Are free videotape catalogs (with promotional labels attached) and their plastic cases exempt from New York sales tax as 'printed promotional materials' when mailed free of charge to prospective customers within New York?

Plain-English summary

AdvantEdge Television Advertising leases previously produced television commercials to businesses across many industries — for example, medical-services commercials that a hospital might license. To market its library, AdvantEdge mails free videotape catalogs of relevant commercials to prospective customers (like a hospital director), hoping they'll watch and then call to lease a commercial. The catalogs carry printed labels with AdvantEdge's name and phone number, and are housed in plastic cases that either have advertising material adhered directly to them or inserted into an attached plastic sleeve, plus a designated space for a mailing label. There's no charge to the recipient for the catalog.

New York exempts "promotional materials" — a broadly defined category covering advertising literature and related tangible property — from sales/use tax when mailed free of charge from a New York point to customers or prospective customers located outside New York, for use outside the state (§ 1115(n)(1)). The videotape catalogs and their labeled cases squarely meet that "promotional materials" definition, so the portion AdvantEdge mails to out-of-state prospects is exempt, as are related mailing-list purchases/services for those out-of-state mailings — provided AdvantEdge gives its vendor a timely, properly completed Form ST-121.2 (Certificate of Exemption for Purchases of Promotional Materials).

But there's a second, broader exemption (added effective March 1, 1997) that also reaches promotional materials mailed free of charge to prospective customers within New York — however, that broader exemption is limited to "printed promotional materials" or promotional materials that have had actual printing/imprinting services performed directly on them. The Department held that videotapes and their plastic cases simply aren't "printed" in the sense the exemption requires, even though they carry printed labels or inserts — the exemption covers items printed in the traditional sense, like brochures, annual reports, and envelopes, not videotape products with printed materials attached. So the in-state portion of AdvantEdge's mailing doesn't get this broader break: catalogs and cases delivered to prospective customers within New York are fully subject to state and local sales/use tax, calculated on AdvantEdge's total cost (production plus other expenses) at the rate where delivery occurs.

What this means for you

Companies distributing free promotional items by mail

The "promotional materials" exemption for mailings to out-of-state prospects is broad and covers almost any advertising-related item, not just paper. But the newer exemption covering in-state mailings is much narrower — it only reaches genuinely "printed" materials, so video, audio, or other non-print promotional items stay taxable when mailed to prospective customers within New York, even if a paper label or insert is attached.

Advertising and marketing businesses with nationwide mailing campaigns

Track your recipient list by in-state vs. out-of-state destination and by item type (printed vs. non-printed promotional item) — the tax outcome can differ dramatically depending on both factors, and you'll need Form ST-121.2 on file to support any exempt claim.

Accountants and tax professionals

This opinion is a useful, concrete example of where the line falls between the older "promotional materials" exemption (broad category, out-of-state destination only) and the newer "printed promotional materials" exemption (narrower category limited to traditionally printed items, but reaching in-state destinations too) — the two exemptions have different scope requirements that must both be checked separately.

Common questions

Q: Is any item that "promotes" a business automatically exempt when mailed for free?
A: Only the out-of-state-mailing exemption is that broad — items mailed free to prospective customers outside New York for use outside the state are exempt as "promotional materials" regardless of format. But the exemption covering in-state mailings requires the item to actually be "printed" in the traditional sense.

Q: Do printed labels attached to a videotape case make the whole item "printed promotional material"?
A: No — the Department held that a videotape and its case aren't transformed into "printed promotional materials" just because printed labels or inserts are attached to them; the underlying product itself has to be printed matter.

Q: What documentation does a company need to claim the promotional-materials exemption?
A: A properly completed Form ST-121.2 (Certificate of Exemption for Purchases of Promotional Materials) given to the vendor within 90 days of delivery.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(7) (use; distribution of promotional materials); § 1101(b)(12) (promotional materials definition)
• Tax Law § 1105(a) (retail sales tax); § 1105(c)(2) (printing/imprinting services)
• Tax Law § 1110(a) (compensating use tax)
• Tax Law § 1115(n)(1), (2), (4), (5), (7), (8) (promotional materials exemption and carve-outs)
• TSB-M-97(6)S (Expanded Sales and Compensating Use Tax Exemption for Promotional Materials, Aug. 20, 1997)
• TSB-M-92(4)S (The Sales and Use Tax and Promotional Materials, July 7, 1992)
• TSB-M-01(4)S (Summary of Recently Enacted Sales and Use Tax Legislation, Feb. 8, 2001)

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_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(1)S
Sales Tax
January 23, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S011219B

On December 19, 2001, the Department of Taxation and Finance received a Petition for
Advisory Opinion from AdvantEdge Television Advertising, Inc., 50 Main Street - 4th Floor, White
Plains, NY 10606. Petitioner, AdvantEdge Television Advertising, Inc., provided additional
information pertaining to the Petition on January 17, 2002.
The issues raised by Petitioner are:
(1) Whether its purchases of videotape catalogs that have printed promotional labels
permanently affixed to them and are mailed to its prospective customers qualify for exemption from
sales and compensating use tax as printed promotional materials under Section 1115(n)(4) of the Tax
Law.
(2) Whether its purchases of plastic videotape cases that have printed promotional materials
permanently affixed to them and are used to house and mail the videotape catalogs likewise qualify
for exemption from sales and compensating use tax.
(3) Whether its purchases of plastic videotape cases that have printed promotional materials
inserted into plastic sleeves on the cases are exempt from tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion. As part of
its Petition, Petitioner submitted a sample videotape catalog for review.
Petitioner sells television commercials. The commercials were previously made and
Petitioner has obtained the rights to lease these commercials to other businesses. Petitioner
maintains a large inventory of commercials for many different types of industries. For example,
Petitioner has approximately 200 commercials that promote different types of medical services that
could be offered by hospitals, such as specialized maternity services.
Petitioner markets its library of commercials by sending out free videotape catalogs of the
commercials to the different businesses that might have a need for these commercials. For example,
Petitioner might send its videotape catalog of hospital commercials to the director of a hospital with
the hope that the director would play the videotape and then call Petitioner and lease one of its
commercials. Petitioner has hundreds of commercials geared toward dozens of different industries.
The videotape catalogs purchased by Petitioner have printed labels with Petitioner’s name
and phone number on them. The videotape catalogs are housed in plastic cases. The plastic cases
have printed material, either adhered to the cases or inserted into plastic sleeves attached to them,

-2­
TSB-A-03(1)S
Sales Tax
January 23, 2003

which is comprised of Petitioner’s advertising messages, postage, and a designated space for a
mailing label. The plastic cases containing the videotape catalogs are sealed in clear plastic
shrink-wrapping when Petitioner receives them. All Petitioner needs to do is attach a mailing label
in the designated space provided. Petitioner uses various mass mailing techniques to identify to
whom the videotape catalogs should be sent, and mails them to its prospective customers with the
hope of generating the lease of a television commercial.
There is no charge to the person who receives the videotape catalog.
Applicable 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:
*

*

*

(7) Use. The exercise of any right or power over tangible personal property
or over any of the services which are subject to tax under section eleven hundred ten
of this article or pursuant to the authority of article twenty-nine of this chapter, by
the purchaser thereof, and includes, but is not limited to, the receiving, storage or any
keeping or retention for any length of time, withdrawal from storage, any installation,
any affixation to real or personal property, or any consumption of such property or
of any such service subject to tax under such section eleven hundred ten or pursuant
to the authority of such article twenty-nine. Without limiting the foregoing, use also
shall include the distribution of only tangible personal property, such as promotional
materials, or of any such service subject to tax under such section eleven hundred ten
or pursuant to the authority of such article twenty-nine.
*

*

*

(12) Promotional materials. Any advertising literature, other related tangible
personal property (whether or not personalized by the recipient’s name or other
information uniquely related to such person) and envelopes used exclusively to
deliver the same. Such other related tangible personal property includes, but is not
limited to, free gifts, complimentary maps or other items given to travel club
members, applications, order forms and return envelopes with respect to such
advertising literature, annual reports, prospectuses, promotional displays and
Cheshire labels but does not include invoices, statements and the like. Promotional
materials shall also include paper or ink furnished to a printer for use in providing

-3­
TSB-A-03(1)S
Sales Tax
January 23, 2003

the services of producing, printing or imprinting promotional materials or in
producing, printing or imprinting promotional materials, where such paper and ink
become a physical component part of the promotional materials and such printer sells
such services or such promotional materials to the person who furnished the paper
and ink to such printer.
Section 1105(a) of the Tax Law imposes a tax on “[t]he receipts from every retail sale of
tangible personal property, except as otherwise provided in this article.”
Section 1105(c)of the Tax Law imposes sales tax, in part, upon:
The receipts from every sale, except for resale, of the following services:
*

*

*

(2) . . . printing or imprinting tangible personal property, performed for a
person who directly or indirectly furnishes the tangible personal property, not
purchased by him for resale, upon which services are performed.
Section 1110(a) of the Tax Law provides, in part:
Except to the extent that property or services have already been or will be
subject to the sales tax under this article, there is hereby imposed on every person a
use tax for the use within this state . . . except as otherwise exempted under this
article, (A) of any tangible personal property purchased at retail. . . .
Section 1115(n)of the Tax Law provides, in part:
(1) Except as otherwise provided in this subdivision, promotional materials
mailed, shipped or otherwise distributed from a point within the state, by or on behalf
of vendors or other persons to their customers or prospective customers located
outside this state for use outside this state shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating
use tax imposed under section eleven hundred ten of this article.
(2) Services otherwise taxable under paragraph one or two of subdivision (c)
of section eleven hundred five of this article relating to mailing lists or activities
directly in conjunction with mailing lists shall be exempt from tax under this article
if such services are performed on or directly in conjunction with promotional
materials exempt under paragraph one or four of this subdivision.
*

*

*

-4­
TSB-A-03(1)S
Sales Tax
January 23, 2003

(4) Notwithstanding any contrary provisions of paragraph one of this
subdivision, promotional materials which are printed materials and promotional
materials upon which services described in paragraph two of subdivision (c) of
section eleven hundred five have been directly performed shall be exempt from tax
under this article where the purchaser of such promotional materials mails or ships
such promotional materials, or causes such promotional materials to be mailed or
shipped, to its customers or prospective customers, without charge to such customers
or prospective customers, by means of a common carrier, United States postal
service or like delivery service. (Emphasis added)
(5) Services otherwise taxable under paragraph two of subdivision (c) of
section eleven hundred five performed on promotional materials exempt under
paragraph four of this subdivision shall be exempt from tax under this article.
*

*

*

(7) Mechanicals, layouts, artwork, photographs, color separations and like
property shall be exempt from tax under this article where such property is
purchased, manufactured, processed or assembled by a person who furnishes such
property to a printer and the printer uses such property directly and predominantly
in the production of promotional materials exempt under paragraph four of this
subdivision, or in performing services exempt under paragraph five of this
subdivision, for sale by such printer to the person who furnished such property to the
printer.
(8) Nothing in this subdivision shall be construed to exempt tangible personal
property (i) purchased by a person (other than exempt promotional materials
described in paragraph four of this subdivision) or (ii) manufactured, processed or
assembled by the manufacturer, processor or assembler, who furnishes such property
to the vendor of promotional materials exempt under paragraph one or four of this
subdivision to be included as free gifts with such exempt promotional materials to
be mailed or shipped to such purchaser’s or such manufacturer’s, processor’s or
assembler’s customers or prospective customers or who otherwise uses such property
in this state, for example, by giving or donating the property as free gifts to another
person, unless such tangible personal property is mailed, shipped or otherwise
distributed from a point within this state to such customers or prospective customers
located outside this state for use outside this state.
Technical Services Bureau Memorandum entitled Expanded Sales and
Compensating Use Tax Exemption for Promotional Materials, August 20, 1997,
TSB-M-97(6)S provides, in part:

-5­
TSB-A-03(1)S
Sales Tax
January 23, 2003

Promotional Materials Exempt Under Section 1115(n)(4) of the Tax Law
Printed Promotional Materials
Effective March 1, 1997, printed promotional materials mailed or shipped
to destinations in the state are exempt from tax when all of the conditions listed
below are met.
•

The printed promotional materials are ultimately mailed or shipped
to customers or prospective customers of the purchaser of the printed
promotional materials.

