Navigating New York State Sales Tax for Interior Design Services

Understanding Sales Tax Obligations for Interior Design Services in New York

For businesses and individuals offering interior decorating and design services in New York State, understanding sales tax obligations is crucial. This guide provides a comprehensive overview of how New York State sales tax applies to Interior Design Services, ensuring compliance and clarity for both service providers and clients. If you operate or deliver interior design services within New York State, or maintain a business presence here, you are required to register for New York State sales tax purposes.

This article will clarify the nuances of sales tax as it pertains to interior design services, which, with the exception of New York City’s local sales tax, are generally taxable at the full state and local sales tax rate. This includes the ⅜% Metropolitan Commuter Transportation District (MCTD) sales tax. For detailed information on specific rates, refer to Tax Bulletin Sales Tax Rates, Additional Sales Taxes, and Fees (TB-ST-825).

Defining Interior Design Services for Tax Purposes

Interior design services encompass a broad spectrum of offerings centered around the planning and aesthetic arrangement of interior spaces. These services, as defined under section 8303 of the Education Law, are not limited to residential projects but extend to commercial and event spaces as well.

Common examples of interior design services include:

Creating layout drawings, schedules, and specifications for interior spaces.
Furniture arrangement and space planning.
Designing and planning custom furniture, fixtures, and cabinetry.
Staging homes or spaces for sale or events.
Lighting and sound design consultations and plans.
Interior floral design and plant arrangements.
Selection, procurement, and placement of surface coverings (like flooring and wallpaper), window treatments, furniture, and decorative accessories.
Similar consulting and design-related services focused on interior aesthetics and functionality.

A wide range of professionals provide interior design services, including:

Interior design consultants.
Kitchen and bathroom designers.
Lighting and sound designers.
Home decorators and interior stylists.
Architects (when providing non-architectural design services).
Engineers (when providing non-engineering design services).
Renderers and design visualization specialists.
Event decorators and stylists.
Other individuals or firms offering comparable services.

It’s important to note that interior design services apply to both tangible personal property (furnishings, décor) and real property (interior spaces themselves). For instance, assisting a client with selecting furniture styles and fabrics relates to tangible personal property, while advising on paint colors and finishes for an office interior pertains to real property. Furthermore, these services can be provided for properties located within or outside of New York State.

Distinguishing Interior Design from Architecture and Engineering Services

While there can be overlap, interior design services are distinct from the regulated practices of architecture and engineering. The practice of architecture is legally defined in section 7301 of the Education Law, and engineering in section 7201 of the same law.

However, it is crucial to understand that when licensed architects or engineers offer interior decorating or design services that fall outside the scope of their regulated professional practices, these specific services are subject to sales tax. The professional license does not automatically exempt all services provided.

Sales Tax Implications for Architects and Engineers Utilizing Interior Design Services

Purchases of drawings, plans, renderings, and other interior decorating and design services by licensed architects or engineers are generally taxable. This is unless these services are specifically purchased for resale or direct use in performing taxable decorating or design services for their own clients. Simply purchasing interior design services as a licensed architect or engineer does not automatically qualify the purchase for sales tax exemption as architectural or engineering services. Furthermore, the use of interior decorating or design services by an architect or engineer is also subject to use tax.

Consider this scenario: an architect incorporates purchased interior design services into broader architectural plans for a client. In this case, the architect cannot claim a resale exemption on the interior design services purchase because they are not reselling the interior design services as interior design services. Instead, it becomes integrated into their architectural service offering. For more detailed clarification, refer to TSB-M-10(5)S, Application of Sales and Use Tax to the Sale of Interior Decorating and Design Services Used by Licensed Architects or Engineers.

