery association are subject to the rules contained in paragraphs (1) and (2) of this subdivision.

Example 9:

A New York State florist receives an order from a customer for flowers which are to be delivered to another jurisdiction within this State. The florist delivers the flowers himself. He is required to collect the tax based upon the combined rate of State and local sales tax in effect in the jurisdiction in which the flowers are delivered.

Example 10:

A New York State florist receives an order from a customer for flowers which are to be delivered outside of New York State. The florist delivers the flowers himself. The receipts from the sale are not taxable as delivery occurs outside of New York State.

(4)Transfer of possession with respect to a rental, lease or license to use, means that one of the following attributes of property ownership has been transferred:

(i) custody or possession of the tangible personal property, actual or constructive;

(ii) the right to custody or possession of the tangible personal property;

(iii) the right to use, or control or direct the use of, tangible personal property.

Example 11:

A company enters into an agreement with another company to lease a copying machine for two years, at a flat rental fee, payable in 24 installments, plus a fee per copy made. This transaction is taxable, as a sale, and the tax is applicable to the receipts from the flat rental fee and the per-copy fee.

(5) It is not essential for a transfer of possession to include the right to move the tangible personal property which is the subject of a rental, lease or license to use.

Example 12:

A corporation contracts with a computer center to use the computer on the center's premises for 10 hours weekly. The corporation provides its own operation and its own materials. During the 10-hour period, no one else may use the machine. This transaction, commonly known as the sale of raw time, constitutes a transfer of possession, pursuant to a rental, lease or license to use, which is a sale subject to tax.

Example 13:

A corporation contracts with a computer center to use the computer on the center's premises for 10 hours weekly. The corporation provides its own materials and the computer center provides and directs the operator. During the 10-hour period, no one else may use the machine. In this case, there is no transfer of possession to the corporation as it has no control over the operation of the computer. However, the transaction may be taxable based on the information provided to the customer.

Example 14:

A corporation contracts with a computer center for access time on the computer center's equipment through the use of a terminal located in the corporation's office. The terminal is connected to the computer by telephone. The corporation's access to the computer through the terminal is not deemed to be a transfer of possession of the computer subject to tax. However, the transaction may be taxable based on the information provided to the customer.

Cross-reference:

See section 527.3 of this Subchapter for taxable status of information services.

(6) When a lease of equipment includes the services of an operator, possession is deemed to be transferred where the lessee has the right to direct and control the use of the equipment. The operator's wages, when separately stated, are excludible from the receipt of the lease, provided they reflect prevailing wage rates.

Example 15:

A company enters into an agreement to lease a crane, together with the services of the operator of the crane. The operator will take instructions from the company's foreman, and the company determines the working hours and locations. The operator's wages are separately stated. This transaction is within the definition of sale, and the transfer of possession has occurred by reason of the company's right to direct and control the use of the equipment by the operator. The taxable receipt excludes the operator's wages.

(f) 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.

Example 1:

A person contracts with an artist for a right to reproduce one of the artist's paintings on a book cover. No other right is given by the artist for the use of his painting. The person who obtains the reproduction right to the painting may have copies made and returns the painting to the artist without alteration, change or correction, and without having destroyed or publicly exhibited the painting. The transfer is not held to be a transaction subject to the sales tax, as a rental, lease or license to use.

Example 2:

A photographer takes photographs and furnishes the same to a magazine publisher for the purpose of reproduction. In the course of reproduction, the photograph is retouched by the publisher. After reproduction, the photograph is returned to the photographer. The receipts from such transaction are subject to the tax as a license to use.

Example 3:

A dealer collects photographs and photographic prints. He furnishes the prints to a magazine publisher for the purpose of further reproduction. After reproduction, the prints are returned to the dealer. The prints may or may not be changed or altered. The receipts from such transactions are subject to the tax. Since the dealer merely collects the photographic prints and does not have the right to grant the right to reproduce the original, the transaction is deemed to be a license to use tangible personal property.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 526.7