If a purchase order shows the sales tax separately, must the tax also be separately stated on later subcontractor progress billings?

Plain-English summary

New Ric Construction Company, Inc. separately stated the sales tax on its contract/purchase order. Its subcontractors then sent progress billings that did not separately state the tax, although the total of those progress payments equaled the original purchase-order amount, which did state the tax. New Ric asked whether stating the tax on the purchase order satisfied the rule that tax be shown separately on the first sales document.

The Department held that it did:

• The tax must be separate on the first document. Under 20 NYCRR § 532.1(b), whenever the customer is given a sales slip, invoice, receipt, or other statement of the price, the tax must be stated, charged, and shown separately on the first such document given.
• The accepted purchase order was that first document. The subcontractors' acceptance of New Ric's purchase order constituted a "contract, statement or other memorandum of sale" under 20 NYCRR § 533.2(b). Because New Ric separately stated the tax on that document, the § 532.1(b) requirement was satisfied.
• No need to restate on later billings. It was therefore not necessary to separately reference the sales tax again on the subcontractors' later progress billings.

What this means for you

The rule targets the first document, not every document

New York requires the tax to be separately stated on the first sales document the customer receives. Once you've done that — here, on an accepted purchase order — later invoices or progress billings covering the same transaction don't each have to repeat a separate tax line.

An accepted purchase order can be the "first document"

A purchase order the other party accepts functions as a contract or memorandum of sale. If it separately states the tax, it can be the document that satisfies § 532.1(b), even though more paperwork follows.

Keep the documents consistent

The result rested on the progress payments totaling the original purchase-order amount that stated the tax. Keep your records so the first tax-stating document and the follow-on billings clearly tie to the same transaction and totals.

Common questions

Q: Our progress billings don't show the tax separately — is that a problem?
A: Not if the tax was separately stated on the first document for the transaction (here, the accepted purchase order). The first-document requirement is then met.

Q: Does a purchase order count as the first sales document?
A: Yes, when it's accepted it's a contract or memorandum of sale; separately stating the tax on it satisfies § 532.1(b).

Q: Should the later billings still reconcile to it?
A: Yes — keep them tied to the same transaction and totals so the records are consistent.

Citations and references

Regulations:

• 20 NYCRR § 532.1(b) — the tax must be stated, charged, and shown separately on the first sales slip, invoice, receipt, or other statement given to the customer
• 20 NYCRR § 533.2(b) — sales records; a true copy of each contract, statement, or other memorandum of sale must be kept

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1989.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a89_41s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-89 (41)S
Sales Tax
November 6, 1989

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S890726A

On July 26, 1989 a Petition for Advisory Opinion was received from New Ric Construction
Company, Inc., 113 Osborne Street, Auburn, New York 13021.
The issue raised is whether the issuance by Petitioner, New Ric Construction Company, Inc.,
of a purchase order with the sales tax shown separately satisfies the requirement that the sales tax
be shown separately on the first sales document.
Petitioner separately stated the sales tax on its contract/purchase order. Subsequent to the
acceptance of Petitioner's purchase order, Petitioner received progress billings from its
subcontractors. The progress billings did not separately state the tax, but, the total progress payments
equaled the original contract/purchase order which did separately state the tax.
Section 532.1(b) of the Sales and Use Tax Regulations provides:
Statement of and reference to tax. (1) Whenever the customer is given any sales slip,
invoice, receipt, or other statement or memorandum of the price, amusement charge,
or rent paid or payable, the tax shall be stated, charged and shown separately on the
first of such documents given to him.
Section 533.2(b) of the Sales and Use Tax Regulations provides:
Sales records. (1) Every person required to collect tax, including every person
purchasing or selling tangible personal property for resale must keep records of every
sale, amusement charge, charge for dues or occupancy, and all amounts paid, charged
or due thereon, and of the tax payable thereon. The records must contain a true copy
of each:
(i)
(ii)
(iii)

sales slip, invoice, receipt, contract, statement or other
memorandum of sale;
guest check, hotel guest check, receipt from admissions such
as ticket stubs, receipt from dues; and
cash register tape and any other original sales document.
(Emphasis supplied)

The acceptance of Petitioner's purchase order by its subcontractors constituted a "contract,
statement or other memorandum of sale". Petitioner separately stated the sales tax on such document

-2­
TSB-A-89 (41)S
Sales Tax
November 6, 1989

and thus satisfied the requirement set forth in regulation Section 532.1(b). Therefore, it was not
necessary to make a separate reference to the sales tax in Petitioner's subcontractor's progress billing.

DATED: November 6, 1989

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.