Examples

For purposes of these examples, it can be assumed that the corporation has met all the requirements of due diligence, unless otherwise provided, and that the business address presumption does not apply.
Example 1: Software Corp sells tax preparation software to individuals through its website. When individual customers purchase the software, Software Corp provides the software on a disk shipped to the customer’s address.
Customer A purchases the software and has it shipped to her billing address in New York State. Software Corp ships a box to Customer A that contains the software on a disk and a user manual explaining how the software works and troubleshooting tips. Computer software by whatever means delivered is considered to be a digital product and therefore receipts from the software are sourced under the rules in this Subpart. Because the product is purchased online, it does not qualify for the special rule for computer software sold at a retail location. Although the sale of the software to Customer A includes the user manual, which is tangible personal property, the user manual is incidental to the actual sale of the software and, therefore, the entire receipt is sourced as a digital product. It is presumed that Customer A primarily uses the software at the billing address, which is located within New York State. Software Corp includes the receipt in New York receipts and everywhere receipts.
Example 2: Develop Corp, a software development corporation located in State A, enters into a contract with a business customer, Purchaser Corp, which is physically located in both New York and State A, to develop custom software to be licensed to Purchaser Corp’s business. Develop Corp delivers the software electronically from its office in State A to Purchaser
Corp. Purchaser Corp will primarily use the software at the location where its employees utilize the software. As no special rules apply to this receipt, Develop Corp must use its books and records to determine where the software will be primarily used. Based on Develop Corp’s records, it is providing Purchaser Corp 100 licenses to use the software at Purchaser Corp’s New York State location and 300 licenses to use the software at Purchaser Corp’s State A location. As a result, 25% of the receipt (100/400) is included in New York receipts. 100% of such receipt is included in everywhere receipts.
Example 3: Movie Corp sells movies for personal use to individual customers that either may be downloaded from the internet or received via DVD, a physical medium. Customer A purchases a digital download for a movie (a digital product) and pays with a credit card that has a billing address in State A. As no special rules apply, Movie Corp must use its books and records to determine where the movie will be primarily used. The general rule presumes that the digital product is primarily used at Customer A’s billing address in State A. Therefore, the receipt from this sale is not included in New York receipts. The receipt from this sale is included in everywhere receipts.
Customer B purchases a DVD and requests it be shipped to an address in New York State. A DVD is not one of the methods of delivery specifically provided for in section 210-A(4), so the movie on a DVD is not considered a digital product. Therefore, Video Corp’s receipt from Customer B is a receipt from the sale of tangible personal property and, as such, should be sourced pursuant to the rules for receipts from the sale of tangible personal property.
Example 4: Cable TV Corp, a corporation that is located outside of New York State, sells monthly subscriptions for cable television to individual customers in New York State and other states. Cable TV Corp provides cable television through cables that are installed at the location of each customer’s television that will be receiving content. Cable TV Corp also has a billing address on file for each of its customers. While most of Cable TV Corp’s customers have cable installed at their billing address, a number of Cable TV Corp’s customers have cable installed at an address other than their billing address. The cable television subscription sold by Cable TV Corp is a digital product. As no special rules apply, the general rule presumes that the digital product is primarily used at an individual customer’s billing address. However, either Cable TV Corp or the commissioner can overcome this presumption through clear and convincing evidence as to where the cable is installed, which better reflects where the digital product is primarily used.
Example 5: Security Corp sells cyber security software to 200 business customers, including a Federal agency XYZ. XYZ has its headquarters located in Washington D.C., and 12 regional offices relatively similar in size located in 12 different states, one of which is New York State. Security Corp generally conducts business with a person at XYZ’s headquarters, but Security Corp provides cyber security software to XYZ’s entire network, which is utilized by XYZ employees at all of the 13 locations. As no special rules apply, Security Corp must use its books and records to determine the primary use location of the software. After making reasonable inquiries to Federal agency XYZ, it does not have more detailed information, such as the number of computers or the distribution of licenses among the locations. Security Corp uses reasonable approximation based on customer information to include 1/13 of the receipts from its cyber security software in New York receipts. Security Corp incudes 100% of such receipts in everywhere receipts.
