I supply merchandise to mall kiosk operators who are independent contractors, and their credit card sales get deposited into my account while they keep their own cash sales — who has to collect and remit the sales tax, and does it matter whether the customer paid cash or credit card?

Plain-English summary

The Gift Giant, Ltd., a distributor of gift and novelty products, maintains carts, kiosks, and inline stores in shopping malls, but doesn't run them itself. Instead, during the holiday season it licenses the carts/kiosks/stores to unrelated independent contractors ("lessee-vendors"), who buy merchandise from The Gift Giant and pay rent for the space. The Gift Giant never owns the goods once they're sold to a lessee-vendor. Under the licensing agreements, all credit card receipts from the lessee-vendors' retail sales get deposited directly into The Gift Giant's account (with the credit card slip listing the lessee-vendor as the seller); The Gift Giant deducts what it's owed (cost of goods, rent, fees) and remits the rest back to the lessee-vendor. Cash receipts, by contrast, are kept entirely by the lessee-vendor.

The Gift Giant asked who is responsible for collecting and remitting sales tax on the lessee-vendors' retail sales, whether that answer changes based on cash versus credit card payment, and how it should actually go about collecting, remitting, and reporting any tax for which it's responsible.

The Department held that The Gift Giant is a "co-vendor." New York's regulations define a co-vendor as anyone who supplies merchandise to an independent contractor that then sells that merchandise at retail — and a co-vendor must take on all the same responsibilities as an ordinary vendor: collecting tax from customers, filing returns, and remitting payment. Specifically, the supplier (here, The Gift Giant) must pre-collect sales and use tax from the lessee-vendor at the time it sells the merchandise to the lessee-vendor, calculated on the suggested retail price at the tax rate in effect where the lessee-vendor takes possession of the goods — not on the eventual retail price the lessee-vendor charges the mall shopper. Because the tax is pre-collected upstream, at the wholesale-to-lessee-vendor transfer, it makes no difference how the lessee-vendor's downstream retail customer ultimately pays — cash or credit card, the obligation and the amount owed are the same.

The Gift Giant must file quarterly on Form ST-100 (or switch to monthly filing if its taxable receipts hit $300,000 in a sales tax quarter) and must give each lessee-vendor a copy of its Certificate of Authority to display at the kiosk. The lessee-vendors, as co-vendors themselves, don't need to separately register as vendors if they sell only The Gift Giant's merchandise, but they're still jointly liable for the tax — meaning the Department can pursue a lessee-vendor directly if The Gift Giant fails to remit.

What this means for you

Suppliers who license carts, kiosks, or booths to independent operators

If you supply merchandise to independent contractors who run your carts or kiosks, you're likely a "co-vendor" under New York's regulations — meaning you must pre-collect sales tax on your sale of the merchandise to the operator (based on suggested retail price at the local rate), not just wait to see how the operator's retail sale shakes out. Get this wrong and you can be personally liable for uncollected tax.

Seasonal or independent kiosk/cart operators

Even though your supplier pre-collects tax and generally handles the paperwork, you remain jointly and severally liable for the sales tax on your own retail sales. You don't have to separately register as a vendor if you sell only your supplier's merchandise, but you must display your supplier's Certificate of Authority and pay the tax your supplier bills you.

Accountants and tax professionals

This is a straightforward application of the "co-vendor" regulations at Sales Tax Regulations §526.10(e) — worth flagging for any client running a licensing/consignment-style retail model (mall kiosks, pop-up shops, trade shows) where an independent contractor sells someone else's merchandise under an ongoing supply relationship.

Common questions

Q: Who collects sales tax when a kiosk operator sells my merchandise under a licensing deal?
A: If you're supplying the merchandise to an independent contractor who resells it, you're a "co-vendor" and must pre-collect the applicable sales/use tax from that operator when you sell to them, based on suggested retail price and the local tax rate where they take possession.

Q: Does it matter whether the final shopper pays cash or by credit card?
A: No. The tax obligation attaches when the supplier sells to the lessee-vendor, so the form of payment the shopper later uses makes no difference to who owes what.

Q: Do the kiosk operators need their own sales tax registration?
A: Not if they sell exclusively the co-vendor's merchandise and the co-vendor is properly registered and collecting tax — but the operators remain jointly responsible for the tax and must display the co-vendor's Certificate of Authority.

Q: Does this ruling apply to my kiosk or licensing arrangement?
A: Not automatically. This is an Advisory Opinion binding only on The Gift Giant, Ltd. and only as to the facts it described. It illustrates how the co-vendor rules work, but your contractual arrangement may differ in ways that change the analysis.

Citations and references

Statutes and regulations:

• Tax Law §1101(a) (definition of "person")
• Tax Law §1101(b)(8) (definition of "vendor")
• Tax Law §1105(a) (imposition of sales tax)
• Tax Law §1131(1) (person required to collect tax)
• Tax Law §1133(a) (personal liability for tax collection)
• Tax Law §1134(a)(1),(2) (vendor registration; display of Certificate of Authority)
• Tax Law §1136 (quarterly vs. monthly filing thresholds)
• Sales Tax Regulations §526.10(e)(1)-(3) (co-vendor definition and responsibilities)

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_61s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-08(61)S
Sales Tax
November 12, 2008

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S080811D

A petition received August 11, 2008 requests an advisory opinion about the following questions
concerning The Gift Giant, Ltd. (“Petitioner”), 555 North Research Place, Central Islip, New York 11722:
(1) Does Petitioner bear any responsibility for New York State and local sales and compensating use tax
(“sales and use tax”) reporting and payment on credit card receipts generated from sales made by a lessee­
vendor but paid into Petitioner’s account?
(2) Does Petitioner bear any responsibility for sales and use tax reporting and payment on cash receipts
generated from sales made by a lessee-vendor and collected by that lessee-vendor?
(3) How should Petitioner collect, remit, and report any sales and use tax for which it is responsible?
Petitioner, as a co-vendor, is responsible for pre-collecting from its lessee-vendors and remitting to the
New York State Department of Taxation and Finance (Department) the applicable retail sales and use tax on its
sales of merchandise to the lessee-vendors. The amount of tax should be based upon the suggested retail price of
that merchandise at the tax rate in effect where the lessee-vendor takes possession of the property. Petitioner is
obligated to collect and remit that tax whether the lessee-vendor’s retail sale involves a cash or credit card
payment. Petitioner is responsible for filing the appropriate sales tax returns. Petitioner must also provide a copy
of its Certificate of Authority to its lessee-vendors to be displayed on or in each of their kiosks, carts, or inline
stores.
Facts
Petitioner, a registered New York State sales tax vendor, is a distributor of gift and novelty products
(“merchandise”) that maintains carts, kiosks, and inline stores in shopping malls. Petitioner has licensing
agreements with unrelated independent contractors (“lessee-vendors”) where the lessee-vendors purchase
merchandise from and pay rent to Petitioner for the use of the carts, kiosks, or inline stores during the holiday
season. Petitioner does not retain ownership of any goods it sells to lessee-vendors.
The licensing agreements require that all credit card receipts from sales generated by the lessee-vendors
be directly deposited into Petitioner’s account. Petitioner then deducts all amounts due, including the cost of
goods sold, rent, and other fees specified in the licensing agreement, and remits the net amount of the credit card
receipts back to the lessee-vendor. The credit card receipt names the lessee-vendor as the retail seller. The
lessee-vendors retain all of their cash receipts.

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TSB-A-08(61)S
Sales Tax
November 12, 2008

Opinion
The receipts from every retail sale of tangible personal property are subject to sales and use tax unless
otherwise exempted or excluded. (Tax Law § 1105[a]). Any person making sales of tangible personal property
that are subject to sales and use tax is deemed to be a “vendor.” (Tax Law § 1101[b][8]). The term “person”
includes, among others, an individual, partnership, limited liability company, and corporation. (Tax Law §
1101[a]). A “person required to collect tax” includes every vendor of tangible personal property. (Tax Law §
1131[1]). Every person required to collect tax is personally liable for the sales and use tax imposed, collected, or
required to be collected. (Tax Law § 1133[a]). Every person required to collect tax must register with the
Department and prominently display its Certificate of Authority in its place of business. (Tax Law §§
1134[a][1],[2]).
A “co-vendor” includes any person supplying merchandise to an independent contractor who sells that
supplier’s tangible personal property. (Sales Tax Regulations § 526.10[e][1]). A “co-vendor” must undertake all
of the responsibilities of a “vendor,” including, but not limited to, collection of tax from customers, filing of
returns and payment of tax. (Sales Tax Regulations § 526.10[e][2][i]). Co-vendors are jointly responsible for the
collection and remittance of sales and use tax and the filing of the pertinent returns. (Sales Tax Regulations §
526.10[e][2][ii]). The supplier must collect in advance from the independent contractor a tax based upon the
retail selling price of the merchandise at the tax rate in effect where possession of the property is taken by the
independent contractor. (Sales Tax Regulations § 526.10[e][3][i]). An independent contractor whose supplier has
registered and is complying with the responsibilities of a vendor is not required to register as a vendor. (Sales Tax
Regulations § 526.10[e][3][ii]).
Petitioner is responsible under Article 28 of the Tax Law for pre-collecting from its lessee-vendors and
remitting to the Department the applicable retail sales and use tax on its sales of merchandise to the lessee­
vendors. Petitioner supplies its lessee-vendors, who are independent contractors, with merchandise for sale; thus,
Petitioner and its lessee-vendors are “co-vendors.” (Sales Tax Regulations § 526.10[e][1]). As a co-vendor,
Petitioner must pre-collect the retail sales and use tax on its sales of merchandise to the lessee-vendors based upon
the suggested retail sale price at the tax rate in effect where the lessee-vendor takes possession of the property.
(See Sales Tax Regulations § 526.10[e][3][i]). Petitioner’s obligation to collect that tax is not influenced by the
form of payment, i.e., cash or credit card, used to purchase merchandise from the lessee-vendors at retail.
Petitioner is also responsible for reporting to the Department its sales of merchandise to its lessee­
vendors. Petitioner must report those sales on a quarterly basis on Tax Form ST-100, New York State and Local
Quarterly Sales and Use Tax Return, and simultaneously remit any tax due. If Petitioner’s total taxable receipts,
however, are $300,000 or more in a sales tax quarter, i.e., March-May, June-August, September-November,
December-February, then Petitioner must contact the Department immediately to change its filing status to a
monthly filer and to obtain the necessary forms. Subsequently, if Petitioner’s total taxable receipts are less than
$300,000 for four consecutive sales tax quarters, then Petitioner may request conversion back to quarterly filing.
(See Tax Law § 1136).
The lessee-vendors are jointly responsible for collecting and remitting any sales and use tax due on their
retail sales of Petitioner’s merchandise. The lessee-vendors, though technically “vendors” and “persons required
to collect tax,” are not required to register as New York State sales tax vendors if they sell only Petitioner’s

TSB-A-08(61)S
Sales Tax
November 12, 2008

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merchandise. (See Sales Tax Regulations § 526.10[e][3][ii]). They are required, however, to pay the applicable
sales and use tax on the suggested retail price of the merchandise they purchase from Petitioner. They are further
required to display a copy of Petitioner’s Certificate of Authority in each kiosk, cart, or inline store. (See Tax
Law § 1134[a][2]). Also, if Petitioner fails to remit any of the sales and use tax due on those sales, then the
Department may collect that amount from the responsible lessee-vendor. (See Tax Law § 1133[a], Sales Tax
Regulations § 526.10[e][2][ii]).

DATED: November 12, 2008

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

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.