Does an accounting firm owe sales tax on the printing/purchase of its free bi-monthly client newsletter, which promotes the firm and its staff, when copies are mailed to clients versus handed out in the office?

Plain-English summary

Holtz Rubenstein & Co., a CPA firm based in Melville with a Manhattan satellite office, publishes a free bi-monthly newsletter ("Adviser") covering general accounting, tax, and business-management topics, mailed to clients and prospective clients. Each issue prominently features the firm's name, includes articles touting individual staff members by name (often ending with an invitation to contact that specific employee), and promotes the firm's international affiliate network. About 84% of printed copies are mailed via U.S. Postal Service; the remaining 16% are handed out to employees, left in the reception area, or given directly to a prospective client at the office. The firm asked whether purchasing/printing this newsletter qualifies for the sales-tax exemption for "promotional materials."

The Department said the newsletter does qualify as "promotional materials" under Tax Law § 1101(b)(12) — despite covering general-interest topics, it's designed to advertise the firm and its staff, which is what tips it from neutral content into advertising literature. But the exemption itself (§ 1115(n)) is conditioned on how the material reaches the recipient, not just what it says:

• Copies mailed to clients/prospects outside New York are exempt under § 1115(n)(1) (promotional materials distributed from within the state to out-of-state customers for use outside the state).
• Copies mailed to clients/prospects within New York via USPS are also exempt, because § 1115(n)(4) separately covers printed promotional materials mailed or shipped by common carrier, USPS, or similar delivery service to customers free of charge.
• But the roughly 16% of copies distributed to employees, left in the reception area, or handed directly to a visitor at the office don't meet either exemption's delivery requirement (they're not mailed or shipped by a qualifying carrier) — so that portion stays taxable.

The Department also noted a separate wrinkle: if the firm buys and stores newsletters in bulk in New York and later reships some out of state, it can claim a refund/credit under § 1119(a)(2) for the tax paid on those specific copies, even though they didn't originally qualify for the up-front exemption. And a vendor (printer) can rely in good faith on a properly completed Form ST-121.2 exemption certificate — but the firm needs to specify the correct exempt percentage on that certificate, since claiming too high a percentage creates a tax liability and claiming too low one leaves a refund on the table.

What this means for you

Businesses that produce marketing newsletters or client publications

The content test for "promotional materials" is fairly permissive — general-interest articles can still count as advertising literature if they're designed to promote your firm and staff. But the exemption only reaches copies actually mailed or shipped by a qualifying carrier; in-office handouts and internal distribution stay taxable, so track your distribution channels separately.

Firms buying print runs distributed through mixed channels

If you print one batch and distribute it multiple ways (mail, office handouts, employee copies), you'll need to apportion the exempt percentage on your exemption certificate to your printer/vendor — get this right, since an inflated exempt percentage creates your own tax exposure and an understated one forfeits a refund you're entitled to.

Accountants and tax professionals

This is a clean illustration of how New York's promotional-materials exemption (§ 1115(n)) turns on delivery method as much as content — useful for any client running a mailed marketing publication with some in-office distribution mixed in.

Common questions

Q: Does a client newsletter need to be pure advertising to qualify as "promotional materials"?
A: No — even a newsletter covering general educational or industry topics can qualify if it's designed to promote the firm and its staff, per the Department's reading of Tax Law § 1101(b)(12).

Q: Are all copies of a promotional newsletter exempt from sales tax?
A: Only the copies actually mailed or shipped via USPS, common carrier, or similar delivery service to customers/prospects free of charge. Copies handed out in person at the office, left in a lobby, or given to employees are not covered by the exemption.

Q: What if I buy newsletters in bulk and later ship some out of state?
A: You can apply for a refund or credit under Tax Law § 1119(a)(2) for the tax paid on those specific copies, even if the original purchase wasn't eligible for the up-front promotional-materials exemption.

