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SMART TAX USA - New York State Tax Exemptions for Manufacturing Facilities

Established in 1927, the New York State Department of Taxation and Finance is one of the largest state revenue collection agencies in the United States. The Department of Taxation and Finance administers New York’s tax system and it apportions funds for schools, roads, state parks, medical care, security services, conservation programs and many other public services. New York State’s sales tax rate is 4% but all counties and some cities have additional sales tax rates ranging from 3% to 4.75%. Basic local sales tax rates vary by jurisdiction and they may also vary according to the percentage at which goods or services are taxed.

All businesses in New York State that engage in sales of tangible personal property or perform any taxable service must register as a sales tax vendor and obtain a Certificate of Authority. Registered businesses are required to collect and remit both state and local sales taxes to the Department of Taxation and Finance. Companies located outside of New York State that have a sufficient business connection inside the state such as a customer base or employees, independent agents and service representatives must also register as a vendor, collect and remit sales taxes.

New York State Sales Tax Publication 852 contains information about sales tax exemptions for manufacturers, processors, generators, assemblers, refiners, miners and extractors, and other producers of goods and merchandise. These types of exemptions are referred to as production exemptions. Production exemptions apply to purchases of machinery and equipment that are used directly and predominantly in a manufacturing production process.

Some of New York State’s more important production exemptions that relate to manufacturing are:

Purchases by a Manufacturer of Raw Materials, Ingredients and Components

Raw materials used in manufacturing production and some supplies that become physical components of the final product for sale are not subject to state or local taxes.

Purchases by a Manufacturer of Machinery and Equipment

Purchases of machinery and equipment that are used more than 50% of the time in the production of tangible personal property, gas, electricity, refrigeration or steam for sale are eligible for New York State production exemptions.

Food Processing Equipment

Purchases of machinery or equipment used directly and predominantly to manufacture food or to process foods for sale are eligible for production exemptions.

On-Site Assembly of Production Machinery and Equipment

If exempted machinery or equipment cannot be assembled before delivery because of size, weight or other physical factors, charges for on-site assembly are considered to be part of the selling price and are eligible for a New York State production exemption. Charges to repair, maintain or service exempt production machinery and equipment are also exempt from state sales and use taxes.

Parts and Tools Used in Production

If parts are installed on machinery or equipment that is used directly and predominantly in production, purchases of such parts are exempt from all state and local sales and use taxes. If tools are necessary to and used within the production process, they are also exempt from state and local sales and use taxes.

Cartons, Containers, and Other Packaging Materials

If packaging and wrapping materials that are used to package a product are transferred with the product to the consumer and become the property of the purchaser, they are eligible for a New York State production exemption.

Safety Apparel and Safety Supplies

Safety apparel and other safety items supplied to employees because they are considered to be indispensable to production are exempt from both the state and local sales and use taxes.

Quality Control

Machinery and equipment that is purchased for use directly and predominantly in quality control of a manufactured product while it is still on the production line can be exempted from all state and local sales and use taxes.

Capital Improvement

If machinery or equipment substantially adds to the value of real property in New York State, becomes part of the real property, or is permanently affixed to the real property so that removal would cause material damage to the real property, the cost of the installation is exempt from all state and local sales taxes.

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