Sales Tax Articles
Sales Tax State Activity Update - May 2007
New York – Lights, Camera, Action...Exemption?
A taxpayer sold videos that were delivered electronically over the Internet to customers. The New York Department of Taxation and Finance rendered an opinion that the sales of videos were not subject to sales and use tax.
Background
The taxpayer stored a digitized catalog of videos and video content on a server located in California. When a customer buys a video it is delivered electronically and stored on the customer's computer. The video cannot be viewed while it is being downloaded. The customer must install propriety software before the video can be downloaded. The software is provided free of charge and is available on the taxpayer's Web Site.
Opinion
The videos were reasoned to be an intangible like downloaded music or photographs. A sale of an intangible is exempt under Sections 1105(a) or section 1110(a) (A) of the Tax Law. However, New York does tax prewritten software delivered electronically in sections 1101(b) (6) and 1105(a) of the Tax law. Also, taxed are Information and Entertainment services delivered by telephony and telegraphy pursuant to sections 1105(c) (1) or 1105 (c) (9) of the Tax Law. The opinion expressed that the videos were not software, information or entertainment services.
This opinion can be viewed on the New York State Department of Taxation and Finance website.
(New York Commissioner of Taxation and Finance, TSB-A-07(11) S, 4/12/07)
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