Q: How do I document the exemption to my printer?
A: By timely furnishing a properly completed Form ST-121.2, Certificate of Exemption for Purchases of Promotional Materials, specifying the correct percentage of the purchase that qualifies for exemption.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(12) (promotional materials definition)
• Tax Law § 1105(a) (retail sales tax)
• Tax Law § 1115(n)(1), (3), (4) (promotional materials exemptions)
• Tax Law § 1119(a)(2) (refund/credit for bulk property later shipped out of state)
• Tax Law § 1132(c)(1) (exemption certificate acceptance)

Prior rulings referenced:

• Automobile Club of New York, Inc., TSB-A-98(28)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_32s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(32)S
Sales Tax
July 18, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S021115B

On November 15, 2002, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Holtz Rubenstein & Co., LLP, 125 Baylis Road, Suite 300, Melville,
New York, 11747-3823.
The issue raised by Petitioner, Holtz Rubenstein & Co., LLP, is whether its bimonthly
newsletter constitutes promotional material qualifying for exemption from sales or compensating
use tax under section 1115(n)(4) of the Tax Law.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a certified public accounting firm based in Melville, New York, with a satellite
office in Manhattan. Petitioner provides a wide variety of accounting, tax and business advisory
services to clients throughout the New York metropolitan area.
Petitioner writes a bi-monthly newsletter (hereinafter “Adviser”) which it distributes by U.S.
Mail to its clients and prospective clients in the New York metropolitan area. Petitioner submitted
three issues of the Adviser with its Petition. The Adviser is designed to promote Petitioner and to
present matters of general interest relating to accounting, taxation and business management, and
items pertaining to Petitioner, its services, and/or its partners and employees. In each issue of the
Adviser submitted with the Petition, a statement appears as follows: “This publication is designed
to present matters of general interest relating to accounting, taxation and business management. It
is not intended to constitute accounting or tax advice. Articles were written by the staff of Holtz
Rubenstein & Co. Please consult your HR&Co. adviser before taking any specific actions.” Each
issue of the Adviser submitted contains at least one article touting individual employees of the firm.
Many of the articles end with a statement to the effect that should a reader have questions or want
more details on the subject of the article, the reader should contact a specific employee (by name
and title) of Petitioner at that employee’s personal business telephone number or e-mail address.
The Adviser is mailed free-of-charge to Petitioner’s clients and prospective clients and is
used by Petitioner for marketing and sales promotion purposes. Generally, the articles contained
in the Adviser are written by the partners and staff of Petitioner. Every issue of the Adviser mentions
Petitioner’s affiliation with DFK International. DFK International is the worldwide association of
independent accounting and business advisory firms in which Petitioner is actively involved.
Through Petitioner’s affiliation with DFK International, it also provides services to clients
throughout the United States and the world. In every issue, the Adviser promotes a different
international DFK-affiliated Firm.

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TSB-A-03(32)S
Sales Tax
July 18, 2003
Petitioner contracts with a printer/mailer in Suffolk County, New York, for the printing
and distribution of the Adviser to its clients and prospective clients located within and without
New York State, and for delivering the remaining copies to Petitioner. Petitioner does not charge
the recipients for the Adviser. Approximately 84% of the printed copies of the Adviser are sent to
current or prospective clients via the United States postal service. The balance of about 16% is
distributed to employees, left in Petitioner’s reception area, or handed to prospective clients.
Applicable Law and Regulations
Section 1101 of the Tax Law provides, in part:
Definitions.
*

*

*

(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:
*

*

*

(12) Promotional materials. Any advertising literature, other related tangible
personal property (whether or not personalized by the recipients 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
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 of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby
imposed and there shall be paid a tax of four percent upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.

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TSB-A-03(32)S
Sales Tax
July 18, 2003
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.
*

*

*

(3) Receipts from the retail sale of promotional materials . . . shall be exempt
from tax under this article to the extent of the vendor's separately stated charge to the
purchaser of such materials or services for the vendor's cost to ship or deliver such
materials to the purchaser's customers or prospective customers by means of the
United States postal service, paid by the vendor to such postal service to ship or
deliver such materials, but only where the vendor separately states such charge to
ship or deliver (not exceeding the vendor's United States postal service costs) in a
written contract with the purchaser or on a written bill rendered to the purchaser.
(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.
Section 1119 of the Tax Law provides, in part:
Refunds or credits based on proof of certain uses. (a) Subject to the
conditions and limitations provided for herein, a refund or credit shall be allowed for
a tax paid pursuant to subdivision (a) of section eleven hundred five or section eleven
hundred ten . . .
(2) on the sale or use of tangible personal property purchased in bulk, or any
portion thereof, which is stored and not used by the purchaser or user within this
state if that property is subsequently reshipped by such purchaser or user to a point
outside this state for use outside this state. . . .

