Does an out-of-state manufacturer that sells to New York customers, using only an independent sales representative who visits every few months, have to register as a New York sales tax vendor?

Plain-English summary

Motion Systems Corporation, a New Jersey manufacturer of linear actuators, sells its product only to other manufacturers, who either incorporate it into their own machinery for resale or buy a unit to test compatibility with their product before deciding whether to use it. Motion Systems has no retail outlets, doesn't distribute catalogs in New York, doesn't attend New York trade shows, and does almost all its customer contact by phone, fax, or written communication directly from its New Jersey office. It does, however, ship a limited amount of product to New York manufacturers and advertises in a trade publication that circulates in New York. Critically, it also pays an independent manufacturer's representative in New York to personally visit potential and existing New York customers roughly every four to six months to troubleshoot and explain the product — though much of what it pays that representative is really a referral commission on long-time customers.

New York's "vendor" definition reaches an out-of-state business that solicits New York business through employees, independent contractors, agents, or other representatives, as long as it has enough constitutional nexus with the state. The Department found that even this limited, infrequent use of an independent New York-based sales representative — a personal visit every four to six months — is enough solicitation activity to create nexus. That makes Motion Systems a "vendor" required to register with New York and collect and remit sales and use tax on its retail sales to New York customers.

That registration requirement doesn't mean every sale gets taxed, though. Sales where the New York customer is buying the actuator for resale — either as-is or as a component built into machinery the customer will later sell — can be made tax-free if Motion Systems accepts a properly completed resale certificate within 90 days of the sale. But a customer who buys an actuator purely to test it against their own product, before committing to actually use it, is making a taxable retail purchase rather than a purchase for resale — though the Department noted that property used directly and predominantly in developing new products or improving existing ones may separately qualify for New York's research-and-development exemption. Finally, if Motion Systems' total New York tax liability stays under $3,000 across its four most recent quarters, it may be eligible to file an annual return instead of quarterly ones.

What this means for you

Out-of-state manufacturers and sellers with any in-state sales presence

Don't assume that minimal, infrequent in-state activity is too small to create sales tax nexus. Even an independent representative making occasional personal visits — not a full-time employee, not a permanent office — was enough here. If you use any representative, agent, or independent contractor to solicit business in New York, you likely need to register as a vendor and collect tax on your retail sales there, regardless of how limited that presence is.

Manufacturers selling components for incorporation into other products

Sales genuinely made for resale — where your customer either resells your product as-is or builds it into something they'll sell — can stay tax-free with a proper resale certificate. But be careful with test/evaluation sales: a customer buying a sample purely to check compatibility, without yet committing to incorporate it, is making a taxable purchase, not a resale purchase, even though the customer may separately be able to claim the research-and-development exemption on that purchase.

Accountants and tax professionals

This is a useful, fairly aggressive nexus example: infrequent (four-to-six-month interval) personal visits by an independent (not even employee) representative sufficed. Also worth flagging for clients: the distinction between a resale-certificate-eligible purchase (intended for incorporation/resale) and a test-purchase (taxable retail sale, potentially R&D-exempt) turns on the buyer's intent and stage of decision-making at the time of purchase, which can be a fact-intensive line to draw.

Common questions

Q: How much in-state sales activity does it take to require an out-of-state seller to register as a New York vendor?
A: Not much. This ruling found that an independent representative making personal visits to New York customers roughly every four to six months was enough to create nexus, even without a permanent office, employees, or systematic advertising in the state.

Q: If my New York customer will resell or incorporate my product into something they sell, do I still have to charge tax?
A: No, as long as you accept a properly completed resale certificate within 90 days of the sale — that sale can be made tax-free.

Q: What about a customer who buys a unit just to test whether it's compatible with their own product?
A: That's a taxable retail sale, not a resale purchase, since the customer hasn't yet committed to incorporating the product into something for resale. It may, however, separately qualify for the research-and-development exemption.

Q: Can another out-of-state manufacturer rely on this ruling?
A: No. This advisory opinion binds the Department only for Motion Systems Corporation on the facts described. Other companies should evaluate their own specific in-state activities against the nexus standard.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4) (definition of "retail sale")
• Tax Law § 1101(b)(8) (definition of "vendor," incl. solicitation nexus)
• Tax Law § 1115(a)(10) (research and development exemption)
• Tax Law § 1131(1) (persons required to collect tax)
• Tax Law § 1132(c) (resale/exemption certificates)
• Tax Law § 1134(a)(1) (vendor registration requirement)
• 20 NYCRR § 526.6(c) (resale exclusion)
• 20 NYCRR § 526.10(a)(4) (solicitation nexus; sales representatives, independent contractors, and service representatives)
• 20 NYCRR § 533.3(d) (annual return filing for small vendors)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2001.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a01_8s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-01(8)S
Sales Tax
February 27, 2001

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S980901A

On September 1, 1998, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Motion Systems Corporation, 600 Industrial Way West, Eatontown, New
Jersey 07724.
The issue raised by Petitioner is whether a corporation located and operated solely in New
Jersey needs to register with New York State as a sales tax vendor.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a manufacturer of linear actuators, and is located and operates solely at its
facility in Eatontown, New Jersey. Petitioner’s product is not sold at retail outlets. The product is
sold and shipped to other manufacturers for incorporation into machinery or equipment which are
then sold by those manufacturers to the ultimate consumer. Petitioner also sells its actuator to
manufacturers who wish to test the product’s performance in connection with the product they are
manufacturing to determine whether the actuator is compatible with their product, before actually
installing the product into their machinery or equipment which will later be sold.
Petitioner does sell and ship, by common carrier, a limited amount of its product to
manufacturers located in New York. Contact between Petitioner and manufacturers occurs almost
exclusively by means of telephone, or electronic or written communication made directly from the
manufacturers to Petitioner’s office in New Jersey. Petitioner also sells and ships its product to
manufacturers in all states and approximately ten foreign countries. Petitioner does not distribute
catalogs or other advertising matter in New York, but does advertise in a trade publication circulated
in New York. Petitioner does not participate in trade shows in New York.
Petitioner utilizes an independent manufacturer representative located in New York to
personally appear at New York manufacturers’ offices to troubleshoot inquiries or explain
Petitioner’s product. The services consist of possibly a personal call on a potential or existing
customer every four to six months. A substantial portion of the money Petitioner pays to the
representative is for commissions for referrals of long-time customers. The vast majority of
customer contact and solicitation is done, however, through telephone or fax contact from
Petitioner’s New Jersey office.
Applicable Laws and Regulations
Section 1101(b) of the Tax Law provides, in part:

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Sales Tax
February 27, 2001
(b) 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 . . .
*

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*

(8) Vendor. (i) The term "vendor" includes:
(A) A person making sales of tangible personal property or services, the
receipts from which are taxed by this article;
(B) A person maintaining a place of business in the state and making sales,
whether at such place of business or elsewhere, to persons within the state of tangible
personal property or services, the use of which is taxed by this article;
(C) A person who solicits business either:
(I) by employees, independent contractors, agents or other representatives;
or
(II) by distribution of catalogs or other advertising matter, without regard to
whether such distribution is the result of regular or systematic solicitation, if such
person has some additional connection with the state which satisfies the nexus
requirement of the United States constitution;
and by reason thereof makes sales to persons within the state of tangible
personal property or services, the use of which is taxed by this article;
(D) A person who makes sales of tangible personal property or services, the
use of which is taxed by this article, and who regularly or systematically delivers
such property or services in this state by means other than the United States mail or
common carrier....
Section 1131(1) of the Tax Law provides, in part:
"Persons required to collect tax" or "person required to collect any tax
imposed by this article" shall include: every vendor of tangible personal property or
services; every recipient of amusement charges; and every operator of a hotel. . . .
Section 1134(a)(1) of the Tax Law provides, in part:

