To tax or not to tax? The question of whether a lighting designer must charge New York state sales tax has been the subject of much discussion recently among lighting designers in New York. This conundrum arose as a result of an audit experienced by a New York lighting designer in July 2008, and it has taken nearly two years for the firm to receive a ruling and favorably resolve the issue.
The New York State Department of Taxation and Finance interpreted lighting design services to be the same as interior design services, simplifying lighting as the selection of fixtures. Further compounding the predicament the lighting firm found itself in was the fact that the New York State Department of Taxation and Finance was auditing the office back through 2002 because it had not filed for a Certificate of Authority. This certificate gives a business the authority to collect the required sales and use taxes, to issue or accept sales tax exemption documents, and may protect firms from being audited further back than three years. After extensive discussions and consults with a tax adviser, rounds of tele-conferences with tax department representatives in Albany, N.Y., and assemblage of documents, the lighting design firm received a tax advisory opinion written specifically (and only for this particular lighting design firm) indicating that it would not be retroactively charged. However, as of Dec. 1, 2009, the firm had to begin to charge sales tax.
So what does this all mean for lighting designers practicing in New York? It means that all interior architectural lighting design services when performed under agreement with a New York–based architecture, engineering, interior design, and/or owner, for projects located in or outside the United States are subject to New York state sales tax. Exterior architectural lighting design services are not subject to sales tax. It also means that New York state considers lighting design services the same as interior design services and they can be audited as far back as seven years, unless a firm files for a Certificate of Authority. The state's interior design tax law went into effect in 1971, but further complicating this is the fact that New York City repealed the law on Dec. 1, 1995, so charging sales tax applies to work only done in New York state, not New York City.
While the audit situation that the New York City–based lighting design firm had to deal with certainly was an unpleasant and exhaustive process, the firm's experience has revealed critically important issues that impact all lighting designers in New York: the stipulations for charging sales tax and how lighting design services are understood by bureaucratic entities. The lighting design firm's efforts to seek a reasonable solution has paved the way for other lighting designers to protect their business. Additional links and resources are available on the Lighting 311 website at lighting311.org.