Contract manufacturing

# (a)

For purposes of this section, a corporation that contracts out its production activities is referred to as “the contracting company”. The entity to whom the production activities are contracted is referred to as “the production company”.

# (b)

# (1)

In determining if the contracting company is a qualified New York manufacturer, it may include the assets and employees used in the production activities in that determination only if the contracting company owns the assets being used by the production company in the production activities and only its employees operate or use those assets.

# (2)

Receipts earned by the contracting company from the sale of goods produced by the production company on behalf of the contracting company are not receipts from the sale of goods produced by manufacturing activities and, thus, would not be included in the numerator of the fraction used in the computation of the principally engaged test.

# (c)

# (1)

In determining if a production company is a qualified New York manufacturer, it may include the assets and employees used in the production activities in that determination only if the production company owns the assets being used and only its employees operate or use those assets.

# (2)

Receipts paid by the contracting company to the production company for the manufacture of the goods produced by the production company on behalf of the contracting company are not receipts from the sale of goods produced by manufacturing activities unless the production company in fact is selling those goods (that is transferring title to those goods) to the contracting company. The receipts received by the production company from the contracting company would be included in the numerator of the fraction used in the computation of the principally engaged test only if the receipts are from the sale of goods as described in the previous sentence.