SALT Report 1848 – The New York Department of Taxation and Finance released an advisory opinion regarding a Taxpayer’s sales of advertising services. The Taxpayer contracts with New York hospitals to install advertising fixtures throughout the hospital’s facilities and grounds. These advertising fixtures include digital displays, static backlit displays, backlit scroll displays that rotate through various advertisements, and banners.
Generally, the Taxpayer contracts with a third party to install the advertising fixtures, and except for the wraps and banners, all displays are either bolted to a wall, a beam, or the floor. Once the fixtures are installed, the Taxpayer is responsible for all aspects of maintenance and hires an independent contractor to repair, replace, and maintain the display fixtures and banners.
The Taxpayer requested guidance regarding whether receipts from its advertising services are subject to tax and whether the fees it pays to subcontractors are also taxable.
The Department determined that the Taxpayer’s sales of advertising placed in hospitals are not one of the taxable services enumerated in section 1105(c) of the Tax Law. Therefore, the Taxpayer’s charges to its customers for advertising services are not subject to sales tax.
Finally, the advertising displays that the Taxpayer provides are not intended to become permanent fixtures as the Taxpayer retains title of the fixtures, and is required to remove the fixtures at the end of the contract. Because the fixtures are not considered permanent, as required by the capital improvement exemption, the installation charges the Taxpayer pays to its subcontractors are subject to sales tax under section 1105(c)(3) of the Tax Law.
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