Example 6: Office Corp, an office supply retailer, has physical stores located in New York and other states. Office Corp sells a variety of office supplies, including a multitude of prewritten computer software programs. When customers purchase items from Office Corp, they take possession of the purchased items immediately at the retail location. In the case of software purchases, customers can either purchase the software on a disk or can purchase a code to download the computer software at a later time. Office Corp’s sale of prewritten software qualifies for the special rule for sales of computer software at retail locations. Therefore, Office Corp includes the receipts from the sale of the software in New York receipts to the extent the sales are made at the retail stores located in New York State. Office Corp includes 100% of such receipts in everywhere receipts.
Example 7: Music Corp provides music streaming services to individual customers for a monthly subscription fee. Customers can access Music Corp’s service through an application on their mobile devices or by visiting Music Corp’s website. Once in their account, individuals can listen to music on a variety of channels and indicate whether they like certain songs. Music Corp uses an algorithm to recommend songs to customers based on songs they have previously indicated that they like. As this service is entirely automated, it meets the definition of a digital service and therefore is sourced under the rules in this Subpart. As no special rules apply, Music Corp must use the general rule to determine the primary use location of its streaming services. Therefore, the primary use location is presumed to be at the billing addresses of its customers. To the extent that customers have billing addresses located in New York State, receipts from such customers are included in New York receipts. Music Corp must include 100% of its receipts from customers in everywhere receipts.
Example 8: Webapp located in State A sells subscription plans to its web-based video/voice conferencing service. This service allows its customers to hold meetings remotely using video and voice transmitted through a web browser. Meetings can be joined by attendees in multiple locations.
When a customer purchases a subscription to Webapp’s service, the customer may log into its online account to use the service at any location where it can access a web browser. Customers also can use this service to conduct meetings with parties who are not subscribers simply by sending the attendee an invitation to the meeting; this can be done from any location as no specialized software is required. Webapp’s service is provided entirely online, without any human intervention by Webapp.
Therefore, it is considered a digital service.
Development Studio subscribes to Webapp’s digital service and uses WebApp’s service to hold numerous meetings with its customers and employees that access the service throughout the country.
As no special rules apply, Webapp must use its books and records to determine the primary use location of its digital service. It determines that Development Studio’s subscription for Webapp’s digital service is used by employees of Development Studio’s New York State office. Webapp includes 100% of this receipt in New York receipts and in everywhere receipts.
Example 9: Website Corp designs custom software and Web applications for use by various businesses. Travel Corp, located in State A, operates hotels in New York and other states and rents rooms to its customers. Travel Corp wants to make the ability to book a room accessible to its customers via the internet, so Travel Corp contracts with Website Corp to design a custom website using Travel Corp’s name and methodology, which will allow Travel Corp’s customers to book hotel rooms online for a fee.
Under the contract, Travel Corp will pay Website Corp a flat annual fee to maintain and host the website. Website Corp is providing a digital service related to the facilitation of a room rental, which is a digital service related to real property. As Website Corp receives a flat annual fee, it must use reasonable approximation based on customer information to apportion the receipt under the special rule for digital services related to real property to the various real property locations. Therefore, Website Corp multiplies the receipt it receives from Travel Corp by a fraction, the numerator of which is the number of rooms rented in New York State via the website and the denominator of which is the number of rooms rented everywhere via the website. Website Corp includes 100% of such receipt in everywhere receipts.
Example 10: Room Corp operates a website that acts as a digital marketplace to facilitate the short-term rental of apartments and houses between individual homeowners and individuals looking for short-term rentals.