•

The printed promotional materials are mailed or shipped by the
purchaser of the materials using a common carrier, the U.S. Postal
Service or a like delivery service. (This requirement is also met if the
mailing or shipping is arranged by a third party [such as a
printer/mailer] on behalf of the purchaser of the promotional
materials.)

•

There is no charge to the purchaser’s customer or prospective
customer (ultimate recipient) for the promotional materials, or for
mailing or shipping them.

•

The purchaser of the promotional materials gives a properly
completed Form ST-121.2, Certificate of Exemption for Purchases
of Promotional Materials, to the seller of the promotional materials.
*

*

*

Certain Promotional Materials Continue to be Taxable or Exempt
Without Regard to the Above Provisions, Under Section 1115(n)(7)[renumbered
paragraph 8 by Chapter 220, Laws of 2000] of the Tax Law
Section 1115(n)(7) of the Tax Law provides that the exemptions in section
1115(n)(4), (5), and (6) described above do not apply to tangible personal property
where the purchaser of the property furnishes it to a promotional materials vendor
to be included as free gifts with exempt promotional materials which are to be mailed
or shipped to the purchaser’s customers or prospective customers. However, if these
free gifts furnished by the purchaser to the exempt promotional materials vendor are
themselves printed promotional materials or promotional materials upon which
section 1105(c)(2) services have been performed, then they would be exempt if they

-6­
TSB-A-03(1)S
Sales Tax
January 23, 2003

are mailed or shipped with the other exempt promotional materials purchased from
the vendor, as described in section 1115(n)(4).
Section 1115(n)(7) of the Tax Law also provides that the section 1115(n)(4),
(5), and (6) exemptions do not apply to tangible personal property which is
manufactured, processed, or assembled by the manufacturer, processor, or assembler
where the manufacturer, processor, or assembler furnishes the property to a vendor
of exempt promotional materials to be included as free gifts (such as a
manufacturer’s product sample) with other exempt promotional materials which are
to be mailed or shipped to the manufacturer’s, processor’s, or assembler’s customers
or prospective customers. Likewise, if the manufacturer, processor, or assembler
otherwise uses the property in this state, such as by giving or donating it as free gifts
to someone, such use would not be exempt from tax.
*

*

Promotional Materials
Mailing Lists (Purchase or Rental)
– List received in NY or outside NY

*

*

*
Before
3/1/97
T - based on
percentage
of NY
mailings

As of
3/1/97
E7

*

7. Exempt based on percentage of promotional materials that are mailed or
   shipped by means of a common carrier, the U.S. Postal Service or like delivery
   service.
   Technical Services Bureau Memorandum entitled The Sales and Use Tax and Promotional
   Materials, July 7, 1992, TSB-M-92(4)S provides, in part:
   *

*

*

II. . . .subdivision (n) was added to section 1115 of the Tax Law to provide
that promotional materials mailed, shipped or otherwise distributed from a point
within this state, by or on behalf of vendors or other persons, to their customers or
prospective customers located outside this state, for use outside this state, are exempt
from sales and compensating use taxes. This new subdivision also provides that
certain services relating to mailing lists or to activities directly in conjunction with
mailing lists are exempt from such taxes when the services are performed on or
directly in conjunction with exempt promotional materials.

