United States

New York: You Reap What You Sew: Sewing Services Subject to Tax

Feb 06, 2017
From KPMG TaxWatch

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Recently, the New York Department of Taxation and Finance concluded that an individual who sewed quilts for customers was performing a taxable service under not one, but two, sections of New York’s tax law. In New York, sales and use tax applies to the service of “producing, fabricating, and processing” tangible personal property performed for a person who furnishes the property upon which the service is performed. Sales and use tax is also imposed on the service of “installing, maintaining, servicing or repairing” tangible personal property. In the situation at hand, customers provided fabric quilt layers and the taxpayer sewed the quilts together using a special stitching design. The Department concluded that the taxpayer was “producing, fabricating or processing” tangible personal property (quilts) on property (the quilt layers) provided by the customer. The Department also concluded that the service was taxable as a service to tangible personal property. Although receipts from tailoring services are excluded from sales and use tax, the taxpayer did not qualify for the exclusion because tailoring services are defined as providing alterations to clothing. Please contact Judy Cheng at 212-872-3530 with questions on TSB-A-16(29)S.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.