I'm an out-of-state jewelry retailer that sells through satellite and cable TV home-shopping arrangements to New York viewers -- do those broadcast and airtime-purchase relationships give me nexus, requiring me to register and collect New York sales tax?

Plain-English summary

Gems TV USA Limited is a Delaware corporation that sells gemstone jewelry directly to customers through television shopping programs and the Internet. Petitioner has no locations or employees in New York State and does not itself or through an agent maintain a place of distribution, sales, or storage, or a warehouse there. All of its products are warehoused in Nevada and shipped to New York customers from outside the state via UPS and UPS Mail Innovations, and its shopping programs are broadcast from a studio located outside New York.

Petitioner reaches New York viewers two ways. First, it contracted with a satellite television provider ("STP") that carries Petitioner's programming on a dedicated home-shopping channel; viewers order through a toll-free number. That contract was negotiated at STP's location outside New York, STP's equipment is outside New York, STP doesn't maintain any office or storage space for Petitioner's products, and STP is not Petitioner's affiliate. Second, Petitioner contracted with a Florida corporation ("Procurer") to buy airtime and place Petitioner's programming on various cable networks; Petitioner reimburses Procurer's airtime cost plus a percentage finder's fee, and Procurer may let cable operators use Petitioner's marketing materials to promote the programming. Critically, neither STP, Procurer, nor the cable operators solicit orders or sell Petitioner's products themselves -- they only broadcast the programming. All orders come in through the Internet or toll-free numbers and are received and accepted at Petitioner's Nevada facility.

Petitioner asked whether these broadcast and airtime relationships force it to register for New York sales tax and collect tax on its jewelry sales to New York customers.

The Department explained that a state can only require an out-of-state seller to collect sales/use tax if the seller has "sufficient nexus" -- some physical presence satisfying the Commerce Clause, per National Geographic Society v California Board of Equalization and Quill Corp v North Dakota -- and that under New York's own Orvis decision, that physical presence "need not be substantial" but must be "demonstrably more than a 'slightest presence.'" Tax Law §1101(b)(8) treats a seller as a taxable "vendor" if, among other things, it maintains a place of business in New York, solicits business there through employees or representatives, regularly delivers property in the state other than by mail or common carrier, or (under a brand-new 2008 addition) is presumed to solicit business through a New York resident who is paid a commission to refer customers -- a so-called "click-through" presumption enacted earlier that year by Chapter 57 of the Laws of 2008.

Applying that framework, the Department held that simply advertising on satellite and cable television in New York does not by itself create nexus, and that airtime/advertising contracts like Petitioner's with STP, Procurer, and the cable operators likewise don't by themselves give an out-of-state seller the New York physical presence needed to require registration or tax collection -- so long as STP, Procurer, and the cable operators have no economic interest or stake in Petitioner's sales, and their relationships with Petitioner remain strictly arm's-length purchases of advertising and airtime. But the Department was careful not to go further: whether Petitioner actually has nexus with New York "depends on all the facts and circumstances," and it declared that conclusively resolving that question was beyond the scope of the opinion. Finally, the Department flagged that regardless of whether Petitioner itself has to collect the tax, the jewelry sold to Petitioner's New York customers is still subject to New York sales and compensating use tax, and those customers remain personally liable for the tax even if Petitioner never collects it from them.

What this means for you

Television and internet home-shopping retailers with no physical New York presence

Buying satellite or cable airtime, or having your programming carried on a channel operated by a satellite or cable provider, does not by itself create New York sales tax nexus -- as long as the broadcaster or airtime procurer is not soliciting or selling your products, is not your affiliate, and is dealing with you at arm's length purely to sell you airtime/advertising space. Keep those relationships structured that way (no shared economic stake in your sales, no order-taking on your behalf) if you want to preserve the "no nexus from broadcasting alone" position.

Businesses using an airtime procurer or ad-placement agent

Structuring the procurer's compensation as a straightforward cost-plus finder's fee (as Gems TV did with Procurer), rather than a cut of sales, supports treating the arrangement as an arm's-length advertising purchase rather than a sales-soliciting agency relationship that could itself create nexus.

Accountants and tax professionals advising remote sellers

This opinion pairs the traditional physical-presence nexus test (Quill, Orvis) with New York's then-brand-new 2008 click-through nexus presumption (Tax Law §1101(b)(8)(vi), TSB-M-08(3)S and TSB-M-08(3.1)S) -- useful background whenever a client's nexus footprint includes broadcast advertising, referral arrangements, or third-party airtime purchases and you need to know which relationships tip a seller into "vendor" status.

New York customers of out-of-state TV/internet retailers

Even where the seller has no obligation to collect New York sales tax, the purchase remains taxable -- customers owe compensating use tax on their own purchases and don't get a pass just because the out-of-state seller didn't charge tax at checkout.

Common questions

Q: Does buying cable or satellite airtime for a TV shopping channel, by itself, create New York sales tax nexus for an out-of-state seller?
A: No. The Department held that merely advertising on satellite and cable television in New York does not by itself create nexus, and that airtime/advertising contracts like Petitioner's don't by themselves supply the physical presence New York requires.

Q: What has to be true for that "no nexus" conclusion to hold?
A: The satellite provider, airtime procurer, and cable operators must have no economic interest or stake in the seller's sales, and their relationships with the seller must remain arm's-length transactions limited to selling airtime and advertising -- not soliciting or selling the seller's products themselves.

Q: Did the Department definitively rule that Gems TV has no New York nexus at all?
A: No. The Department expressly said that whether an out-of-state seller has nexus with New York depends on all the facts and circumstances of the case, and that conclusively determining Petitioner's nexus was beyond the scope of this Advisory Opinion.

Q: If Gems TV doesn't have to collect New York sales tax, do its New York customers owe anything?
A: Yes. The jewelry sold to New York customers remains subject to New York sales and compensating use tax under Tax Law §§1105(a) and 1110(a), and customers remain liable for that use tax even if Petitioner doesn't collect it from them.

Q: Does this ruling apply to my TV or internet shopping business?
A: Not automatically. This is an Advisory Opinion binding only on Gems TV USA Limited and only as to the facts it described, and the Department's holding presumes the broadcaster, airtime procurer, and cable operators have no stake in the seller's sales and don't solicit orders on the seller's behalf -- change those facts, and the nexus analysis could come out differently.

Citations and references

Statutes and regulations:

• Tax Law §1101(b)(8) (definition of "vendor")
• Tax Law §1101(b)(8)(v) (fulfillment-services exclusion from vendor definition)
• Tax Law §1101(b)(8)(vi) (click-through nexus presumption, added by Ch. 57, Laws of 2008)
• Tax Law §1110 (compensating use tax)
• Tax Law §1105(a) (sales tax on retail sales of tangible personal property)
• Sales and Use Tax Regulations §526.10 (vendor; additional connections satisfying nexus, including Example 6)

Guidance referenced:

• TSB-M-08(3)S, "New Presumption Applicable to Definition of Sales Tax Vendor," May 8, 2008
• TSB-M-08(3.1)S, "Additional Information on How Sellers May Rebut the New Presumption...," June 30, 2008

Cases referenced:

• National Geographic Society v California Board of Equalization, 430 US 561 (1977)
• Quill Corp v North Dakota, 504 US 298 (1992)
• Orvis Company, Inc v Tax Appeals Tribunal, 86 NY2d 165

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a08_36s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Taxpayer Guidance Division

TSB-A-08(36)S
Sales Tax
August 6, 2008

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S070430A

On April 30, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Gems TV USA Limited, 1190 Trademark Drive, Suite 107, Reno,
Nevada 89521.
The issue raised by Petitioner, Gems TV USA Limited, is whether Petitioner's
relationships with a satellite television provider, a television airtime procurer, and various cable
television operators will cause Petitioner to be required to register for sales tax purposes in
New York State and collect the New York State and local sales tax on its sales of tangible
personal property within the State.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner, a Delaware corporation, is a retailer of gemstone jewelry. The jewelry is sold
directly to customers via television and the Internet. Petitioner has no locations or employees in
New York State and does not itself or through an agent maintain or occupy a place of
distribution, sales, or storage, or a warehouse in the State. All of Petitioner's products are
warehoused in Nevada and are shipped from a location outside New York State to New York
customers via UPS and UPS-Mail Innovations. Petitioner's shopping programs are transmitted
from its studio located outside New York State. Petitioner reaches a television audience via the
following agreements:
•
Petitioner executed an agreement with a satellite television provider (“STP”) that
provides that STP will distribute Petitioner's programming via its satellite system.
Petitioner's products are thus available through a dedicated television home shopping
channel owned by STP. Viewers of this channel are able to place orders through the use
of a toll-free telephone number.
Petitioner negotiated the contract at STP’s primary location outside New York.
STP’s equipment is also located outside New York. STP does not maintain an office or
other storage place for Petitioner's products. STP is not an affiliate of Petitioner.
•
Petitioner executed an agreement with Procurer, a Florida corporation, to
purchase airtime and distribute Petitioner's programming on various cable television
networks. Procurer negotiates and purchases airtime for Petitioner's use on cable systems
and in markets specified by Petitioner. Petitioner then makes payment to Procurer equal
to Procurer’s cost for acquiring the airtime, plus a percentage finder’s fee. In reaching
agreements with cable operators, Procurer may use, or allow cable operators to use,

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Petitioner’s marketing and promotional materials in connection with the distribution,
marketing, promotion, or advertising of Petitioner's programming.
Neither STP, Procurer, nor the cable operators solicit orders for or sell Petitioner's
products. STP and the cable operators broadcast Petitioner’s programming. Orders are sent to
Petitioner through the Internet or through toll-free telephone numbers. The orders are received
and accepted at Petitioner's facility in Nevada.
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:
*

*

*

(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

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property or services in this state by means other than the United States mail or common
carrier;
(E) A person who regularly or systematically solicits business in this state by the
distribution, without regard to the location from which such distribution originated, of
catalogs, advertising flyers or letters, or by any other means of solicitation of business, to
persons in this state and by reason thereof makes sales to persons within the state of
tangible personal property, the use of which is taxed by this article, if such solicitation
satisfies the nexus requirement of the United States constitution;
(F) A person making sales of tangible personal property, the use of which is taxed
by this article, where such person retains an ownership interest in such property and
where such property is brought into this state by the person to whom such property is sold
and the person to whom such property is sold becomes or is a resident or uses such
property in any manner in carrying on in this state any employment, trade, business or
profession;
(G) Any other person making sales to persons within the state of tangible
personal property or services, the use of which is taxed by this article, who may be
authorized by the commissioner of taxation and finance to collect such tax by part IV of
this article; . . .
*

*

*

(v) Notwithstanding any other provision of law, the term vendor shall not include:
(A) a person who is not otherwise a vendor who purchases fulfillment
services carried on in New York by a person other than an affiliated person; or
(B) a person who is not otherwise a vendor who owns tangible personal
property located on the premises of an unaffiliated person performing fulfillment
services for such person.
For purposes of this subparagraph, persons are affiliated persons with respect to
each other where one of such persons has an ownership interest of more than five percent,
whether direct or indirect, in the other, or where an ownership interest of more than five
percent, whether direct or indirect, is held in each of such persons by another person or
by a group of other persons which are affiliated persons with respect to each other.
(vi) For purposes of subclause (I) of clause (C) of subparagraph (i) of this
paragraph, a person making sales of tangible personal property or services taxable under
this article ("seller") shall be presumed to be soliciting business through an independent
contractor or other representative if the seller enters into an agreement with a resident of

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this state under which the resident, for a commission or other consideration, directly or
indirectly refers potential customers, whether by a link on an internet website or
otherwise, to the seller, if the cumulative gross receipts from sales by the seller to
customers in the state who are referred to the seller by all residents with this type of an
agreement with the seller is in excess of ten thousand dollars during the preceding four
quarterly periods ending on the last day of February, May, August, and November. This
presumption may be rebutted by proof that the resident with whom the seller has an
agreement did not engage in any solicitation in the state on behalf of the seller that would
satisfy the nexus requirement of the United States constitution during the four quarterly
periods in question. Nothing in this subparagraph shall be construed to narrow the scope
of the terms independent contractor or other representative for purposes of subclause (I)
of clause (C) of subparagraph (i) of this paragraph.
Subparagraph (vi) of section 1101(b)(8) was recently added to the Tax Law by Chapter
57 of the Laws of 2008.
Section 1110 of the Tax Law provides, in part:
Imposition of compensating use tax. (a) 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 on and after June
first, nineteen hundred seventy-one except as otherwise exempted under this article, (A)
of any tangible personal property purchased at retail, . . .
Section 526.10 of the Sales and Use Tax Regulations provides, in part:
Vendor. (a) Persons included.
*

*

*

(4)(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:
(a) the operation of a [sic] retail stores in the State;

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(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;
(e) the maintenance of a post office box in the State for receiving
responses to such person's solicitations; or
(f) the maintenance of an office in the State, even if such office performs
no activities related to the sales solicited by such person.
Example 6: Company K is engaged in the mail-order retail sale of
computer hardware and software in New York State. Sales are solicited in
New York by means of direct mail advertising sent from the company's
Oregon headquarters. Company K has no property or employees in New
York State. The hardware and software are sent to New York customers
via common carrier. Customers of Company K who experience problems
using a product purchased may contact the company by phone in Oregon
for assistance. In certain instances, and at no charge to the customer,
Company K will send a computer expert employed by it in Oregon to
New York State and provide technical assistance at the customer's
premises. Company K is a vendor because of its having service
representatives in the State. The result would be the same if, alternatively,
Company K has an independent contractor or agent based in New York
State or elsewhere provide technical assistance at the customer's premises
on Company K's behalf.
Opinion
Petitioner is a retailer of gemstone jewelry. The jewelry is sold directly to customers via
television and the Internet. Petitioner states that it has no locations or employees in New York
State and does not itself or through an agent maintain a place of distribution, sales, or storage, or
a warehouse in the State. All of Petitioner's products are shipped from a location outside
New York State to New York customers.
A state can require an out-of-state seller to collect the state's sales or use tax only when
the seller has "sufficient nexus" with the taxing state, i.e., some physical presence as required by
the Commerce Clause of the United States Constitution. See National Geographic Society v
California Board of Equalization, 430 US 561 (1977); Quill Corp. v North Dakota, 504 US 298
(1992). In Orvis Company, Inc. v Tax Appeals Tribunal, 86 NY2d 165, 178, the court stated

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with respect to the requirements for nexus, “While a physical presence of the vendor is required,
it need not be substantial. Rather, it must be demonstrably more than a ‘slightest presence.’”
If an out-of-state seller maintains a place of business in New York State; solicits business
by employees, independent contractors, agents or other representatives in New York; regularly or
systematically delivers property or services in New York by means other than U.S. mail or
common carrier; has ownership interest in property in New York; maintains a post office box in
New York for receiving responses to such seller's solicitations; maintains an office in New York,
even if such office performs no activities related to the sales solicited by the seller; or engages in
any other activity which might be construed as providing a physical presence in New York, it is
considered to have nexus with New York. The seller in such case is, therefore, required to
register for sales tax purposes in New York and to undertake all of the obligations of persons
required to collect tax in New York including, but not limited to, collection of sales tax from its
customers in New York and filing periodic sales and use tax returns. In addition, an out-of-state
seller may be presumed to be a vendor required to be registered for sales tax purposes if it, or a
third party acting on the seller's behalf, enters into an agreement with a New York State resident
under which, for a commission or other consideration, the resident representative directly or
indirectly refers potential customers to the seller, whether by link on an Internet Web site or
otherwise. A resident representative would be indirectly referring potential customers to the
seller where, for example, the resident representative refers potential customers to its own Web
site, or to another party’s Web site which then directs the potential customer to the seller’s Web
site. However, an agreement to place an advertisement does not give rise to the presumption
described above. For this purpose, placing an advertisement does not include the placement of a
link on a Web site that, directly or indirectly, links to the Web site of a seller, where the
consideration for placing the link on the Web site is based on the volume of completed sales
generated by the link. See section 1101(b)(8) of the Tax Law, section 526.10(a)(4) of the Sales
and Use Tax Regulations, and Taxpayer Guidance Division memorandum entitled New
Presumption Applicable to Definition of Sales Tax Vendor, May 8, 2008, TSB-M-8(3)S.
If an out-of-state seller merely advertises on satellite and cable television stations in
New York State, this activity would not by itself create nexus with New York State.
Contractual relationships for the purchase of airtime or advertising of the kind described by
Petitioner with STP, Procurer, and the cable operators also do not appear by themselves to give
an out-of-state seller the physical presence in New York that would require it to register for sales
tax purposes or collect sales tax on its sales. This presumes that STP, Procurer, and the cable
operators have no economic interests or stake in Petitioner's sales and their relationships with
Petitioner are strictly related to the sale of advertising and airtime in arm’s length transactions.
(See Taxpayer Guidance Division memorandum entitled Additional Information on How Sellers
May Rebut the New Presumption Applicable to the Definition of Sales Tax Vendor as Described
in TSB-M-08(3)S, June 30, 2008, TSB-M-8(3.1)S.)

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A determination as to whether an out-of-state seller has nexus with New York, however,
depends on all the facts and circumstances of a case. It is beyond the scope of this Opinion to
conclusively determine whether Petitioner has nexus with New York.
It should be noted that the jewelry sold to Petitioner's customers in New York State is
subject to sales and compensating use tax. See sections 1105(a) and 1110(a) of the Tax Law.
The fact that Petitioner does not collect tax from its New York customers does not relieve those
customers of their liability for the tax.

DATED: August 6, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the
person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.