Are the bags and boxes a beer wholesaler sells to retailers for sorting empty returnable containers taxable?

Plain-English summary

The New York State Beer Wholesalers Association asked about the sale of plastic bags and wooden boxes to retailers used to handle empty returnable containers under the Bottle Bill. Wholesalers must accept empties from retailers and may require sorting; the wholesaler sells the retailer a plastic bag (supported by a wooden box) that holds up to 240 empty cans, which the retailer fills and returns. It asked whether these sales are taxable.

The Department held the sales are taxable — and the packaging exemption doesn't apply.

• These are taxable retail sales. A "retail sale" is a sale for any purpose other than resale as such (or as a component part) or for use in a taxable service (§ 1101(b)(4)). The retailer buys the bags and boxes for none of those purposes — it uses them to handle empties — so the sales are taxable retail sales under § 1105(a).
• The packaging-materials exemption doesn't fit. Section § 1115(a)(19) exempts cartons, containers and packaging materials that a vendor uses to package tangible personal property for sale and transfers to the purchaser. The retailer isn't using the bags and boxes to package goods for sale — it's using them to collect and return empty deposit containers — so the exemption doesn't apply.
• Result. The wholesaler's sales of the bags and boxes to retailers are subject to sales tax.

What this means for you

"Containers" aren't automatically tax-exempt — the exemption is about packaging goods for sale. New York's § 1115(a)(19) exemption covers packaging a seller uses to wrap the product it sells and hands to the buyer. Bags or boxes used to move, sort, or return something else — like empty deposit containers — don't qualify.

How the buyer uses the item controls. The same plastic bag could be exempt in one use (packaging merchandise a store sells) and taxable in another (collecting empties). Here, the retailer's use was handling returnables, which is a taxable purchase.

Regulatory mandates don't create tax exemptions. Even though the Bottle Bill requires wholesalers to take back and retailers to sort empties, that legal requirement doesn't make the sorting supplies exempt. The tax question turns on the statute's own terms, not on the environmental mandate.

Common questions

Q: We sell retailers bags and boxes to sort and return empties. Is that taxable?
A: Yes. The retailer isn't buying them for resale or to package goods for sale, so the sales are taxable retail sales, and the § 1115(a)(19) packaging exemption doesn't apply.

Q: Aren't bags and boxes "containers," and containers exempt?
A: Only when a vendor uses them to package tangible personal property for sale and transfers them to the buyer. Used to collect and return empty deposit containers, they don't meet the exemption.

Q: Does the Bottle Bill requirement change the tax result?
A: No. The legal duty to accept and sort empties doesn't exempt the supplies used to do it; taxability is decided under the Tax Law's own terms.

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(b)(4) — definition of "retail sale"; resale and component-part exclusions
• Tax Law § 1115(a)(19) — exemption for cartons, containers and packaging materials transferred with goods sold

Other authorities referenced:

• New York State Returnable Container Act ("Bottle Bill"), ECL § 27-1001 et seq., and 6 NYCRR 367.5 (Dept. of Environmental Conservation)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1984.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a84_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-84(1)S
Sales Tax
February 16, 1984

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S830915A

On September 15, 1983 a Petition for Advisory Opinion was received from the New York
State Beer Wholesalers Association, 7 Woodland Avenue, Larchmont, New York 10538.
The issue raised is whether the sale of containers and wooden boxes to retailers by
wholesalers constitutes a taxable sale when such containers and boxes are used in the recycling of
returnable cans and bottles.
Petitioner states that under the provisions of Section 367.5 of the Department of
Environmental Conservation Rules and Regulations, promulgated pursuant to the New York State
Returnable Container Act (ECL §27-1001 et. seq., the "Bottle Bill"), wholesalers are required to
accept empty beverage containers from retailers. To allow proper handling, the regulations provide
that wholesalers may require retailers to sort the containers.
In the transactions described by Petitioner, wholesalers will sell plastic bags and wooden
boxes to retailers. The bags will be used to assist in counting, handling, sorting and transporting
empty beverage containers. The individual retailer will fill the plastic bag, supported by the box,
with up to 240 empty cans. Once a bag is filled by the retailer, it is closed and used to transport
the empty containers back to the wholesaler. On receipt of a full bag, the wholesaler may either
crush the containers, or simply ship them to the recycler in the bag used by the retailer.
It is Petitioner's contention that the sale of the bags and box to a retailer is not a sale to the
ultimate consumer and therefore not within the purview of the Tax Law. Petitioner also contends that
the bags sold by the wholesalers constitute "containers" and that sales of such bags are therefore
exempt from sales tax under the provisions of Section 1115(a)(19) of the Tax Law.
Section 1105(a) of the Tax Law imposes a tax on the "receipts from every retail sale of
tangible personal property .... " Section 1101(b)(4) of the Tax Law defines "retail sales" as: "...A sale
of tangible personal property to any person for any purpose, other than (A) for resale as such or as
a physical component part of tangible personal property, or (B) for use by that person in performing
the services subject to tax..." under section 1105(c)(1),(2),(3) or (5) of the Tax Law.
Section 1115(a)(19) of the Tax Law exempts from tax receipts from the sale of "cartons,
containers, and wrapping and packaging materials and supplies, and components thereof for use and
consumption by a vendor in packaging or packing tangible personal property for sale, and actually
transferred by the vendor to the purchaser." (Emphasis added)

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-84(1)S
Sales Tax
February 16, 1984

Because the sale of the bags and boxes to the retailer is not a sale for resale as such, nor for
resale as a physical component part of tangible personal property, and as the bags and boxes are not
purchased for use by the retailer in performing any of the services subject to tax under Section
1105(c) of the Tax Law, such sales constitute retail sales within the meaning of Section 1101(b)(4)
of the Tax Law, and the receipts therefrom are subject to the sales tax imposed under Section 1105(a)
of the Tax Law.
As the bags and box purchased by the retailer are not used by the retailer in packaging or
packing tangible personal property for sale, the sale of such bags and boxes to the retailer does not
qualify for the exemption provided for under Section 1115(a)(19) of the Tax Law.

DATED: January 18, 1984

s/FRANK J. PUCCIA
Director
Technical Services Bureau