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TSB-A-01(8)S
Sales Tax
February 27, 2001
(i) Every person required to collect any tax imposed by this article ...
commencing business or opening a new place of business, (ii) every person
purchasing or selling tangible personal property for resale commencing business or
opening a new place of business ... shall file with the commissioner a certificate of
registration, in a form prescribed by the commissioner, at least twenty days prior to
commencing business or opening a new place of business ....
Section 526.6(c) of the New York State Sales and Use Tax Regulations provides:
Resale exclusion. (1) Where a person, in the course of his business
operations, purchases tangible personal property or services which he intends to sell,
either in the form in which purchased, or as a component part of other property or
services, the property or services which he has purchased will be considered as
purchased for resale, and therefore not subject to tax until he has transferred the
property to his customer.
Section 526.10(a)(4) of the New York State Sales and Use Tax Regulations provides, in part:
(i) A person who solicits business by the distribution of catalogs or other
advertising matter, without regard to whether such distribution is the result of regular
or systematic solicitation, if such person has some additional connection with the
State which satisfies the nexus requirement of the United States Constitution and by
reason thereof makes sales to persons within the State of tangible personal property
or services the use of which is subject to tax, is a vendor.
(ii) For purposes of subparagraph (i) of this paragraph, the additional
connection with the State a person may have in order to qualify as a vendor shall
include, but not be limited to:
*

*

*

(b) the presence of traveling sales representatives in the State;
(c) the presence of employees, independent contractors or agents in the State;
(d) the presence of service representatives in the State....
Section 533.3(d) of the Sales and Use Tax Regulations provides, in part:
Annual return. (1) Every person required to register with the Department of
Taxation and Finance (see section 533.1 of this Part and Parts 539 and 540 of this
Title) only because such person is purchasing or selling tangible personal property
for resale, and who is not required to collect any tax or pay any tax directly to the

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Sales Tax
February 27, 2001
Department of Taxation and Finance, must file a return annually in accordance with
the schedule provided in paragraph (4) of this subdivision.
(2) Any person required to file quarterly returns whose total tax due for the
four most recent quarterly periods for which data is available for such person within
the most recent six quarters for which data is available did not exceed $3,000, may
be notified by the department or may elect to file returns annually in lieu of quarterly.
*

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*

(4) An annual return is to be filed in accordance with the following schedule.
(i) Annual filers for years commencing on or after June 1, 1998, including
those persons who are not required to collect any tax or pay any tax directly to the
department, shall file their returns:
(a) For the short annual period of nine months beginning June 1, 1998, and
ending on February 28, 1999, on or before March 20, 1999.
(b) For annual periods beginning on or after March 1, 1999, which annual
periods shall begin on March 1st and end with the last day of February in the
subsequent year, on or before March 20th of each such subsequent year.
(ii) Quarterly filers who are notified by the department that they shall file
annually must file annual returns (unless they timely notify the department in
accordance with subparagraph [3][ii] of this subdivision that they wish to continue
filing quarterly returns) as follows:
(a) For the short annual period of nine months beginning June 1, 1998, and
ending on February 28, 1999, on or before March 20, 1999.
(b) For annual periods beginning on or after March 1, 1999, the annual period
shall begin on March 1st and end with the last day of February in the subsequent year,
with the annual return being due on or before March 20th of each such subsequent
year.
(c) Quarterly filers who become annual filers shall file their last quarterly
return for the quarterly period which ends immediately prior to the date on which the
annual period begins and in accordance with instructions provided in the notification
issued pursuant to paragraph (3) of this subdivision and in accordance with such
other applicable instructions. Annual returns must then be filed for subsequent
annual periods succeeding this last quarterly period.