Individual homeowners are able to list their homes on Room Corp’s website and will pay Room Corp a small commission if someone books their property via Room Corp’s website. In return Room Corp provides a variety of services to the homeowners automatically via their website, such as payment processing, liability insurance, and ID verification of renters. The digital service Room Corp is providing is related to the facilitation of a real property rental that is a digital service related to real property. Therefore, Room Corp must include the receipts from facilitating real property rentals in New York receipts to the extent the real property is located in New York State. Room Corp must include 100% of the receipts in everywhere receipts.
Example 11: Ticket Corp operates a website that allows individuals to purchase tickets to various live events. Sports Corp enters into a contract with Ticket Corp to list tickets for its sporting events on Ticket Corp’s website and Ticket Corp retains a small commission for every ticket that is purchased through its website under this contract. Ticket Corp’s fully automated website is providing the digital service of facilitating the purchase of an in-person service because the ticket sales are for a live sporting event and a live sporting event meets the definition of in-person service. Therefore, Ticket Corp should source its receipts from the commissions it receives for facilitating in-person services to the location of the venue hosting the event.
Example 12: Game Co, an online gaming company based in New York State, sells monthly subscriptions to individual customers. The majority of Game Co’s customers do not pay with a credit card. They instead use an online payment transfer service to pay their monthly subscription fee and, therefore, do not provide Game Co with a billing address. To subscribe, individuals need to provide only a first name, screen name, password, and online payment information. As such, Game Co does not have enough information to determine the primary use location and, because Game Co’s customers are individuals, Game Co does not need to make reasonable inquiries as to individuals’ billing addresses. Although Game Co does not have address information for most of its subscribers, it can use IP address information to determine where the individual customers log into the website. Therefore, Game Co can use this information to reasonably approximate based on customer information the primary use location of its game and must include receipts from subscribers logging into its game from IP addresses located within New York State in New York receipts. Game Co includes 100% of such receipts in everywhere receipts.
Example 13: Marketplace Corp hosts a website that facilitates the sale of tangible personal property by unrelated individuals. Marketplace Corp does not take title to any of the tangible property posted on its website. Item sellers can create accounts on Marketplace Corp’s website and list property for sale. Individual buyers can visit Marketplace Corp’s website to view pages containing tangible property that item sellers are offering for sale.
Marketplace Corp makes these pages readily available for consumer access at the request of the item sellers. Marketplace Corp receives two primary revenue streams from the item sellers: (1) a small fee for listing tangible property on Marketplace Corp’s website, regardless of whether it sells; and (2) a small commission for every sale of tangible property made via Marketplace Corp’s website. Both revenue streams are services related to tangible personal property and, therefore, the special rule applies.
Marketplace Corp receives the first revenue stream directly from the item seller when the item seller lists the tangible property on Marketplace Corp’s website. In fact, Marketplace Corp receives this receipt regardless of whether the property is sold or the seller removes it from the website without a sale. Therefore, although it is a service related to tangible personal property, Marketplace Corp does not have information on where the tangible personal property is received by a buyer because, at the time the fee is received by Marketplace Corp, the property has not yet been and, in fact, may never be, sold. Furthermore, the service Marketplace Corp provided to generate this receipt is complete at the time the tangible property is listed and there is not yet a consumer in the transaction, so this receipt is not generated in an intermediary transaction. Receipts from listing fees are included in New York receipts using the general rule based on the primary use location of the item seller. Marketplace Corp includes all receipts from listing fees generated via its website in everywhere receipts.
In contrast, Marketplace Corp is receiving the second revenue stream from item sellers at the time the tangible personal property is sold and, as such, Marketplace Corp has information on where the tangible personal property will be delivered to the consumer.
Marketplace Corp includes receipts from its second revenue stream for commissions in New York receipts to the extent the commission was received for facilitating the sale of tangible personal property delivered into New York State. Marketplace Corp includes all receipts from commissions received via its website in everywhere receipts.
Example 14: Software Corp sells case management software to 200 large corporations.
