Does a New Jersey document-storage company owe New York tax on its various service charges (storage, retrieval, filing, faxing, photocopying) to New York customers?

Plain-English summary

A CPA asked on behalf of a New Jersey document-storage company (the "Company") with no New York place of business. The Company stores customers' papers, documents, and files in containers on shelves at its New Jersey facility -- title to the containers and materials never passes to the Company -- and collects New Jersey sales tax on the monthly storage charge. Beyond storage, it charges separately for a long list of services, ALL performed in New Jersey: retrieval (pulling a container to the loading dock), filing/refiling, disposal, data-entry/processing, interfile (filing loose papers within an existing container), fax and photocopy services (which a customer can use in New Jersey or request remotely, potentially sending output to New York), computer data updates, permanent removal, and general hourly labor. It also sells storage containers (delivered to a customer's location in either state) and charges for delivery/pickup of containers between New Jersey and a customer's New York or New Jersey office.

The Department broke this into distinct pieces. Because the Company's storage service itself happens entirely in New Jersey, it's not subject to New York's storage-services tax (§ 1105(c)(4)) -- storage isn't taxed based on where the customer is located, but where the storage physically occurs -- and there's no compensating use tax on storage either. The same goes for all the various New Jersey-performed labor services related to those stored materials, including delivering or picking up containers between New Jersey and a New York customer's office: none of that is subject to New York sales or use tax.

But two categories ARE different. First, the Company's retail SALES of tangible personal property -- photocopies and storage containers -- delivered to New York customers ARE subject to New York's compensating use tax, and if the Company regularly or systematically delivers that property into New York (or otherwise meets the "vendor" tests under § 1101(b)(8)), it must register as a vendor and collect New York tax on those sales, including any delivery charge. However, if New Jersey tax was already legally paid on those same sales without a right to refund, and New Jersey offers a reciprocal exemption, New York's tax would apply only to the extent New York's rate exceeds New Jersey's (§ 1118(7)). Second, the Company's fax service to New York customers is treated as an interstate telephone/telegraph service -- since the fax originates in New Jersey and terminates in New York -- and is specifically excluded from New York's telephone-service tax under § 1105(b).

What this means for you

Out-of-state document/records storage companies with New York customers

Services genuinely performed entirely at your out-of-state facility (storage itself, filing, retrieval, data entry, general labor) aren't taxed by New York just because the ultimate customer or the delivered materials end up in New York. But selling tangible goods -- containers, photocopies -- delivered into New York IS subject to New York use tax if you regularly deliver into the state, separate from the service-tax analysis.

New York customers of out-of-state storage vendors

Don't assume your out-of-state storage vendor's entire invoice is New York-tax-free -- material/container sales and photocopy charges delivered to you in New York carry New York tax exposure for the vendor (which may be passed through to you), even though the core storage and labor services don't.

Accountants and tax professionals

This opinion is a useful multi-category breakdown for interstate storage/records-management businesses: destination-of-SERVICE-performance controls for storage and labor (New Jersey, untaxed), destination-of-DELIVERY controls for tangible goods sales (New York, taxed), and the interstate-telecommunications exclusion applies to cross-border fax transmissions -- three distinct sourcing rules in one fact pattern.

Common questions

Q: Does it matter that the delivery/pickup of containers crosses state lines?
A: No -- the opinion treats delivery/pickup of stored materials to or from a New York customer's office as part of the untaxed New Jersey-performed service, not as a separately taxable New York transaction.

Q: Is the fax service taxed if it originates or terminates in New York?
A: This opinion addresses faxes originating in New Jersey and terminating in New York, concluding that's an untaxed interstate telephone/telegraph service; it doesn't address the reverse direction.

Q: What triggers the Company's obligation to register as a New York vendor?
A: Regularly or systematically delivering photocopies or containers into New York (or otherwise meeting one of the § 1101(b)(8) vendor tests) -- the opinion notes a presumption of "regular" delivery if a person or their agent enters New York to deliver more than 12 times in the preceding four quarterly periods.

Q: Can another out-of-state storage company rely on this ruling?
A: No. This advisory opinion binds the Department only with respect to the specific petitioner's client and the exact facts described.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(3) (definition of receipt)
• Tax Law § 1101(b)(7) (definition of use)
• Tax Law § 1101(b)(8)(i)(D), (iii) (interstate vendor; 12-occasion delivery presumption)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(b) (tax on telephone/telegraph service, excluding interstate)
• Tax Law § 1105(c)(4) (tax on storing tangible personal property)
• Tax Law § 1110(a) (compensating use tax)
• Tax Law § 1118(7) (credit for tax legally paid to another state)
• 20 NYCRR § 526.10(c) (interstate vendors)

Prior rulings and cases referenced:

• None cited in this opinion.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_70s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (70) S
Sales Tax
November 25, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S960205A