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TSB-A-01(8)S
Sales Tax
February 27, 2001
(5) A properly completed annual return is to be prepared in accordance with
the instructions provided by the Department of Taxation and Finance. It must
include completed schedules, if required, and must show:
(i) the name, address and identification number of the vendor, recipient of
amusement charges, or operator of a hotel;
(ii) gross amount, to the nearest whole dollar, of sales of tangible personal
property and services, food and drink, amusement charges, and rents;
(iii) amount, to the nearest whole dollar, of taxable sales of tangible personal
property and services, food and drink, amusement charges and rents for each
jurisdiction, and totals of all jurisdictions;
(iv) amount, to the nearest whole dollar, of purchases subject to use tax, for
each jurisdiction, and totals of all jurisdictions;
(v) amount of sales and use taxes for each jurisdiction, and totals of all
jurisdictions;
(vi) credits claimed and prepayments, if any;
(vii) sales and use taxes due;
(viii) late filing charge, penalties and interest, if any, and total amount due;
(ix) the signature of the vendor, officer or employee of the vendor signing the
return and the individual's title;
(x) the signature and address of a preparer, if other than the vendor; and
(xi) the date prepared.
(6) If, at any time during the course of the annual periods described in
paragraph (4) of this subdivision, the total tax due from a person required to file
returns is in excess of $3,000, such person must commence filing a quarterly or
monthly return as required by section 1136 of the Tax Law and the preceding
provisions of this section. On the first quarterly return so required, such person must
report and pay any tax due for the period commencing with the beginning of the
abridged annual period. Failure to do so may result in penalty and interest being
charged from the date a quarterly or monthly return should have been filed.

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TSB-A-01(8)S
Sales Tax
February 27, 2001
Opinion
In this case, Petitioner manufactures linear actuators at its facility in Eatontown, New Jersey.
Petitioner’s product is not sold at retail outlets. The product is solely sold and shipped to other
manufacturers for incorporation into machinery or equipment which is then sold by those
manufacturers to the ultimate consumer. Petitioner utilizes an independent manufacturer
representative located in New York to personally appear at New York manufacturers’ offices to
troubleshoot inquiries or explain Petitioner’s product. The services consist of a personal call on a
potential or existing customer every four to six months.
Under Section 1101(b)(8)(i)(C)(I) of the New York State Tax Law and Section 526.10 of the
New York State Sales and Use Tax Regulations, since Petitioner, an out-of-state corporation, is
soliciting business in New York by means of an independent manufacturer’s representative,
Petitioner has nexus and is a vendor required to register under Section 1134 of the Tax Law.
Therefore, Petitioner will be required to collect and remit sales and use tax on retail sales of the
linear actuator to persons in New York. It should be noted, however, that where Petitioner’s
customers are purchasing the linear actuator for resale, as such, or as a physical component part of
machinery or equipment which will later be sold by the customer, the actuator may be purchased for
resale. Therefore, in such instances, the sales by Petitioner of the actuator will not be subject to sales
tax. See Section 1101(b)(4)(i) of the Tax Law and Section 526.6(c) of the Sales and Use Tax
Regulations. The purchase of an actuator for the purpose of testing its performance in connection
with the product the purchaser is manufacturing is not deemed to be a purchase for resale, but is
considered a retail sale. It is noted, though, that tangible personal property purchased for use or
consumption directly and predominantly in the development of new products or improvement of
existing products may qualify for the exemption under Section 1115(a)(10) of the Tax Law as
property used directly and predominantly in research and development. See Section 528.11 of the
Sales and Use Tax Regulations. Petitioner will not be required to collect sales and use tax where it
accepts in good faith a properly completed resale or exemption certificate within 90 days of the date
of sale. See Section 1132(c) of the Tax Law and Section 532.4 of the Sales and Use Tax
Regulations.
Presuming Petitioner’s total tax due from the retail sales of the linear actuator for the past
four most recent quarterly periods did not exceed $3,000, Petitioner may elect to file an annual
return under Section 533.3(d) of the Sales and Use Tax Regulations.

DATED: February 27, 2001

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist III
Technical Services Division

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