Are a fulfillment shop's services for a publisher — packing, shipping, invoicing, mail pickup, recordkeeping and storing books — subject to sales tax?

Plain-English summary

Mary B. Letter Shop performs a bundle of fulfillment services for a publisher. The publisher forwards books; the shop packages and ships them to the publisher's customers, invoices those customers, holds the publisher's inventory at its premises, picks up mail and corresponds with the publisher's accounts about shipments, and maintains inventory and shipping records. It asked whether it must collect sales tax on these services.

The Department held none of the services are taxable.

• Shipping, billing, mail pickup and correspondence aren't enumerated. These are not among the services listed as taxable in § 1105(c), so their receipts aren't taxed.
• The recordkeeping isn't a taxable information service. The business records are individual in nature and maintained solely for the publisher's benefit, so they're not a taxable information service under § 1105(c)(1).
• Packaging isn't taxable, because the books are held for sale. Section 1105(c)(3) taxes servicing of property not held for sale in the regular course of business. The publisher's books are held for sale, so packaging them isn't taxable.
• Storage isn't taxable, for the same reason. Section 1105(c)(4) taxes storage of property not held for sale. Because the books are held for sale, storing them isn't taxable.
• Documentation: to establish the non-taxable status, the shop should obtain a properly completed Exempt Use Certificate (Form ST-121) from the publisher, marking under "Other" that the books packaged and stored are held for sale in the publisher's business.

What this means for you

Many back-office and logistics services simply aren't on New York's taxable-services list. Shipping, billing, mail handling and correspondence aren't enumerated in § 1105(c), so charging for them doesn't create a sales-tax collection duty.

"Held for sale" is the switch for storage and servicing charges. Sections 1105(c)(3) and (c)(4) tax servicing and storage only of property that is not held for sale. When you handle or warehouse a client's inventory that the client is selling, those services fall outside the tax.

Records kept for one client are individual, not a taxable information service. Maintaining inventory and shipping records solely for the client's benefit isn't the kind of information service § 1105(c)(1) taxes.

Paper up the exemption. Even when a service is non-taxable, get the right certificate — here, a Form ST-121 Exempt Use Certificate — so you can show why you didn't collect tax if you're ever audited.

Common questions

Q: Do I charge sales tax on packing and shipping a client's inventory?
A: Not here. Shipping isn't an enumerated taxable service, and packaging property that's held for sale isn't taxable under § 1105(c)(3). No tax to collect on those charges.

Q: What about storing the client's goods?
A: Storage is taxable under § 1105(c)(4) only for property not held for sale. Because the publisher's books are held for sale, storing them isn't taxable.

Q: I keep detailed inventory records — is that a taxable information service?
A: No. Records that are individual in nature and kept solely for your client's benefit aren't a taxable information service under § 1105(c)(1).

Q: How do I document that these services are non-taxable?
A: Obtain a properly completed Exempt Use Certificate (Form ST-121) from the client stating that the goods you package and store are held for sale in its business.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(c)(1) — information services, excluding information personal or individual in nature not incorporated into reports furnished to others
• Tax Law § 1105(c)(3) — taxes servicing/repairing property not held for sale in the regular course of business
• Tax Law § 1105(c)(4) — taxes storing property not held for sale in the regular course of business
• Form ST-121 — Exempt Use Certificate used to document the non-taxable status of the services (books held for sale)

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_3s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81(3)S
Sales Tax
August 4, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810327A

On March 27, 1981 a Petition for Advisory Opinion was received from Mary B. Letter Shop,
12 Lois Lane, Old Bethpage, New York 11804.
The issue raised is whether Petitioner is required to collect sales tax from a customer (a
publishing firm) for whom Petitioner performs various services, as follows:
a.
The publisher forwards books to Petitioner, which packages and ships the books to
the publisher's customers.
b.

Petitioner invoices the publisher's customers.

c.

Petitioner holds the publisher's inventory at Petitioner's place of business.

d.
Petitioner picks up mail for the publisher at the Post Office and, where necessary,
corresponds with the publisher's accounts relative to the books shipped.
e.
Petitioner maintains records relative to the inventory of the books which are at its
place of business, maintaining all shipping records of books shipped, as well as current inventory
data.
Section 1105(c) of the Tax Law imposes a tax on ". . . The receipts from every sale, except
for resale, of the following services:
(1) The furnishing of information by printed, mimeographed or multigraphed matter . . . but
excluding the furnishing of information which is personal or individual in nature and which is not
or may not be substantially incorporated in reports furnished to other persons . . .
*
*
*
(3) Installing tangible personal property, or maintaining, servicing or repairing tangible
personal property not held for sale in the regular course of business . . .
(4) Storing all tangible personal property not held for sale in the regular course of business
...."
The services of shipping, billing, picking up mail, and corresponding with the publisher's
accounts, which are performed by Petitioner, are not among the taxable services enumerated in
section 1105(c) of the Tax Law. Receipts from the sale of these services are accordingly not subject
to the sales tax.
JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

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

-2­
TSB-A-81(3)S
Sales Tax
August 4, 1981

The business records kept by Petitioner for the publisher are individual in nature and are
maintained solely for the benefit of the publisher. This service is thus not a taxable information
service within the meaning of section 1105(c)(1) of the Tax Law and is, therefore, not subject to the
sales tax.
The books packaged by Petitioner are held for sale in the regular course of business. The
packaging service performed by Petitioner is, therefore, not subject to sales tax under section
1105(c)(3) of the Tax Law.
The books stored by Petitioner are also held for sale in the regular course of business. The
storage service performed by Petitioner is, therefore, not subject to sales tax under section 1105(c)(4)
of the Tax Law.
None of the services described by Petitioner are subject to the sales tax. As an aid to
establishing such non-taxable status Petitioner should obtain from its customer a properly completed
Exempt Use Certificate (Form ST-121), indicating under the box designated "Other" that the books
packaged and stored by Petitioner are held for sale in the course of the publisher's business.

DATED: July 17, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau