Section 1118. Exemptions from use tax

The following uses of property and
  services shall not be subject to the compensating use tax imposed  under
  this article:
    (1)  In  respect  to the use of property used by the purchaser in this
  state prior to August first, nineteen hundred sixty-five.
    (2) In respect to the use of property or  services  purchased  by  the
  user  while  a nonresident of this state, except in the case of tangible
  personal property or services which the user, in the  performance  of  a
  contract, incorporates into real property located in the state. A person
  while engaged in any manner in carrying on in this state any employment,
  trade,  business  or  profession, shall not be deemed a nonresident with
  respect to the use in  this  state  of  property  or  services  in  such
  employment, trade, business or profession. This exemption does not apply
  to  the  use  of  qualified  property  where  the  qualified property is
  purchased primarily to carry individuals, whether or not for  hire,  who
  are   agents,  employees,  officers,  shareholders,  members,  managers,
  partners, or  directors  of  (A)  the  purchaser,  where  any  of  those
  individuals was a resident of this state when the qualified property was
  purchased  or  (B)  any  affiliated  person that was a resident when the
  qualified property was purchased. For purposes of this subdivision:  (i)
  persons  are  affiliated persons with respect to each other where one of
  the persons has an ownership interest of more than five percent, whether
  direct or indirect, in the other, or where an ownership interest of more
  than five percent, whether direct or indirect, is held in  each  of  the
  persons  by  another  person  or  by  a  group of other persons that are
  affiliated persons with respect to each other; (ii) "qualified property"
  means aircraft, vessels and motor vehicles; and (iii) "carry"  means  to
  take  any  person  from  one  point to another, whether for the business
  purposes or pleasure of that person.
    (3) In respect to the use of property or services  upon  the  sale  of
  which  the  purchaser  would  be expressly exempt from the taxes imposed
  under subdivision (a), (b) or (c) of section  eleven  hundred  five.  In
  respect  to the use of property to the extent that it is exempt from the
  sales tax under subdivision (g) of section eleven hundred eleven of this
  article.
    (4) In respect to the use of  property  which  is  converted  into  or
  becomes  a  component  part  of  a  product  produced  for  sale  by the
  purchaser.
    (5) In respect to the use of paper in the  publication  of  newspapers
  and periodicals.
    (6)  In  respect  to  the  use  of  property  used exclusively for the
  temporary  construction,  improvement,  alteration  or  repair  of   any
  building, structure or exhibit, located entirely on land owned by a city
  having  a  population  of  one  million  or  more  and leased by it to a
  corporation organized for the sole purpose of holding a world's fair and
  confining its operations solely to preparing  for  and  conducting  such
  fair.
    (7)  (a)  In  respect to the use of property or services to the extent
  that a retail sales or use tax was legally due and paid thereon, without
  any right to  a  refund  or  credit  thereof,  to  any  other  state  or
  jurisdiction  within any other state but only when it is shown that such
  other state  or  jurisdiction  allows  a  corresponding  exemption  with
  respect  to  the  sale  or use of tangible personal property or services
  upon which such a sales tax or compensating use tax  was  paid  to  this
  state. To the extent that the tax imposed by this article is at a higher
  rate  than  the  rate  of  tax  in  the  first taxing jurisdiction, this
  exemption shall be inapplicable and the tax imposed  by  section  eleven

  hundred  ten of this chapter shall apply to the extent of the difference
  in such rates, except as provided in paragraph (b) of this subdivision.
    (b)  To  the  extent  that  the  compensating  use tax imposed by this
  article  and  a  compensating  use  tax  imposed  pursuant  to   article
  twenty-nine  are at a higher aggregate rate than the rate of tax imposed
  in the first taxing jurisdiction, the exemption  provided  in  paragraph
  (a)  of  this subdivision shall be inapplicable and the taxes imposed by
  this article and pursuant to article  twenty-nine  shall  apply  to  the
  extent  of  the difference between such aggregate rate and the rate paid
  in the first taxing jurisdiction. In  such  event,  the  amount  payable
  shall  be  allocated between the tax imposed by this article and the tax
  imposed pursuant to article twenty-nine in proportion to the  respective
  rates of such taxes.
    (8)  In  respect  to  the  use  of  spare  parts  (including engines),
  consumable technical supplies, maintenance  and  ground  equipment  used
  exclusively in the operation or handling or maintenance of aircraft, and
  aircraft  stores,  brought  into  this state from a foreign country by a
  foreign airline which holds a foreign air carrier permit, issued by  the
  Civil  Aeronautics Board pursuant to Section 402 of the Federal Aviation
  Act of 1958, as  amended,  to  engage  in  foreign  air  transportation,
  provided that:
    (i)  such  property  is  to  be  used  on aircraft (or directly in the
  operation, handling or maintenance of aircraft) of the airline providing
  foreign air transportation services (or such aircraft of another foreign
  airline eligible under this subdivision); and
    (ii) such property would not  be  subject  to  taxes  imposed  in  the
  foreign  country  in  which  the  particular foreign airline is based if
  brought into such country by a United States airline operating  in  that
  country.
    (9)  In  respect to the use of a thoroughbred, standardbred or quarter
  horse purchased outside the state and brought into  the  state  for  the
  purpose  of  entering  a  racing  event  or  events on which pari-mutuel
  wagering is authorized  by  law,  and  to  prepare  therefor.  Provided,
  however,  that  the  exemption  contained  in this subdivision shall not
  apply to any such horse which enters racing events in this state on more
  than five days in any one calendar year. Nothing contained herein  shall
  alter   the   exemption   provided  to  nonresidents,  as  specified  in
  subdivision two of this section.
    (10) In respect to the use of horses purchased outside the  state  and
  brought  into  the  state for racing to the extent that the value of the
  horse exceeds one  hundred  thousand  dollars.  On  or  before  December
  fifteenth,   nineteen   hundred  eighty-five,  and  December  fifteenth,
  nineteen hundred eighty-six, the board shall report to the  director  of
  the  budget,  the  chairman  of  the  senate  finance  committee and the
  chairman of  the  assembly  ways  and  means  committee  concerning  the
  benefits or costs associated with the provisions of this subdivision, an
  assessment  of  any economic impact and appropriate recommendations. The
  commissioner of taxation and finance shall provide  to  the  board  such
  reports as are necessary to effect the board's mandate.
    (11)  In  respect  to  the  use  of  computer  software  that  did not
  constitute tangible personal property prior to September first, nineteen
  hundred ninety-one, used by the purchaser, author or other  creator,  or
  copyright owner in this state prior to such date.
    (12)  In respect to the use of prepaid telephone calling service prior
  to the effective date of a chapter  of  the  laws  of  nineteen  hundred
  ninety-nine which added this subdivision.