-7­
TSB-A-03(1)S
Sales Tax
January 23, 2003

Before the addition of this exemption . . . [s]ervices performed on mailing
lists in this state were taxable without any right to refund. Accordingly, this new
exemption with respect to mailing list services represents a major change in the
taxability of such services in that, among other things, the exemption can be claimed
in the first instance, rather than through a refund claim.
*

*

*

Services performed on mailing lists used to distribute promotional materials
are subject to the sales or use tax in the same proportion that New York State
addresses contained in the mailing list bear to the total number of addresses
contained in such list.
Opinion
Petitioner purchases promotional videotapes of television commercials it desires to sell to
prospective customers. The videotapes display Petitioner’s company logo and phone number on
printed labels attached to them. Petitioner also displays its advertising messages on printed paper
attached (permanently or not) to the outside of the plastic videotape cases in which the tapes are held
and mailed to the prospective customers.
The videotape catalogs and their cases with advertising messages attached to them
(permanently or not) qualify as “promotional materials” as defined in Section 1101(b)(12) of the Tax
Law. Petitioner’s purchases of such promotional materials which are mailed, without charge, to its
prospective customers located outside New York State, for use outside the state, are exempt from
sales and compensating use tax. See Section 1115(n)(1) of the Tax Law. Likewise, that portion of
Petitioner’s purchases of mailing lists or services related to mailing lists which are for the videotape
catalogs and cases mailed to points outside New York State are exempt from sales and compensating
use tax. See Section 1115(n)(2) of the Tax Law. The above described purchases may be made
without payment of tax provided Petitioner furnishes its supplier with a properly completed Form
ST-121.2, Certificate of Exemption for Purchases of Promotional Materials, not later than 90 days
after delivery of the property or the rendition of the service. See TSB-M-97(6)S, supra.
Effective March 1, 1997, printed promotional materials and promotional materials upon
which services subject to tax under Section 1105(c)(2) of the Tax Law (e.g., printing and imprinting)
have been directly performed that are mailed to prospective customers within New York State (as
well as prospective customers outside New York State) by U.S. Postal Service or common carrier,
free of charge to the recipient, are exempt from sales and compensating use tax. See Section
1115(n)(4) of the Tax Law. The videotape catalogs and their plastic cases are not printed
promotional materials for purposes of this exemption. The exemption applies to items printed in the
traditional sense, such as printed annual reports, brochures, paper, and envelopes. See
TSB-M-97(6)S, supra. When the Tax Law was amended by Chapter 220 of the Laws of 2000 (and

-8­
TSB-A-03(1)S
Sales Tax
January 23, 2003

deemed effective retroactive to March 1, 1997) to expand the definition of promotional materials
and to clarify the scope of the exemption for promotional materials, the amendments only included
items furnished to or items used by a “printer” to produce promotional materials, such as paper and
ink furnished to a printer and used to produce printed promotional materials. See Technical Services
Division Memorandum, Summary of Recently Enacted Sales and Use Tax Legislation, February 8,
2001, TSB-M-01(4)S. While the videotape catalogs and their plastic cases do constitute promotional
materials, no service subject to tax under Section 1105(c)(2) of the Tax Law has been directly
performed on them as required by Section 1115(n)(4) of the Tax Law. Therefore, the exemption for
printed promotional materials does not apply to the videotape catalogs and plastic cases described
in this Opinion which have labels or printed material affixed to them or inserted into them.
Therefore, Petitioner’s purchases of the videotape catalogs of television commercials
embodied in tangible format, i.e., videotapes, and their plastic cases are subject to State and local
sales and compensating use taxes as purchases of tangible personal property when delivered by
Petitioner or its designee to customers or prospective customers located in New York State. The
amount subject to tax is the total charge to Petitioner, including the cost of producing the videotape
catalogs and other expenses. The applicable sales or compensating use tax rate is the rate in effect
in the locality (city or county) where Petitioner or Petitioner’s designee takes delivery of the
videotape catalog. However, as noted above, the portion of such videotapes and plastic cases
subsequently mailed and delivered out of New York State are eligible for exemption from tax upon
Petitioner providing the vendor with a properly completed Form ST-121.2, Certificate of Exemption
for Purchases of Promotional Materials, not later than 90 days after delivery of the property. See
TSB-M-97(6)S, supra.

DATED: January 23, 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.