N.Y. Comp. Codes R. & Regs. tit. 20 § 528.28

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

Section 528.28 - Tangible personal property donated to exempt organizations

Tax Law, § 1115(1)

(a) Tangible personal property donated to an exempt organization described in section 529.2, 529.3, 529.4, 529.6, 529.7, 529.8, 529.9 or 529.10 of this Title is exempt from sales and use taxes provided that:

(1) the property is manufactured, processed or assembled by the donor; and

(2) the manufacturer, processor or assembler offers items of the same kind of tangible personal property for sale in the regular course of business; and

(3) the manufacturer, processor or assembler has not made any other use of the tangible personal property which is donated.

Example 1:

On December 5, 1988, a company that manufactures and sells computers to retail computer stores donates several computers to a New York State public school, an exempt organization under section 529.2 of this Title. The computers were, prior to being donated, held in inventory and were not used for any other purpose. Since the company offers the computers for sale during the regular course of business and made no use of the computers before they were donated to the public school, the company may make the donation without incurring sales or use tax liability.

Cross-reference:

For definition of the terms "items of the same kind" and "offered for sale in the regular course of business," see section 531.3(b) of this Title.

(b) The donation of tangible personal property by an individual, retailer, wholesaler or other person, who did not manufacture, process or assemble the donated property and who has not already paid sales or use tax on the donated property is generally subject to sales or use tax. The tax is to be paid by the donor.

Example 2:

On December 5, 1988, a proprietor of a retail computer store, who bought computers for resale, donated five of these computers to a New York State public school, an exempt organization under section 529.2 of this Title. Although the proprietor offers the computers for sale in the regular course of business and made no use of the computers before they were donated to the public school, the vendor is not the manufacturer, processor or assembler of the equipment. Accordingly, the proprietor owes tax on the donation of the computers.

(c) Nothing in this subdivision shall be construed to allow a refund or credit of sales or use tax properly paid by the donor on the donated property.

Example 3:

A manufacturer of computers withdrew one of its computers from inventory for use in its own office operations. As the manufacturer used the computer itself, the manufacturer was properly liable for and paid use tax on its use of the computer. Subsequently, the manufacturer donated the computer to an exempt organization described in section 529.7 of this Title. As the manufacturer properly paid tax at the time of self-use of the computer, the manufacturer is not allowed a credit or refund of the tax properly paid, even though the computer was donated to the exempt organization. No additional sales or use tax is due at the time of the donation.

(d) Tangible personal property purchased and used by a manufacturer, processor or assembler in performing services described in sections 527.4 and 527.5 of this Title (such as processing, installing, maintaining and repairing of tangible personal property) and donated to an exempt organization described in subdivision (a) of this section is not exempt from sales or use tax. Thus, the manufacturer, processor or assembler must pay the applicable tax. But where the manufacturer, processor or assembler uses tangible personal property which it manufactured, processed or assembled in conjunction with performing such services (without having made any prior use of such property), the donation of such property in conjunction with performing such services is exempt.

(e) Services performed by the manufacturer, processor or assembler (donor) on qualifying tangible personal property which it donated to an exempt organization are not subject to tax, whether or not the donor charges the donee for the services. Where the donor charges the donee, the purchase of the donor's services is exempt because the donee is an exempt organization, provided that the donee gives the donor a properly completed exempt-organization certificate. Where the donor does not charge the donee, the wages, salaries and other compensation paid by the donor to its employees in conjunction with performing the services on the exempt donated tangible personal property are not subject to tax. But where the donor purchases such services from a third party to be performed on the donated property, then the donor is liable for sales or use tax on the amounts it paid to purchase such services. The charges to the donor for any replacement parts which do not qualify for the exemption described in subdivision (a) of this section are also taxable to the donor.

Example 4:

A manufacturer of photocopy machines donates a photocopier to an exempt organization described in section 529.7 of this Title. The manufacturer hires a subcontractor to perform maintenance and repairs on the copier. Upon completion of the maintenance or repair work, the subcontractor directly bills the manufacturer/donor. These charges to the donor for its purchase of such services are subject to applicable sales or use tax.

Example 5:

Assume that the photocopy machine manufacturer in Example 4 uses its own employees to perform maintenance and repairs, rather than hiring a subcontractor to perform the services. While the salaries, wages and other compensation paid to the donor's employees are not subject to tax, any supplies and any replacement parts that do not qualify for exemption under section 528.28(a) of this Part are subject to tax.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 528.28