NYS Sales tax on Design services? It depends on the medium of delivery

Question: I am a graphic designer residing in Brooklyn, New York. Do I have to charge sales tax to my clients on the services I provide?

Graphic design services involve the sale of creative ideas to your client. In New York State only the sale of ‘tangible personal property’ is subject to sales tax*. In this way the taxability of graphic design services and drug laws have something in common: it all boils down to the 'medium of delivery'  i.e. in what form is the end product delivered to your customer?

If the final designs are delivered in hard copy format e.g. computer discs, printed materials, etc. then you are selling ‘tangible personal property’ and the work is subject to New York State Sales tax (this includes any design costs to you and any reimbursable expenses).

However, if the 'medium of delivery' is electronic then you are exempt from charging your client sales tax. A service provided electronically is not ‘tangible property’.  In addition, to be subject to New York State sales tax, the sale must originate and conclude in New York. If you deliver the end product outside of New York for use outside New York then you are exempt from having to collect New York State sales tax. 

In any case, please check the applicability of sales tax for the state of delivery.

Tip: If you are a graphic designer and have to charge sales tax, make separate invoices to segregate the tangible and intangible services you provide. Since tangibility of property is crucial to determining taxability it will be prudent to create a ‘design services’ invoice and a ‘tangible services’ invoice. For example, if you provide printing services with a design logo imprinted on the printing material always make sure there are separate invoices (or separate line items in one invoice) for the printing and designing of the logo. Otherwise, the state may consider it as one and levy sales tax on the entire amount you invoice your client.

*For detailed information on this please refer to the state website athttp://www.tax.ny.gov/pdf/advisory_opinions/sales/a06_32s.pdf

https://docs.google.com/viewer?url=http%3A%2F%2Fwww.tax.ny.gov%2Fpdf%2Fpublications%2Fsales%2Fpub718.pdf