Does a customer's letter saying it doesn't want to be charged sales tax relieve a vendor of collecting the tax?

Plain-English summary

Mohawk Dental Supply Company, Inc. sells both taxable and non-taxable items to dental laboratories. It has proper resale certificates from various labs — but some labs instead sent letters stating that they simply don't want to be charged sales tax on any purchases. Mohawk asked whether such a letter relieves it of the duty to collect tax on the taxable items.

The Department held a letter is not enough — only a prescribed certificate relieves the vendor.

• Everything is presumed taxable. Under § 1132(c), all receipts for the types of property and services taxed by § 1105 are presumed subject to tax until the contrary is established, and the burden is on the person required to collect (or the customer).
• Only a certificate in the prescribed form shifts that burden. A vendor is relieved of collecting only if it takes from the purchaser a certificate in the form prescribed by the Tax Commission — signed, with the purchaser's name, address, and registration-certificate number, stating that the property was purchased for resale or is otherwise exempt.
• A "please don't charge me tax" letter isn't that certificate. A customer's letter requesting relief from sales tax does not constitute a certificate in the prescribed form. So Mohawk must collect sales tax on taxable items unless the customer furnishes a properly completed exemption certificate.

What this means for you

Don't stop charging tax on a customer's say-so. A letter, email, or verbal request not to be billed sales tax gives you no protection. If you don't collect and don't hold a proper certificate, the presumption of taxability leaves you liable for the tax.

Insist on the actual form. To sell tax-free to a reseller or exempt buyer, get the specific certificate the Tax Commission prescribes (for example, a resale certificate or exempt-use certificate), fully completed and signed, with the purchaser's registration number. Keep it on file to substantiate the exempt sale.

Mixed taxable/non-taxable accounts still need certificates for the taxable items. Even a good customer that buys plenty of non-taxable goods must give you a proper certificate before you can skip tax on the taxable ones.

Common questions

Q: My customer wrote me a letter saying not to charge sales tax. Can I rely on it?
A: No. A letter isn't a certificate in the Tax Commission's prescribed form. Without a proper certificate you must collect tax on taxable items, and you'd be liable if you don't.

Q: What document do I actually need?
A: A properly completed, signed exemption or resale certificate in the prescribed form, showing the purchaser's name, address and registration-certificate number and the basis for exemption.

Q: The customer really is a reseller — does that help if I only have the letter?
A: You still need the proper certificate. Being a reseller in fact doesn't relieve you as the vendor unless you take the prescribed certificate; otherwise the sale is presumed taxable under § 1132(c).

Citations and references

Statute:

• Tax Law § 1132(c) — presumption of taxability; vendor relieved only by a certificate in the Tax Commission's prescribed form

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_33s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-81(33)S
Sales Tax
October 19, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810601A

On June 1, 1981 a Petition for Advisory Opinion was received from Mohawk Dental
Supply Company, Inc., 417 Court Street, Utica, New York 13502.
The issue raised is whether Petitioner's receipt of a letter from a customer, stating that the
customer does not want to be charged sales tax on any purchases, relieves Petitioner of liability
for collecting the tax on sales of taxable items.
Petitioner sells taxable and non-taxable items to dental laboratories. Petitioner has
received resale certificates from various laboratories. Some laboratories have submitted letters to
Petitioner stating that they do not want to be charged sales tax on any purchases.
Section 1132(c) of the Tax Law states, in part:
"For the purpose of the proper administration of this article and to prevent evasion of the
tax hereby imposed, it shall be presumed that all receipts for property or services of any type
mentioned in subdivisions (a), (b), (c) and (d) of section eleven hundred five . . . are subject to tax
until the contrary is established, and the burden of proving that any receipt . . . is not taxable
hereunder shall be upon the person required to collect tax or the customer. Unless (1) a vendor
shall have taken from the purchaser a certificate in such form as the tax commission may
prescribe, signed by the purchaser and setting forth his name and address and, . . . the number of
his registration certificate, together with such other information as said commission may require,
to the effect that the property or service was purchased for resale or for some use by reason of
which the sale is exempt from tax under the provisions of section eleven hundred fifteen, . . . the
sale shall be deemed a taxable sale at retail."
Accordingly, Petitioner must collect sales tax on sales of taxable items unless the
customer has furnished a properly completed exemption certificate in a form prescribed by the
Tax Commission. A letter from a customer requesting relief from sales tax does not constitute a
certificate in a form prescribed by the Tax Commission.

DATED: September 29, 1981

JAMES H. TULLY, JR., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR