If I sell a product from a New York terminal to out-of-state customers who arrange their own pickup, do I have to charge New York sales tax, and does it matter whether a common carrier or the customer's own truck picks it up?

Plain-English summary

An asphalt refiner ships hot liquid asphalt by rail into a terminal in Albany, New York, then loads it onto trucks for delivery to customers — many of them out-of-state businesses that will resell it or use it on projects elsewhere, including government projects. It asked whether its sales are subject to New York sales tax. The Department's answer turns almost entirely on who physically takes delivery of the asphalt, and where.

New York sales tax is a destination tax — it follows the point where the customer (or the customer's designee) takes possession, not where title passes or where the contract says delivery occurs (FOB terms don't control). If the seller delivers the asphalt to the customer's own truck, or to a private/contract carrier that the customer hired, in New York, that's a taxable in-state transfer — even if the truck immediately heads out of state afterward. If the customer itself is a common carrier that will do its own further transportation, in-state delivery to that customer still counts as an in-state transfer.

But if the seller instead hands the asphalt directly to a common carrier for delivery to the customer at an out-of-state destination, that sale is untaxed — this holds true even if the customer is the one who hired and is paying the common carrier. The seller has to keep good records (customer invoices showing delivery location, bills of lading) to document out-of-state common-carrier deliveries, because all sales are presumed taxable without such proof. Beyond the carrier distinction, asphalt sold for resale (via Form ST-120) is untaxed, and asphalt sold to a registered New York contractor who will incorporate it into real property of a government entity or other exempt organization (via Form ST-120.1) is also untaxed — but the same purchase for an out-of-state government's property doesn't qualify, since only New York governmental entities are exempt under §1116(a).

What this means for you

Manufacturers, refiners, and distributors delivering from a New York location

The taxability of an out-of-state-bound sale hinges on the mechanics of delivery, not the contract's shipping terms. Handing goods to a common carrier for out-of-state delivery is untaxed; handing goods to the customer's own truck or the customer's own hired carrier in New York is taxed, even for the identical ultimate destination. Keep delivery-location records (invoices, bills of lading) for every out-of-state sale you treat as untaxed.

Construction contractors and resellers purchasing bulk materials in New York

You can buy materials tax-free for resale (Form ST-120) or, if you're a New York-registered contractor incorporating the material into government or other exempt-organization real property, via Form ST-120.1 — but that contractor exemption only reaches New York governmental entities and exempt organizations, not other states or their political subdivisions.

Accountants and tax professionals

This opinion is a clean restatement of New York's long-standing common-carrier delivery rule (seller-arranged common carrier = destination-of-carrier delivery sourcing regardless of who pays the freight) layered onto the standard resale and §1115(a)(15)/(16)/§1116(a) contractor/governmental exemptions. The out-of-state refund/credit mechanism under Tax Law §1119(a)(1) is worth flagging for contractors who pay New York tax on pickup but later install the material outside the state.

Common questions

Q: We sell goods from a New York location to an out-of-state customer who arranges its own trucking — is that taxable?
A: Yes. If the customer's own truck or the customer's own hired carrier takes possession in New York, that's a taxable in-state transfer, regardless of where the goods ultimately end up.

Q: What if we hire the common carrier ourselves and it delivers to the customer out of state?
A: That's untaxed, as long as you can document (invoices, bills of lading) that you relinquished possession to the common carrier for delivery to an out-of-state destination.

Q: Does it matter who pays the common carrier's freight charges?
A: No — delivery by common carrier is treated as delivery by the seller for sales tax purposes regardless of contract shipping terms (FOB, FAS, etc.) or who is footing the freight bill.

Q: Can a contractor buy the material tax-free if it's going into a government project?
A: Only if it's a New York-registered contractor incorporating the material into real property of a New York governmental entity or exempt organization, using Form ST-120.1. Property of other states or their subdivisions doesn't qualify.

Q: Does this ruling apply to any bulk-materials seller?
A: Not automatically. An advisory opinion binds the Department only as to the taxpayer who requested it and only on the facts described, though the destination-sourcing and common-carrier rules it applies reflect settled, generally applicable Department policy.

Citations and references

Statutes, regulations, and forms:

• Tax Law §1105(a) (sales tax on retail sales); §1213 (local sourcing)
• Tax Law §1116(a) (governmental/exempt organization exemption)
• Tax Law §§1115(a)(15), (16) (contractor exemption for exempt real property)
• Tax Law §1119(a)(1), (c) (refund/credit provisions)
• 20 NYCRR §525.2(a)(3) (destination tax); §526.7(e)(2) (out-of-state delivery)
• Form ST-120, Resale Certificate; Form ST-120.1, Contractor Exempt Purchase Certificate

Cited opinions and cases:

• Audio-Video Corporation, TSB-A-89(42)S; Norman Levy Associates, Inc., TSB-A-96(23)S
• Crowe Chizek & Company LLC, TSB-A-08(53)S; TSB-M-82(28)S
• Lockwood Support Services, Inc., TSB-A-87(26)S
• F & M Schaefer Brewing Co. v Gerosa, 4 NY2d 423
• Matter of Savemart, Inc. v State Tax Commission, 105 AD2d 1001
• James Waite/Michael Waite, Officers of Harrison Radio Corp, DTA Nos. 806363, 806419

Source

• Landing page: NY Sales Tax Advisory Opinions, 2009
• Original opinion: TSB-A-09(28)S

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(28)S
Sales Tax
July 14, 2009

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

PETITION NO. S090206A

Petitioner name and address redacted, requests an advisory opinion as to whether its charges for the
sale of asphalt delivered at a railway terminal in Albany, New York are subject to sales tax. The customers
may use the asphalt in the performance of contracts with federal, state, and local governments, and other
exempt entities. Some of the customers will sell or otherwise use the asphalt out of state. We conclude that
Petitioner’s charges for sales of asphalt delivered to its customers within New York State are subject to tax,
unless the asphalt is (1) purchased for resale by in-state or out-of- state vendors who are not construction
contractors; (2) purchased by construction contractors registered as New York vendors who will be
incorporating the asphalt as an integral component part of the real property of a governmental entity or
exempt organization described in section 1116(a) of the Tax Law; or (3) delivered to the custody of a
common carrier for delivery by the common carrier to the customer outside New York State for use outside
the State.
Facts
Petitioner is one of the largest asphalt refiners and marketers in the United States. Petitioner’s
product comes into the railway terminal in Albany, New York in railroad cars in a “wet” and
“heated/warmed” condition. The asphalt is delivered to customers at the Albany terminal by loading the
product into tractor-trailer (tanker) combinations or tank trucks capable of maintaining the product in its wet
and heated condition during transport. These vehicles may be owned by the customer or may be owned and
operated by a third-party carrier contracted and paid directly by the customer to transport the asphalt from
Albany to the customer’s desired destination. Many of Petitioner’s customers are out-of-state entities that
are not doing business in New York. The customers may subject the asphalt to further processing and either
resell the asphalt or use it in fulfillment of construction projects. These customers all assert that the asphalt
is not for use in New York. Additionally, some customers claim that the asphalt will be used outside the
State in projects for the federal government or other state governments and political subdivisions.
Analysis
Generally, the sales tax is a "destination tax." The point of delivery or point at which possession is
transferred by the vendor to the purchaser, or the purchaser's designee, controls both the tax incidence and
the tax rate. See 20 NYCRR 525.2(a)(3); Tax Law §1213 (with respect to local sales tax). Section
526.7(e)(2) of the Sales and Use Tax Regulations provides that a sale of tangible personal property, where
title to the property passes in New York State, but delivery occurs outside of New York State, is not subject
to tax. Accordingly, sales of tangible personal property that are delivered to customers, or their designees, in
New York are subject to tax, unless otherwise exempt. Out-of-state delivery to the customer, whether by the
vendor’s own vehicles, private and contract carriers hired by the vendor, or common carrier, is considered to
be a nontaxable out-of-state sale.
If a vendor relinquishes possession of tangible personal property directly to a common carrier, the
sales tax is to be collected at the combined State and local rate in effect where the common carrier delivers
the property (Audio-Video Corporation, Adv Op Comm T&F, November 14,1989, TSB-A-89(42)S). This is
so, even if the common carrier is directly contracted and paid by the purchaser (Norman Levy Associates,

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TSB-A-09(28)S
Sales Tax
July 14, 2009

Inc. Adv Op Comm T&F, April 22, 1996, TSB-A-96(23)S). Thus, regardless of the contract terms of sale
(e.g., FOB, FAS., etc.), for purposes of the incidence of the sales tax, delivery by common carrier is deemed
to be delivery by the seller. See Crowe Chizek & Company LLC Adv Op Comm T&F, December 15, 2008,
TSB-A-08(53)S; 1982 Legislation Information For Sellers and; Purchasers of Automotive Fuel, October 26,
1982, Technical Services Bureau Memorandum, TSB-M-82(28)S.
Accordingly, if Petitioner relinquishes possession of the asphalt directly to the custody of a common
carrier, Petitioner is required to collect the appropriate sales tax in effect at the point where the common
carrier delivers the asphalt to the customer. Provided that Petitioner maintains records indicating points of
delivery, Petitioner is liable to collect sales tax only on deliveries made to locations in New York. All sales
are deemed to be taxable unless satisfactory evidence to the contrary is maintained. Records indicating
delivery should include, in addition to the records required to be kept by section 1135 of the Tax Law and
section 533.2 of the Sales and Use Tax Regulations, the customer invoice showing the location of the
delivery and copies of bills of lading from the common carrier (Norman Levy Associates Inc, supra).
Petitioner is not required to collect New York State and local sales tax when the records indicate that
Petitioner has released the asphalt directly to a common carrier for delivery by that common carrier to the
customer at an out-of-state destination. Crowe Chizek & Company LLC, supra.
However, any delivery of the asphalt to an agent, representative, employee, or other designee of the
customer would be considered a taxable transfer of the possession of the asphalt to the customer in
New York. If a vendor delivers property to a customer’s own truck in New York ( F & M Schaefer Brewing
Co. v Gerosa, 4 NY 2d 423, 427; affd 3 AD2d 898; appeal dismissed, 358 U.S. 282) or to the customer’s
private or contract carrier (Matter of Savemart, Inc. v State Tax Commission, 105 AD2d 1001, appeal
dismissed, 64 NY2d 1039, lv denied, 65 NY2d 604), an in-state transfer of possession of purchased goods is
considered to have occurred. If the customer itself is a common carrier, in-state delivery to the customer,
after which the customer will provide its own transportation and delivery to an out-of-state location is also
considered a transfer of possession within New York (James Waite, Officer of Harrison Radio Corp;
Michael Waite, Officer of Harrison Radio Corp, Det Tx App Trib, January 12, 1995, DTA Nos. 806363,
806419). Thus, if Petitioner’s customers take delivery of the asphalt in their own vehicles or by a private or
contract carrier hired by the customer for the purposes of transporting the asphalt to the customer, regardless
of whether the ultimate destination is within or without New York, Petitioner is required to collect sales tax
on the receipts from those sales, unless the sale is otherwise exempt.
If Petitioner’s customer is not a construction contractor (i.e., the customer never sells asphalt to its
customers on an installed basis) and the customer will resell the asphalt as such or will further process the
asphalt and sell it as a new product, then Petitioner’s customer may purchase the asphalt for resale without
paying tax by issuing to Petitioner a New York State Form ST-120, Resale Certificate. An out of state
vendor who is not registered or doing business within New York but who is registered for purposes of its
home state sales and use tax may also use Form ST-120, Resale Certificate, to make purchases of the asphalt
for resale. A construction contractor who paid tax on its purchase of asphalt and subsequently resells the
asphalt on an uninstalled basis may claim a refund or credit of the tax it paid on that purchase. (See Tax Law
§1119(c).)
An out-of-state construction contractor who purchases from Petitioner asphalt that is delivered to the
contractor’s own vehicle or to a contract or private carrier hired by the contractor may be eligible for a credit
or refund of the New York State and local sales tax paid to Petitioner on that sale, if the contractor
subsequently installs the asphalt into realty outside the State. (See Tax Law §1119(a)(1).)

TSB-A-09(28)S
Sales Tax
July 14, 2009

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Purchases of tangible personal property by contractors for use in adding to, altering, or improving
real property of an organization or governmental entity exempt from sales tax under Tax Law §1116(a), or
for use in maintaining, servicing, or repairing real property of an exempt organization or governmental
entity, are exempt from sales tax, provided that the tangible personal property becomes an integral
component part of the real property. See Tax Law §1115(a)(15), (16). Accordingly, asphalt used by
Petitioner's customers in projects for the federal government may qualify for exemption. A contractor must
be registered as a vendor with New York in order to use the Contractor Exempt Purchase Certificate (Form
ST-120.1) to make exempt purchases of tangible personal property. States other than New York, and their
political subdivisions, are not exempt under section 1116(a) of the Tax Law. See Lockwood Support
Services, Inc., Adv Op St Tx Comm, August 31, 1987, TSB-A-87(26)S. Sales of asphalt to a customer for
installation into the real property owned by other states and their political subdivisions or by private
organizations that are not exempt under Tax Law §1116(a) are not exempt. Petitioner is required to collect
tax from the customer on those sales. However, the refund and credit provisions under Tax Law §1119(a)(1)
for tangible personal property installed into realty outside New York would apply to those purchases.

DATED: July 14, 2009

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.