Does a nonprofit educational organization have to collect sales tax on course manuals, CD-ROMs, and merchandise sold by mail, over the Internet, and by order-taking at traveling seminars, versus on-site sales at its occasional New York conventions?

Plain-English summary

The McKenzie Institute is a not-for-profit organization registered as exempt under § 1116(a)(4) that runs multi-day seminars around the country to train physical therapists and medical professionals in mechanical therapy. It sells course manuals, slides, handbooks, consumer brochures, and branded polo/denim shirts. At its regular traveling seminars (held periodically in New York and elsewhere), attendees can order merchandise, but nothing is physically displayed on-site — orders are shipped later from the Institute's Syracuse office. Educational CD-ROMs are also sold over the Internet. Separately, the Institute holds an annual convention at rotating worldwide locations, including U.S. cities only roughly once every three years, and does display merchandise on-site for sale there.

Sales by a qualifying exempt organization are generally tax-free, but the exemption is lost for retail sales made through a "shop or store" — defined by regulation as any place goods are sold from display with regularity, frequency, and continuity. The Department drew directly on two prior opinions to sort the Institute's channels: mail-order sales by an exempt organization aren't shop-or-store sales (National Wildlife Federation), while genuinely recurring on-site display sales at a fixed location or regular event are (Practising Law Institute, for its New York lecture programs and Conference Center).

Here, none of the Institute's regular seminars display merchandise, so taking orders there — even in New York — is functionally like mail order, telemarketing, or door-to-door sales, none of which trigger the shop-or-store carve-out for an exempt organization. Internet sales of the CD-ROM are treated the same way. Even the on-site display sales at the annual convention stay exempt, but for a different reason: because the convention lands in New York only rarely (about every third year), it lacks the "degree of continuity or regularity" needed to make it a shop or store, unlike the Practising Law Institute's regular New York-based programs.

What this means for you

Nonprofits selling merchandise at events and by mail

Whether you have to collect sales tax often turns on two separate questions: (1) is merchandise physically displayed on-site, and (2) if so, does that display happen with enough regularity in New York to be a "shop or store"? Mail order and Internet sales generally escape the shop-or-store carve-out entirely, regardless of frequency.

Organizations with rotating or infrequent New York events

An event that happens in New York only occasionally (here, roughly once every three years) can escape shop-or-store status even with genuine on-site merchandise display — contrast this with a nonprofit running the same kind of display sales at a fixed New York location on a regular schedule, which would be taxable (see the Practising Law Institute opinion cited here).

Accountants and tax professionals

Useful side-by-side citation pair: National Wildlife Federation (mail order never triggers shop-or-store) and Practising Law Institute (regular on-site display sales do) — this opinion adds the "infrequent rotating convention" wrinkle to that framework.

Common questions

Q: Does taking an order at a seminar count as a taxable "shop or store" sale if nothing is on display?
A: No — taking orders without displaying merchandise is treated like mail order or telemarketing, which doesn't trigger the shop-or-store carve-out for an exempt organization.

Q: Are Internet sales by a nonprofit treated differently from mail-order sales?
A: No — the opinion treats Internet sales (here, of an educational CD-ROM) the same way as mail-order sales for purposes of the exempt-organization sales tax rules.

Q: If an event is held in New York only once every few years, can on-site display sales there still be tax-exempt?
A: Yes, in this case — infrequent, rotating events lack the regularity and continuity the regulations require to make on-site sales into a taxable "shop or store," even though genuine display and selling occurs.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4) (retail sale definition)
• Tax Law § 1105(a) (retail sales tax)
• Tax Law § 1116(a)(4) (exemption for educational organizations); § 1116(b)(1) (shop-or-store carve-out)
• 20 NYCRR § 529.7(i) (shop-or-store definition)

Prior rulings referenced:

• National Wildlife Federation, TSB-A-86(11)S
• Practising Law Institute, TSB-A-99(17)S
• Junior Achievement of Western New York, Inc., TSB-A-84(13)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_14s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(14)S
Sales Tax
April 4, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S010221D

On February 21, 2001, the Department of Taxation and Finance received a Petition for
Advisory Opinion from The McKenzie Institute, Inc., 600 East Genesee Street, Suite 124, Syracuse,
NY 13202. Petitioner, The McKenzie Institute, Inc., provided additional information with respect
to the Petition on November 12, 2002.
The issue raised by Petitioner is whether it is required to collect sales tax on its sales of
course manuals, educational CD-ROMs, slides, handbooks, consumer brochures, and polo and
denim shirts.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a not-for-profit organization that sponsors seminars throughout the United States
to educate physical therapists, medical professionals and the public in the concepts, benefits and
principles of mechanical therapy and the treatment of mechanical disorders, and to promote research
of these concepts and treatments. Petitioner has been issued an Exempt Organization Certificate by
the Department of Taxation and Finance pursuant to Section 1116(a)(4) of the Tax Law.
Petitioner takes orders for the sale of course manuals, slides, handbooks, consumer
brochures, and polo and denim shirts at its seminars and through the mail. The seminars are held
periodically in various locations, both within and without New York State, for periods of three to
four days. The merchandise is not displayed at the seminars. Attendees may submit orders for
merchandise which will be filled and shipped from Petitioner’s main office in Syracuse, New York.
Educational CD-ROMs will also be sold via the Internet. Petitioner provides an “on-site” display
for sales of the merchandise at its annual conventions which are held at various locations throughout
the world, including different locations in the United States approximately every third year.
Applicable Law and Regulations
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:
*

*

*

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(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. . . .
Section 1105(a) of the Tax Law imposes tax upon:
The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
Section 1116 of the Tax Law provides, in part:
Exempt organizations. (a) Except as otherwise provided in this section, any
sale or amusement charge by or to any of the following or any use or occupancy by
any of the following shall not be subject to the sales and compensating use taxes
imposed under this article:
*

*

*

(4) Any corporation, association, trust, or community chest, fund, foundation,
or limited liability company, organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary or educational purposes, or to
foster national or international amateur sports competition . . . .
*

*

*

(b) Nothing in this section shall exempt:
(1) retail sales of tangible personal property by any shop or store operated by
an organization described in paragraph (4), paragraph (5) or paragraph (6) of
subdivision (a) of this section. . . .
Section 529.7(i) of the Sales and Use Tax Regulations provides, in part:
Sales by exempt organizations. (1) Except as provided in paragraphs (2)
through (4) of this subdivision, sales of tangible personal property and services by
exempt organizations are exempt from the sales and use tax.
(2) Retail sales of tangible personal property made by any shop or store
operated by an exempt organization described in section 1116(a)(4), (5) or (6) are
subject to the sales and use tax. A shop or store as used in this section includes any
place or establishment where goods are sold from display with a degree of regularity,
frequency and continuity as well as any place where sales are made through a

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temporary shop or store located on the same premises as persons required to collect
tax. Vending machines alone do not constitute a shop or store. However, where
vending machines are located in a defined area devoted to selling tangible personal
property, then sales from such vending machines constitute sales from a shop or
store.
Opinion
National Wildlife Federation, Adv Op St Tx Comm, March 26, 1986, TSB-A-86(11)S
concluded that an organization qualifying for exemption under Section 1116(a)(4) of the Tax Law
would not be required to collect sales tax on its mail order sales since such sales are not considered
sales by a shop or store.
Practising Law Institute, Adv Op St Tx Comm, April 7, 1999, TSB-A-99(17)S concluded
that the Institute was making sales at a shop or store within the meaning and intent of Section
1116(b)(1) of the Tax Law and Section 529.7(i) of the Sales and Use Tax Regulations when making
“on-site” sales of books and materials at lecture programs held in New York and at its Conference
Center. Therefore, the Institute was required to collect and remit sales tax on its “on-site” sales.
The Institute was not required to collect sales tax on its mail order sales since they were not through
a shop or store.
In this case, Petitioner is an exempt organization as described in Section 1116(a)(4) of the
Tax Law. Petitioner displays and sells course manuals, slides, handbooks, consumer brochures, and
polo and denim shirts on-site only at its annual convention held in various locations throughout the
United States and internationally. At all other seminars, held periodically in various locations in
New York and throughout the country, Petitioner will take orders for the merchandise but does not
display the merchandise on-site. In addition, Petitioner’s course manuals, slides, handbooks,
consumer brochures, and polo and denim shirts may be ordered by mail. An educational CD-ROM
is also sold via the Internet.
Petitioner will not be considered to be making sales by a shop or store within the meaning
and intent of Section 1116(b)(1) of the Tax Law and Section 529.7(i) of the Sales and Use Tax
Regulations when making sales at its annual conventions, were the convention held within
New York. The infrequent occasions when the annual convention might be held in New York
evidence no degree of continuity or regularity so as to make the sales occurring at the convention
sales by a shop or store. Taking orders for sales at any of its seminars held within New York, with
fulfillment therefor from its offices in Syracuse, New York, is similar to making door to door sales,
or mail order or telemarketing sales, none of which sales are subject to tax when performed by an
exempt organization. See Junior Achievement of Western New York, Inc., Adv Op St Tax Comm,
April 9, 1984, TSB-A-84(13)S; and National Wildlife Federation, supra. Petitioner, therefore, will
not be required to collect and remit sales tax on such sales of course manuals, slides, handbooks,

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consumer brochures, and polo and denim shirts in New York. Petitioner also will not be required
to collect and remit sales tax on its mail order sales. See National Wildlife Federation, supra, and
Practising Law Institute, supra. Moreover, Petitioner will not be required to collect sales tax on
sales of educational CD-ROMs via the Internet.

DATED: April 4, 2003

NOTE:

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

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