On February 5, 1996, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Steven Buskin, CPA, 197 Route 18, Suite 3000, East Brunswick, New Jersey
08816. Petitioner, Steven Buskin, provided additional information pertaining to the Petition on May
24, 1996.
Petitioner questions the applicability of New York State sales and compensating use taxes
to a number of transactions entered into between his client (the Company) which is located in New
Jersey and its customers located in New York.
Petitioner submits the following facts as the basis for this Advisory Opinion.
The Company, a New Jersey corporation, is located in the State of New Jersey and has no
place of business in New York State. The Company is in the business of storing and servicing stored
materials (e.g., papers, documents and files) owned by its customers. The materials are generally
placed in various sized containers. These containers are placed on shelves within the Company's
storage facility. At no time does title to the containers or the materials that are in the containers pass
to the Company.
The Company's "Storage and Service Agreement" clearly indicates that the storage will take
place in New Jersey. Charges for storing customers' containers are based on the size of each
container. Charges are billed periodically, generally on a monthly basis. New Jersey sales tax is
collected on the monthly storage charge.
In addition to the storage of customers' containers, the Company also performs the following
services for its customers. (To the extent that the services are performed in New Jersey and are
subject to New Jersey sales tax, New Jersey sales tax is collected by the Company regardless of
whether the customer is located in New Jersey or New York.)
Retrieval - This is the charge for taking a container off a shelf and placing it on the
Company's loading dock for delivery to or pick up by a customer.
Filing and Refiling - This is the charge for placing a container on a shelf when it is first
placed in the Company's storage facility or when it is returned to storage. (There is no filing charge
to a new customer for filing the initial containers that a customer places in storage. The filing charge
is only for subsequent additional containers to be filed for storage.)

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Disposal - This is the charge for disposing of a customer's container from the Company's
storage facility through the use of an independent disposal company.
Processing and Data Entry Charge - This is a labor charge for creating a customer's data base,
relating to materials in storage, on the Company's computer system.
Interfile - This is a charge for filing individual papers within a customer's file container that
is already in storage.
Fax Services - This is a charge for the use of a fax machine. A customer may either use the
fax machine in New Jersey or request the Company to fax papers or other documents. Conceivably,
faxes could be sent to destinations in New York State.
Photocopies - This is a charge for the use of a photocopy machine. A customer may either
use the machine in New Jersey or request the Company to photocopy papers or other documents.
Conceivably, copies could be sent to destinations in New York State.
Computer Entry. Changes or Removals - This represents a data entry labor charge for
updating a customer's file.
Permanent Removal - This is the labor charge made when a container is permanently
removed from storage. The charge occurs when a container is to be destroyed at a customer's request
or when a customer wants to remove a container from storage at the termination of the contract. This
charge is for preparing containers for shipment by placing them on pallets, shrink wrapping the
loaded pallets and otherwise ensuring that the containers do not get lost in transit.
Labor Per Hour - This is a charge for furnishing labor on behalf of a customer for any activity
not specifically listed in the customer's contract, for example, looking for papers or other documents.
All of these activities are performed in New Jersey.
Material - This is the selling price of a storage container sold to a customer. The container
may be delivered to a customer's business location in New Jersey or New York. The container may
also be used to replace a container damaged when the container is received for storage at the
Company's facility.
Deliveries and Pick ups - This charge represents the transportation charge made for delivering
a container to a customer and/or for picking up a container from a customer's place of business.
Deliveries are made from New Jersey to a customer's office in either New Jersey or New York. The
delivery charge generally arises when a customer asks to have a container retrieved from storage and
delivered to his or her business location. Pick up charges generally occur either when a customer
wants to return a container to storage that was previously delivered or when a customer wants to
place a new container in storage. There is generally no charge for picking up containers

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when a customer initially signs a contract. Different rates apply to different levels of response time
to a customer's request for delivery or pick up as well as the distance to a customer's place of
business.
Applicable Law and Regulations
Section ll01(b) of the Tax Law provides, in part:
When used in this article for the purposes of the taxes imposed by
subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section eleven
hundred ten, the following terms shall mean:
*

*

*

(3) Receipt. The amount of the sale price of any property and the charge for
any service taxable under this article, valued in money, whether received in money
or otherwise, including any amount for which credit is allowed by the vendor to the
purchaser, without any deduction for expenses or early payment discounts and also
including any charges by the vendor to the purchaser for shipping or delivery
regardless of whether such charges are separately stated in the written contract, if
any, or on the bill rendered to such purchaser and regardless of whether such
shipping or delivery is provided by such vendor or a third party, but excluding any
credit for tangible personal property accepted in part payment and intended for resale
....
*
*
*
(7) Use. The exercise of any right or power over tangible personal property
by the purchaser thereof and includes, but is not limited to, the receiving, storage or
any keeping or retention for any length of time, withdrawal from storage, any
installation, any affixation to real or personal property, or any consumption of such
property. Without limiting the foregoing, use also shall include the distribution of
only tangible personal property, such as promotional materials.
Section ll01(b)(8)(i) of the Tax Law defines "vendor" to include:
(D) A person who makes sales of tangible personal property or services, the
use of which is taxed by this article, and who regularly or systematically delivers
such property or services in this state by means other than the United States mail or
common carrier ....
Section ll01(b)(8)(iii) also provides:
For purposes of clause (D) of subparagraph (i) of this paragraph, a person
shall be presumed to be regularly or systematically delivering property or services