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TSB-A-03(32)S
Sales Tax
July 18, 2003

Opinion
Petitioner’s bi-monthly newsletter (Adviser), which it distributes free-of-charge to its clients
and prospective clients located within and without New York State, is designed to promote
Petitioner’s services and to present matters of general interest relating to accounting, taxation and
business management. It also has items pertaining to Petitioner, its services, and/or its partners and
employees. Approximately 84% of the printed copies of the Adviser are sent to current or
prospective clients via the United States postal service. The balance of about 16% is distributed to
employees, left in Petitioner’s reception area, or handed to prospective clients. The Adviser is used
by Petitioner for marketing and sales promotion purposes.
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” are exempt from sales and compensating use tax. See
section 1115(n)(1) of the Tax Law. In addition, printed promotional materials delivered within
New York State to customers or prospective customers of the person purchasing the materials will
not be subject to tax when they are delivered by common carrier, the United States postal service
or like delivery service, and the customer or prospective customer receives them free of any charge.
See section 1115(n)(4) of the Tax Law.
Each issue of the Adviser submitted contains articles promoting Petitioner’s individual staff
members and its affiliates. Many of the articles close with the recommendation that the reader
contact a specific member of Petitioner’s staff. Each issue contains a recommendation that
Petitioner be contacted before a reader takes any action that may be suggested in any of the articles.
Based on these factors and the fact that Petitioner’s name is prominently displayed on the title page,
the Adviser appears to be advertising literature intended to promote Petitioner’s services to its clients
or prospective clients and qualifies as promotional materials as defined under section 1101(b)(12)
of the Tax Law. Accordingly, the purchase by Petitioner of those copies of the Adviser that are
distributed to clients or prospective clients outside New York State is not subject to tax pursuant to
section 1115(n)(1) of the Tax Law. Moreover, because the Adviser constitutes printed promotional
material, the purchase by Petitioner of those copies of the Adviser that are distributed to current or
prospective clients within New York State via the United States postal service will be exempt from
State and local sales and use taxes under section 1115(n)(4) of the Tax Law. However, to the extent
that any such promotional materials are distributed to Petitioner’s employees or picked up by a
customer or prospective customer at Petitioner’s offices in New York State, Petitioner's purchase
of this portion of the promotional materials will be subject to tax, since they are not distributed,
mailed or shipped in accordance with section 1115(n)(4) of the Tax Law.
If Petitioner purchases and stores but does not otherwise use copies of the Adviser in
New York, Petitioner may apply for the credit or refund authorized in section 1119(a)(2) of the Tax
Law for the sales tax paid on those copies that are later shipped outside of the State for use outside
New York, notwithstanding that the purchase was not eligible for exemption under section 1115(n)
of the Tax Law.

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TSB-A-03(32)S
Sales Tax
July 18, 2003
A vendor's timely acceptance, in good faith, of a properly completed Form ST-121.2,
Certificate of Exemption for Purchases of Promotional Materials, relieves the vendor from the duty
to collect sales tax on its sale of promotional materials to Petitioner. Petitioner may make purchases
of promotional materials exempt from tax by giving the supplier a properly completed certificate
within 90 days of delivery of the promotional materials. See section 1132(c)(1) of the Tax Law.
Petitioner should indicate on the certificate the percentage of the total purchase that qualifies for
exemption from sales tax. To the extent that Petitioner indicates an exempt percentage on the
certificate higher or lower than is warranted, Petitioner would owe sales or use tax or be entitled to
a credit or refund of the tax, as the case may be. See Automobile Club of New York, Inc., Adv Op
Comm T & F, April 14, 1998 TSB-A-98(28)S.

DATED: July 18, 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.