Determining the Applicable Sales Tax Rate: The Point of Delivery

The sales tax rate applied to interior design services hinges on the point of delivery of these services to the purchaser. Interior design services can be delivered in various ways, impacting tax jurisdiction:

Delivery of Renderings or Plans Only: If the service is solely the creation and delivery of design plans or renderings, the sale is taxable at the location where these plans are delivered to the client. If plans are delivered to a client within New York State, they are subject to applicable state and local sales tax at that delivery location, regardless of where the property being designed is situated. Conversely, plans delivered outside of New York State are not subject to New York sales tax at the point of delivery. However, be aware that use tax may apply if these plans are subsequently utilized within New York State.
On-Site Advice Only: When interior design services consist solely of on-location consultation and advice, the sale is taxable at the physical location of the property where the advice is given. If this property is in New York State, New York sales tax applies.
Combined Renderings/Plans and On-Site Advice (Single Charge): If a contract for interior design services includes both renderings/plans and on-site advice for a single, bundled charge, the entire service is considered to be delivered where the on-site advice is provided. Tax liability is determined by the location of the property receiving the on-site consultation. If the property is in New York State, the entire bundled service is subject to New York sales tax.
Combined Renderings/Plans and On-Site Advice (Separate Charges): If the contract clearly and reasonably separates charges for different components (plans and on-site advice), each component is treated independently for tax purposes. Delivery of plans within New York State would be taxable, and on-site services provided in New York State would also be taxable. On-site services rendered outside of New York State would not be subject to New York sales tax.
Plans Delivered to NY, On-site Advice Outside NY (Single Charge): If a contract with a single charge includes plans and on-site advice, but the property for on-site advice is outside New York State, the entire charge is typically not taxable in New York. However, if plans are delivered to New York, but the out-of-state on-site advice is never provided (e.g., project cancellation), the portion of the charge attributable to plan delivery in New York becomes taxable at the point it’s determined the on-site service will not occur. Any renegotiated reduced charge due to the cancelled on-site service becomes the taxable amount. Otherwise, the original full contract amount becomes taxable.
Renderings/Plans Followed by Physical Implementation: When interior design services extend beyond planning to include physical implementation of the design (project management, construction oversight), the service provider is then classified as a construction contractor. In this case, the transaction is no longer treated as solely interior design services, but rather as services to tangible personal property or real property, or both.
- Taxable Installation, Repair, Maintenance, or Servicing: If the work involves installation, repair, maintenance, or servicing of tangible personal property or real property located in New York State, it is generally taxable. Construction contractors pay sales tax on materials used in taxable repair, maintenance, or installation, but may be eligible for a sales tax credit.
- Capital Improvement Installation (Non-Taxable): If the work constitutes the installation of tangible personal property that becomes a capital improvement to real property upon installation, the transaction itself is not taxable. However, the construction contractor pays sales tax on materials incorporated into the capital improvement, and no sales tax credit is available.
Use Tax for Services Used in NY but Delivered Out-of-State: Even if interior design services are delivered to a New York State resident outside of New York (e.g., plans delivered out of state), if the resulting design is used in New York State, the purchaser owes New York use tax. The use tax rate is determined by the location where the plans are utilized. Refer to Tax Bulletins Use Tax for Businesses (TB-ST-910) and Use Tax for Individuals (including estates and trusts) (TB ST-913) for detailed use tax information.

Sales Tax Rates Across New York State

New York State (excluding New York City): Sales and uses of interior decorating and design services are subject to the 4% state tax rate, plus the local county/city rate where the services are delivered. Additionally, the ⅜% MCTD rate applies if delivery is within the Metropolitan Commuter Transportation District (excluding New York City).
New York City: Within New York City, interior decorating and design services are subject to the 4% state tax and the ⅜% MCTD tax. Crucially, interior design services are exempt from New York City’s local sales and use taxes.

Examples Illustrating Sales Tax Application

Example 1: An architect in Albany, New York, purchases an interior lighting design plan for a building project. The plan is delivered in Albany. The sale is taxed at Albany’s 8% combined state and local rate.

Example 2: Mr. Y, a Manhattan resident, commissions design plans for his vacation home in Washington County, NY. Plans are delivered to him in Manhattan. These plan charges are exempt from NYC local tax but are subject to the 4⅜% combined state and MCTD taxes.

Example 3: A couple in Essex County, NY, hires an interior designer for on-site staging advice to sell their home. The designer’s services are taxed at Essex County’s 7¾% combined sales tax rate.