Business Corp purchases software from Software Corp to be installed on laptops used by Business Corp’s employees. The contract between Business Corp and Software Corp is managed at Business Corp’s office in State A, but Business Corp’s employees spend the majority of their time working throughout the country, including in New York. As no special rules apply, Software Corp must use its books and records to determine where the software will be primarily used. Software Corp’s books and records do not provide any information on the amount of time that Business Corp’s employees spend working in other states to determine where the software is primarily used. Because Software Corp only has 200 customers, it must ask Business Corp where its employees utilize the software. Business Corp is not able to provide such information, nor would population information be relevant to software used by Business Corp’s employees in internal operations. Therefore, Software Corp does not have adequate information to determine the primary use locations or reasonably approximate such locations. It must source the receipt to where the digital product is received, which is presumed to be at the location where the contract is managed. Business Corp manages the contract with Software Corp at its office in State A; therefore, the receipt is not included in New York receipts. Software Corp must include 100% of the receipt in everywhere receipts.
Example 15: Sales Corp provides only one type of digital product to approximately 200 business customers. In tax year 2021, all of its receipts were sourced under this Subpart and, as a result, 45% of Sales Corp’s receipts were included in New York receipts. In tax year 2022, Sales Corp continues to provide only one type of digital product to its customers. At the end of tax year 2022, Sales Corp’s computer system crashes and it is unable to recover information it had obtained on where the digital product was primarily used. Upon reasonable inquiries to its known customers, Sales Corp still cannot obtain information on where the digital products were primarily used or determine where they were received. Therefore, under the preceding taxable year method, Sales Corp includes 45% of its 2022 receipts in New York receipts. Sales Corp includes 100% of receipts from this type of digital product in everywhere receipts.
Example 16: Taxpayer A has $10,000 in receipts from a new type of digital product.
After exercising due diligence, Taxpayer A cannot determine where the digital product is primarily used or where it was received. Further, because this is a new type of digital product, it cannot use the preceding taxable year method. Therefore, under the current taxable year method, Taxpayer A must determine the portion of the $10,000 to include in New York receipts based on the apportionment of the receipts for all its other digital products and digital services using the primary use location method and the apportionment of the receipts for all its other digital products and digital services using the where received method. In the current taxable year, Taxpayer A has $65,000 in digital products receipts and $85,000 in digital services receipts sourced using the primary use location method and the where received method, of which $75,000 (or 50 percent) are New York receipts. Therefore, Taxpayer A includes 50% of the $10,000, or $5,000, of receipts from the new type of digital product in New York receipts. Taxpayer A includes 100% of receipts from the new type of digital product in everywhere receipts.
Taxpayer B also has $10,000 in receipts from a new type of digital product that, after exercising due diligence, it cannot source using either the primary use method or the where received method. However, unlike Taxpayer A, Taxpayer B has been able to source all its other receipts from digital products and digital services using the primary use location method and has determined that 40 percent of all those other receipts are New York receipts. Therefore, under the current taxable year method, $4000, or 40%, of the receipts from this new digital product are included in Taxpayer B’s New York receipts. Taxpayer B includes 100% of the receipts from the new type of digital product in everywhere receipts.
Example 17: App Design Corp (the taxpayer), a corporation located in State B, provides mobile phone application (“app”) design services to its customer, Bank Corp (the business customer), which has branches located in New York and other states. Bank Corp contracts with App Design Corp to have App Design Corp design an app that will be readily available for free download by any of Bank Corp’s account holders (the consumers) via a digital marketplace. App Design Corp also will provide periodic updates to ensure the app runs smoothly and the information transmitted through the app is secure. App Design Corp is receiving receipts from Bank Corp in an intermediary transaction because App Design Corp is making its digital product readily available to consumers at the request of Bank Corp, and App Design Corp maintains involvement with the app after consumers download it. As no special rule for determining primary use location applies, App Corp must determine where Bank Corp primarily uses the digital service, which is at the location where the consumers download and use the app.
