Can an out-of-state printing company accept a New York Resale Certificate (Form ST-120) from an out-of-state customer that isn't registered in New York, when the finished product is shipped directly to that customer's own customer in New York?

Plain-English summary

A law firm asked the Department, on behalf of a client, about a common "drop shipment" situation: a fully integrated printing facility in New Jersey produces finished goods (books, posters, advertising material) for a purchaser located outside both New Jersey and New York. Instead of shipping the goods back to that purchaser, the seller ships them directly to the purchaser's own customer in New York. The purchaser itself isn't registered with New York and isn't required to be. The question was whether the New Jersey seller could still accept a valid New York Resale Certificate (Form ST-120) from this unregistered out-of-state purchaser to avoid collecting New York sales tax on the drop-shipped goods.

Historically, Form ST-120 could only be used by vendors already registered in New York. A 1998 Department policy change (TSB-M-98(3)S) opened it up: a "qualified out-of-state purchaser" -- one that isn't registered and isn't required to register in New York, but is registered in another state (or based somewhere that doesn't require registration) -- can now use Form ST-120 to make tax-exempt purchases for resale even when the goods are drop-shipped directly to that purchaser's own customer (or an unaffiliated fulfillment provider) in New York.

Applying that policy here, the Department confirmed the New Jersey seller could accept a properly completed Form ST-120 from the purchaser (indicating the purchaser's out-of-state registration number, or that it's located somewhere registration isn't required), and doing so within 90 days of the sale protects the seller from New York sales or use tax liability on the drop-shipped transaction -- even though neither the purchaser nor, in some cases, the seller is registered in New York.

What this means for you

Out-of-state manufacturers, printers, and drop-shippers

If your out-of-state customer asks you to ship finished goods directly to its own customer in New York, you can still treat the sale as an exempt resale as long as your customer gives you a properly completed Form ST-120 -- your customer does not need to be registered in New York to issue one, as long as it's registered elsewhere (or exempt from registration) and isn't independently required to register in New York.

Out-of-state resellers and distributors

You can issue Form ST-120 to your own out-of-state suppliers for goods they drop-ship into New York on your behalf, without first registering as a New York vendor -- as long as you meet the "qualified out-of-state purchaser" criteria (not required to register in New York, and registered elsewhere or exempt from registration where you're located).

Accountants and tax professionals

Confirm the certificate is accepted within 90 days of the sale (the safe-harbor window under Tax Law § 1132(c)) and that it shows the purchaser's out-of-state registration number or a statement that its home jurisdiction doesn't require registration. Note this policy also phased out the older Form ST-128, Out-of-State Resale Permit, in favor of the revised Form ST-120.

Common questions

Q: Does an out-of-state purchaser need to register with New York before it can issue a resale certificate for goods drop-shipped there?
A: No, as long as it isn't otherwise required to register in New York (e.g., no place of business, employees, or property there) and it's registered to collect tax elsewhere, or is located somewhere that doesn't require registration.

Q: What protects the seller from liability if it accepts a certificate that turns out to be invalid?
A: Accepting a properly completed exemption certificate in good faith within 90 days of the sale protects the seller from sales/use tax liability under Tax Law § 1132(c), even without independently verifying the purchaser's status.

Q: Is Form ST-128 still usable for out-of-state resale purchases?
A: The Department discontinued issuing new ST-128 permits once Form ST-120 was revised to cover this situation, though existing ST-128 permits remained valid as exemption documents until they expired.

Q: Can another business rely on this ruling?
A: No. It binds the Department only as to this petitioner's facts, though it applies the Department's own generally published policy memorandum, TSB-M-98(3)S.

Citations and references

Statutes, regulations, and Department guidance:

• Tax Law § 1101(b)(4)(i) (definition of "retail sale"; resale exclusion)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1132(c) and 20 NYCRR § 532.4 (seller protection for accepting a properly completed exemption certificate)
• TSB-M-98(3)S, June 5, 1998 (nonregistered out-of-state purchaser's use of Resale Certificate Form ST-120)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2000.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a00_20s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(20)S
Sales Tax
April 25, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S000201A

On February 1, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Kahn, Hoffman, Nonenmacher & Hochman, LLP, 10 Esquire Road, New
City, NY 10956.
The issue raised by Petitioner, Kahn, Hoffman, Nonenmacher & Hochman, LLP, is whether
an out-of-state seller may accept a Resale Certificate from an out-of-state purchaser where
merchandise is shipped directly to the purchaser’s customer in New York.
Petitioner submits the following facts as the basis for this Advisory Opinion.
The seller is a fully integrated printing facility located in New Jersey. The integrated
operations begin with receiving text, artwork, and instructions from a purchaser. Through various
processes, the seller produces a finished product (i.e., book, poster, advertising material, etc.)
packaged and ready for shipment. The purchaser in this case is located outside of New Jersey and
New York, and is neither registered with the New York State Tax Department as a sales tax vendor
nor required to be registered. The finished product is shipped directly by the seller to the purchaser’s
customer who is located in New York. The seller is a business registered under the New York/New
Jersey Reciprocal Tax Agreement, and files a combined New York/New Jersey sales tax return
pursuant to such Agreement.
Applicable Law and Authority
Section 1101(b) of the Tax Law provides, in part:
When used in this article for the purposes of the taxes imposed by
subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section eleven
hundred ten, the following terms shall mean:
(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such or as a physical component part of tangible
personal property. . . .(emphasis added)
Section 1105(a) of the Tax Law imposes a sales tax upon "[t]he receipts from every retail sale
of tangible personal property, except as otherwise provided in this article."

-2­
TSB-A-00(20)S
Sales Tax
April 25, 2000

Technical Services Bureau Memorandum TSB-M-98(3)S, June 5, 1998, entitled
Nonregistered Out-of-State Purchaser’s Use of Resale Certificate Form ST-120 provides, in part:
The New York State Tax Department has changed its policy regarding the
use of sales tax resale certificate, Form ST-120, by out-of-state vendors not registered
in New York State. Prior to this change in policy, Form ST-120 could only be used
by vendors registered in New York State.
Effective immediately, any qualified out-of-state purchaser (see definition
below) can use Form ST-120, Resale Certificate (print date 5/98) to make tax­
exempt purchases for resale when:
•

the vendor will drop-ship the item(s) purchased for resale to the
out-of-state purchaser’s customer in New York State,

•

the vendor will drop-ship the item(s) purchased for resale to the
out-of-state purchaser’s unaffiliated fulfillment service provider in
New York State, or

•

the out-of-state purchaser takes delivery of the items in New York for resale
from a business located outside New York State.

The Department has revised Form ST-120 (print date 5/98) to reflect this new
policy. There is no change in the use of the certificate by registered vendors; and
registered vendors may continue to accept and issue previous versions of Form ST­
120 until they have acquired the latest edition (print date 5/98).
Users of Form ST-128, Out-of State Resale Permit
Please note that along with this change in policy, the Department is also
discontinuing its out-of-state resale permit program. Form ST-120, Resale
Certificate, is replacing Form ST-128, Out-of-State Resale Permit. Holders of
Form ST-128 are no longer required to use their permit or to apply for a replacement
when the current permit expires. Although the Form ST-120 is for immediate use,
we will continue to recognize Form ST-128 as a legitimate exemption document until
the expiration date of the current permit.
A qualified out-of-state purchaser is one who:

-3­
TSB-A-00(20)S
Sales Tax
April 25, 2000

•

is not registered and is not required to be registered as a sales tax vendor
with the New York State Tax Department, and

•

is registered with another state, the District of Columbia, a province of
Canada, or other country, or has its only location in a state, province or
country that does not require registration; and

•

is purchasing items for resale that will be either (1) delivered by the vendor
to the purchaser’s customer or unaffiliated fulfillment service provider
located in New York State, or (2) delivered to the purchaser in New York
State, but resold from a business located outside the state.

If, among other things, a purchaser has any place of business or salespeople
in New York State, or owns or leases tangible personal property in New York State,
that purchaser is required to be registered in New York State. If you need help
determining if you are required to register because you engage in some other activity
in the State, contact the Department (See the “Need Help Section” of Form ST-120,
Resale Certificate). However, a purchaser who is not otherwise required to be
registered in New York may purchase fulfillment services from an unaffiliated New
York fulfillment service provider and have its tangible personal property located on
the premises of the provider without being required to be registered in New York.
The term drop-shipment as used in this memorandum means a shipment that
occurs when a purchaser purchases merchandise from a vendor who delivers the
merchandise to the purchaser’s customer or unaffiliated fulfillment service provider.
Qualified out-of-state purchasers may issue Form ST-120 either as a single­
use certificate or as a blanket certificate. Certificates issued as blanket certificates
will cover the first and any subsequent purchases of the same general type of
property or service purchased for resale. (emphasis added)
Opinion
In a drop shipment situation, a purchaser purchases merchandise from a vendor who delivers
the merchandise to the purchaser’s customer. If the vendor is presented with a properly completed
New York State sales tax exemption document, such as a Resale Certificate, Form ST-120, the
vendor does not have to collect sales or use tax. An out-of-state purchaser does not have to be
registered with the New York State Tax Department as a sales tax vendor in order to use a Resale
Certificate to make purchases for resale in a drop shipment transaction. See TSB-M-98(3), supra.
The out-of-state purchaser should indicate on the Resale Certificate its registration number issued

-4­
TSB-A-00(20)S
Sales Tax
April 25, 2000

by the state in which it is registered to collect tax, or indicate that it is located in a state that does not
require registration.
Accordingly, if the purchaser is registered with the New York State Tax Department and
holds a current, valid Certificate of Authority; or if the purchaser is neither registered with New York
nor required to be registered with New York, as indicated in the facts of this Advisory Opinion, and
is registered with another state or is located in a state that does not require registration, the purchaser
may present the seller with a properly completed Resale Certificate, Form ST-120, for the product
being drop shipped into New York. Upon acceptance of a properly completed Resale Certificate
within ninety days of the sale, the seller is protected from liability for sales or use tax. See Section
1132(c) of the Tax Law and Section 532.4 of the Sales and Use Tax Regulations.

DATED: April 25, 2000

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.