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November 25, 1996

in this state if the cumulative total number of occasions such person or his agent
came into the state to deliver property or services exceeded twelve during the
preceding four quarterly periods ending on the last day of February, May, August and
November, unless such person can demonstrate, to the satisfaction of the
commissioner, that he cannot reasonably be expected to come into the state for such
purposes on more than twelve occasions during the next succeeding four quarterly
periods ending on the last day of February, May, August and November.
Section 1105 of the Tax Law imposes sales tax on:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
(b) The receipts ... from every sale, other than sales for resale, of telephony
and telegraphy and telephone and telegraph service of whatever nature except
interstate and international telephony and telegraphy and telephone and telegraph
service ....
(c) The receipts from every sale, except for resale, of the following
services:
*

*

*

(4) Storing all tangible personal property not held for sale in the regular
course of business and the rental of safe deposit boxes or similar space.
Section lll0(a) of the Tax Law imposes the compensating use tax, in part, as follows:
(a) Except to the extent that property or services have already been or will be
subject to the sales tax under this article, there is hereby imposed on every person a
use tax for the use within this state ... except as otherwise exempted under this article,
(A) of any tangible personal property purchased at retail ... (C) of any of the services
described in paragraphs (1), (7) and (8) of subdivision (c) of section eleven hundred
five, (D) of any tangible personal property, however acquired, where not acquired for
purposes of resale, upon which any of the services described in paragraphs (2), (3)
and (7) of subdivision (c) of section eleven hundred five have been performed ....
Section 1118 of the Tax Law provides in part:
The following uses of property shall not be subject to the compensating
use tax imposed under this article:
*

*

*

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(7)(a) In respect to the use of property or services to the extent that a retail
sales or use tax was legally due and paid thereon, without any right to a refund or
credit thereof, to any other state or jurisdiction within any other state but only when
it is shown that such other state or jurisdiction allows a corresponding exemption
with respect to the sale or use of tangible personal property or services upon which
such a sales tax or compensating use tax was paid to this state. To the extent that the
tax imposed by this article is at a higher rate than the rate of tax in the first taxing
jurisdiction, this exemption shall be inapplicable and the tax imposed by section
eleven hundred ten of this chapter shall apply to the extent of the difference in such
rates, except as provided in paragraph (b) of this subdivision.
(b) To the extent that the compensating use tax imposed by this article and a
compensating use tax imposed pursuant to article twenty-nine are at a higher
aggregate rate than the rate of tax imposed in the first taxing jurisdiction, the
exemption provided in paragraph (a) of this subdivision shall be inapplicable and the
taxes imposed by this article and pursuant to article twenty-nine shall apply to the
extent of the difference between such aggregate rate and the rate paid in the first
taxing jurisdiction ....
Section 1131(1) of the Tax Law defines "persons required to collect tax," in part, to include
"every vendor of tangible personal property .... " Section 1131(3) defines "tax," in part, to include
"any tax imposed by sections eleven hundred five, or eleven hundred ten .... "
Section 526.10(a)(5) of the Sales and Use Tax Regulations codifies the definition of "vendor"
as previously described. Subdivision (c) of this Section provides, in part:
Interstate vendors. (1) A person outside this State making sales to persons within the State
... who makes deliveries in New York as described in paragraph (5) of subdivision (a) of this section,
is required to collect the tax on any taxable property or services delivered in New York.
Opinion
The Company's storage of materials at its facility in New Jersey are not subject to the sales
tax imposed by Section 1105(c)(4) of the Tax Law since the storage does not occur in this State.
There is no compensating use tax imposed on the storing of tangible personal property. The various
services provided by Petitioner in this case relating to the stored materials in New Jersey, including
delivering and/or picking up stored materials to or from a customer's office in New York, are also
not subject to sales or use tax.
The Company's retail sales of photocopies and of containers to its New York customers are
sales of tangible personal property, the use of which is subject to compensating use tax imposed by
Section lll0(a)(A) of the Tax Law. If the Company regularly or systematically delivers the
photocopies or containers to its customers in this State (or otherwise qualifies as a vendor under

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Section 1101(b)(8)), the Company is a vendor. As a vendor and a person required to collect tax, the
Company would be required to comply with the requirements of Articles 28 and 29 of the Tax Law,
including the collection and remittance of State and local sales and compensating use taxes, for
example, on its sales of photocopies and containers that are delivered to customers in this State. The
receipt or consideration for such photocopies and containers would include any charge by the
Company to deliver them to its customers. However, in accordance with Section 1118(7) of the Tax
Law, if New Jersey sales or use tax was legally due and paid on these sales without any right to a
refund or credit, and if the State of New Jersey allows a corresponding exemption for New York
sales and compensating use taxes, any New York State and local compensating use taxes would
apply only to the extent that the New York aggregate rate of tax exceeded the New Jersey rate.
It is also noted that the Company's fax service to its New York customers is considered to
be an interstate telephone and telegraph service, since the fax originates in New Jersey and
terminates in New York, and as such is excluded from tax under Section l105(b) of the Tax Law.

DATED: November 25, 1996

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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