App Design Corp cannot determine information on New York account holders who download the app based on its own books and records because it does not have information on either the primary use location or where the app is received by the consumers and, therefore, App Design Corp must make reasonable inquiries to Bank Corp for location statistics on account holders who download the app. Bank Corp cannot provide App Design Corp with any information after reasonable inquiries, so App Design Corp should look to publicly available information, such as the number of Bank Corp’s bank branches located within and without New York State, and use the percentage of branches in New York to reasonably approximate based on customer information the primary use location of the app.
Example 18: Website Design Corp (the taxpayer) designs and maintains websites for unrelated parties. Database Corp (the business customer) develops an internet-based information database and enters into a contract with Website Design Corp to create a website and sell access to the database to individual customers (the consumers) for a small monthly fee. The contract specifies that Website Design Corp will retain a commission each month from every consumer that pays for access to the database and remit the remainder to Database Corp. Website Design Corp actively maintains and updates the website where it makes the database readily available on the internet for access by consumers at the request of Database Corp.
Therefore, Website Design Corp must apportion its receipts from commissions based on the location of the consumers rather than the location of Database Corp. As no special rule for determining primary use location applies, Website Design Corp must use the general rule to determine the primary use location of its digital service. As the consumers are individuals, Website Design Corp presumes the digital product will be primarily used at the billing addresses of the consumers. To the extent that consumers have billing addresses located in New York State, receipts from such customers are included in New York receipts. Website Design Corp must include 100% of its receipts in everywhere receipts.
Example 19: Research Corp, a corporation located in State D, compiles a digital collection of treatises on a variety of subjects and sells a copy of its collection to University A, located in New York. However, Research Corp does not provide continuing support after the sale and, if Research Corp were to update any information, it would sell this as a separate product. Therefore, after Research Corp delivers the copy of the digital collection to University A, it maintains no interaction with the product and provides no further services in connection with the receipt. For this reason, this is not considered an intermediary transaction. As no special rules apply, Research Corp must use its books and records to determine if it can ascertain the primary use location of the digital collection. Research Corp’s books and records indicate that University A will use the digital collection at its location in New York State; therefore, the entire receipt is included in both New York receipts and everywhere receipts.
Example 20: Images Corp, a corporation located in State E, maintains an online database of digital images that it licenses to customers to use in a variety of publications. Receipts from the license to use the digital database are apportioned under these rules. Newspaper Corp, located in New York State, enters into a contract with Images Corp whereby, in exchange for a monthly flat fee, Newspaper Corp receives a license to use an unlimited number of images from Image Corp’s online database in Newspaper Corp’s print and digital publications that will be viewed by Newspaper Corp’s subscribers worldwide. Images Corp’s database is only accessible by Newspaper Corp directly and not by its subscribers; therefore, this is not an intermediary transaction. Images Corp must apportion the receipt it receives from Newspaper Corp under the general rule to the primary use location of Newspaper Corp. Newspaper Corp uses the images it selects from the online database when composing articles; therefore, Newspaper Corp’s primary use location is where this editorial control is exercised.
Because Newspaper Corp makes editorial decisions at its office located in New York State, the entire receipt is included in both New York receipts and everywhere receipts.
Example 21: Exchange Corp, a security exchange located in New York, has contracts with 300 brokerage firms that grant digital access to its exchange. Under the terms of the contract, employees of the firms are able to digitally access the exchange for purposes of purchasing or selling shares of stock on the exchange for a fee. Exchange Corp’s contract with Trader Corp, one such brokerage firm, allows Trader Corp’s 120 traders based in New York and 80 traders based in State A to buy and sell shares of stock on the exchange on behalf of clients. As Exchange Corp is not a registered securities broker or dealer, the fees it earns from allowing customers to trade on the exchange cannot be apportioned under the rules in section 210-A(5)(b). Furthermore, because the fee is for granting digital access to the exchange, the receipt is apportioned under the rules in this Subpart.
This is not an intermediary transaction because Exchange Corp is not providing access to the exchange directly to consumers at Trader Corp’s direction. Only Trader Corp’s own employees have digital access to the exchange. For this reason, the receipt must be apportioned to the location where Trader Corp’s traders primarily utilize the digital product.
Exchange Corp does not have adequate information to determine the exact location where the traders primarily use this digital product and, since Exchange Corp has more than 250 business customers that pay fees for substantially similar digital products, and no more than 5% of its receipts are from Trader Corp, Exchange Corp is not required to make reasonable inquiries to Trader Corp. Therefore, Exchange Corp must use its books and records to reasonably approximate where Trader Corp’s traders primarily use the exchange. Since 60% of Trader Corp’s traders are based in New York State, 60% of the receipts Exchange Corp receives from Trader Corp are included in New York receipts. Exchange Corp includes 100% of the receipts in everywhere receipts.
Example 22: Channel Corp operates a digital platform, available through Channel Corp’s website or as a downloadable application, for individual subscribers to access Channel Corp’s content for a monthly fee.
Subscribers can subscribe either directly with Channel Corp. or through another entity.
For revenue earned directly by Channel Corp from its subscribers, it is presumed that an individual subscriber primarily accesses Channel Corp’s digital content at its billing address. Therefore, receipts earned by subscribers with billing addresses in New York State are included in New York receipts. Channel Corp includes 100% of the receipts it earned from these subscribers in everywhere receipts.
Platform Corp (the business customer) operates a digital application store where individuals can download and purchase a subscription to various digital applications. Under the agreement between Channel Corp and Platform Corp, Platform Corp can sell subscriptions to Channel Corp’s service in its marketplace for a fee set by Channel Corp in exchange for a commission. In addition, the agreement requires that Platform Corp receive all payments from individual subscribers for access to Channel Corp’s service and must remit the fees, after retaining its commission, to Channel Corp.
While subscribers download Channel Corp’s digital application from Platform Corp’s platform, the subscribers access Channel Corp’s service directly through its digital application to view content. Channel Corp actively maintains and updates the digital application, which is readily available for access by subscribers who pay for the service through Platform Corp. Platform Corp forwards these receipts, minus its commission, to Channel Corp. Therefore, these are receipts from an intermediary transaction and Channel Corp must apportion them based on the location of the subscribers (the consumers) rather than the location of Platform Corp. Channel Corp’s books and records do not have information on the consumer’s billing address. Therefore, Channel Corp must make reasonable inquiries to Platform Corp to determine where the subscribers access Channel Corp’s digital application. After making such inquiries, Channel Corp still does not know the subscriber location so it reasonably approximates that location using third-party data.
Example 23: Channel Corp operates a digital platform, available through Channel Corp’s website or as a downloadable application of digital content that can be accessed by users. Phone Corp sells phone subscription plans, some of which bundle access to various digital platforms of movies and TV shows operated by different providers as part of the package. Channel Corp enters into an agreement with Phone Corp (the business customer) that allows Phone Corp to bundle access to Channel Corp’s digital platform in exchange for a fee set by Channel Corp. Under the agreement, Phone Corp may decide what fee to charge (or even not charge) its customers for the bundled service. After individual consumers purchase a phone plan that provides access to Channel Corp’s digital content, the consumers access Channel Corp’s digital platform through its website or by downloading Channel Corp’s application.
Channel Corp actively maintains and updates the application, which is readily available for access by subscribers who pay for service through Phone Corp. Therefore, these are receipts from intermediary transactions and Channel Corp must apportion based on the location of the Phone Corp’s users rather than the location of Phone Corp. It is presumed that the users primarily access the digital content at their billing address. Channel Corp’s books and records do not contain the billing address of Phone Corp’s users and, upon inquiries, Phone Corp did not provide this information. However, if Channel Corp collects location information when subscribers create an account to access Channel Corp’s service, then Channel Corp may use such information to reasonably approximate use.
To the extent the location is in New York State, the receipts are included in New York receipts. All receipts that Channel Corp receives from Phone Corp are included in everywhere receipts.