Sales Tax State Activity Update - July 2004

Beauty Treatment Services A Mixed Bag In The Big Apple

A taxpayer creates and produces compact discs, videos, and DVDs for various artists on its in-house label.

In a Petition for an Advisory Opinion, the taxpayer raised the issue as to whether the services purchased from a hairstylist and makeup artist, which are part of the creative process for cover art of compact discs, videos and DVDs, were subject to tax.

Section 1105(c) of the New York State Tax Law imposes the sales tax only on enumerated services. Services rendered by a hairstylist and makeup artist are not enumerated. On the other hand, Section 11-2002(h) of the Administrative Code of the City of New York Imposes the city sales tax on beauty services, so the 4 1/8% city tax would be due.

But what if the services were performed on a wig? It appears there is some wiggle room for claiming the wig qualifies as a production supply and therefore exempt from both the state and city tax. The latter issue was not specifically ruled on in the opinion, however.

(Sony (Advisory Opinion), New York Commissioner of Taxation and Finance, TSBA-04 (14) S, 05/25/04 07/04

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