Example 4: A lighting designer contracts with an architect for a lighting plan for commercial space in Rockland County, NY, including on-site consultation during installation. The contract is a single charge of $8,500, and plans are delivered to the architect in NYC. The entire service is taxed at Rockland County’s 8⅜% combined rate because the on-site advice is provided there, even though plans are delivered elsewhere.

Example 5: Ms. R in Monroe County, NY, hires a designer for a renovation plan for her cottage in Ontario County, NY. The designer consults with her at the cottage in Ontario County and delivers the plan to Ms. R in Monroe County. If it’s a single charge, the service is taxed in Ontario County where the on-site consultation occurred. If charges are separated, the consultation is taxed in Ontario County, and the plan delivery is taxed in Monroe County.

Example 6: A company in White Plains, NY, hires an Albany, NY, designer for office redesign in Seattle, WA. The contract separates charges: $12,000 for the plan (delivered to White Plains) and $300/day plus expenses for on-site presence in Seattle. The $12,000 plan charge is taxed at White Plains’ 8⅜% rate. The Seattle on-site service charge is not subject to New York sales tax.

Example 7: Designer M contracts with a law firm in Lake Placid, NY (Essex County), for interior design of a satellite office in Burlington, VT, including on-site advice in Vermont. Single charge of $10,000. Plans are delivered to Lake Placid, but no NY sales tax is collected because on-site service is in VT. Later, the VT office plan is cancelled, and on-site advice doesn’t happen. Designer M refunds $3,000. At this point, Designer M must collect Essex County sales tax on the revised $7,000 plan charge.

Example 8: Mr. Z hires Firm D for a restaurant renovation design and project management (construction contractor services). This is considered a capital improvement project. Firm D’s charges are not taxable, but Firm D pays sales tax on materials used.

Example 9: A White Plains, NY, resident purchases decorating services from a Connecticut decorator. Renderings are provided at the CT shop, and the resident brings them to White Plains for use. The resident owes 8⅜% combined state, county, city, and MCTD use tax in White Plains. Had the services been purchased from a White Plains decorator, sales tax would have been paid at the same rate.

Sales of Furniture, Fixtures, and Additional Services in Conjunction with Interior Design

Often, interior design services are provided alongside sales of tangible personal property and other taxable services. These can include:

Sales of furniture, fixtures, and decorative items.
Installation services for tangible personal property (placement, arrangement of furnishings).
Repair, maintenance, or servicing of tangible personal property (refinishing, reupholstering).
Repair, maintenance, or servicing of real property (repainting, wallpapering).

When interior decorating or design services are bundled with sales of tangible personal property or other taxable services, the entire package may be subject to sales tax if the tangible property or associated services are delivered to the customer in New York State.

Specific Rules for New York City: In New York City, if tangible personal property sales or other taxable services are part of an interior design project, that portion of the bill is subject to the combined state, MCTD, and local sales and use tax rate (8⅞%). However, if interior design services are contracted separately from the sale of property or other services, and the charge for design services is reasonable and clearly itemized on the invoice, then only the interior design services portion is subject to the lower combined state and MCTD rate of 4⅜%. If interior design services are not separately contracted and itemized, the entire charge becomes subject to the 8⅞% rate.

Remember, separately contracted interior design services are taxed based on their point of delivery, as previously detailed.

Disclaimer: This Tax Bulletin provides general guidance and information current as of the issue date. Taxpayers should be aware that tax laws and interpretations are subject to change. This information is not exhaustive and should not be considered a substitute for professional legal or tax advice.

References and Resources

Tax Law: Sections 1105(c)(7), 1109, 1110, 1134, and 1210(a)(4)(iv)

Education Law: Sections 7201, 7301, and 8303

Regulations: Sections 525.2, 527.1, and 527.7

Memoranda:

TSB-M-95(13)S, Repeal of New York City’s Sales Tax on Interior Decorating and Design Services
TSB-M-10(5)S, Application of Sales and Use Tax to the Sale of Interior Decorating and Design Services Used by Licensed Architects or Engineers

Bulletins:

Updated: June 2, 2011