Which of a mail house's printing, sorting, inserting, and mailing services for financial-institution statements are subject to New York sales tax?

Plain-English summary

Werthan Industries, doing business as Check Printers, is retained by banks, mortgage companies, auto finance companies, and student loan servicers to print monthly statements, coupon books, and similar notices and mail them to those institutions' customers nationwide. Werthan receives each institution's customer data electronically or on tape, prints the material, sorts it by zip code, inserts it into envelopes, seals them, affixes or meters postage, and mails everything out -- billing separately for postage reimbursement and for services related to in-state versus out-of-state mailings. Werthan asked exactly which of these services are taxable, whether that depends on whether the statements go to New York or out-of-state addresses, and whether it can collect tax only on the taxable line items if everything is separately billed.

New York draws a careful line here based on two existing precedents. Sorting, inserting the material into envelopes, sealing them, affixing or metering postage, bagging/mailing, and reimbursed postal charges are not taxable services at all (following a 1997 ruling on a similar mail-processing operation), as long as they're separately stated from any taxable charges on the bill. But the actual printing of the statements is a taxable "printing and imprinting" service under Tax Law § 1105(c)(2) -- following a 1996 ruling involving another financial-statement printer -- and that tax applies whenever the finished statements are mailed to a New York address, because New York's sales tax is a destination tax based on where the printed material is actually delivered and used. If the statements are mailed to an address outside New York, the printing charge for those pieces is exempt instead, as long as Werthan separately bills for in-state versus out-of-state mailings the way it described. There's a further wrinkle: if Werthan's customer furnishes the paper (Werthan only prints on it), the printing is a taxable service under § 1105(c)(2); but if Werthan supplies the paper and envelopes itself as part of the job, the whole transaction becomes an ordinary taxable sale of tangible personal property under § 1105(a) instead of a service. Finally, envelopes and address labels used to mail material out through a New York post office are themselves fully taxable at the point they're mailed from, even if some or all of the enclosed contents are exempt because they're addressed out of state. As long as taxable and nontaxable charges are separately stated (or the exempt services are grouped under a label like "exempt services" with an itemized list), Werthan only needs to collect tax on the taxable portion.

What this means for you

Mail houses, statement printers, and print-and-mail service bureaus

Break your invoice into distinct line items -- sorting/inserting/sealing/postage/mailing (not taxable if separately stated), printing (taxable if delivered to New York addresses, exempt if delivered out of state) -- and keep records showing the destination of everything you mail, since the tax on printing tracks where the finished piece is actually delivered, not where you're located.

Financial institutions and other businesses outsourcing customer statement mailings

Ask your printer/mailer to separately itemize postage, mailing-related services, and the printing charge itself, and to separately identify in-state versus out-of-state destinations -- this can meaningfully reduce your taxable exposure compared to one lump-sum bill.

Accountants and tax professionals

This ruling is a clean, citation-rich application of the destination-tax rule (20 NYCRR § 525.2(a)(3)) and the printing/imprinting taxability rule (§ 527.4(e)) to a modern outsourced-mailing operation -- useful any time a client's print-and-mail vendor needs its invoice restructured to isolate the genuinely taxable printing charge from the nontaxable processing and mailing services around it.

Common questions

Q: Is sorting and inserting statements into envelopes taxable in New York?
A: No -- sorting, inserting, sealing, postage/metering, and mailing charges (including reimbursed postage) aren't taxable services, as long as they're separately stated from any taxable charges.

Q: Does it matter whether the printed statements are mailed to New York or out-of-state addresses?
A: Yes -- the printing charge itself is taxable only for statements mailed to New York addresses; printing charges for material mailed out of state are exempt, provided the mailer separately bills for in-state versus out-of-state destinations.

Q: What if the printer supplies the paper and envelopes itself instead of just printing on customer-furnished stock?
A: Then the whole transaction becomes a taxable sale of tangible personal property, not a service -- a different tax analysis than when the customer furnishes the materials.

Q: Does this ruling apply to my company's print-and-mail billing structure?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Your own invoice structure and mailing-destination records would need their own analysis.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_73s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(73)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970626A

On June 26, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Werthan Industries, Inc., d/b/a Check
Printers, 1530 Antioch Pike, Antioch, TN 37013.
The issues raised by Petitioner, Werthan Industries, Inc., d/b/a Check
Printers, are:
1.

Whether the following provided by Petitioner are subject to
New York State and local sales and use taxes:
a.

Sorting of large print jobs of coupon payment books,
monthly statements, co-issue letters and tax and
interest statements ("Printed Material") by computer and
zip code for mailing purposes.

b.

Printing of Printed Material.

c.

Inserting the Printed Material in envelopes and sealing
the envelopes.

d.

Affixing postage or metering mail.

e.

Sorting items for mailing.

f.

Bagging and mailing Printed Material.

g.

Postal
charges
reimbursed
financial institution.

by

a

2.

Whether Petitioner must collect sales tax on Printed Material
which is mailed to a financial institution's customers located
outside of New York State, assuming such charges are
separately billed to each financial institution.

3.

Whether Petitioner must collect sales tax, if any, on its
entire charge or only on the taxable services separately
stated on its invoice.

Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner is a Delaware Corporation which has its principal office in
Nashville, Tennessee.
Petitioner is retained by banks, mortgage companies, automotive finance
companies and student loan servicing agencies ("Financial Institutions") to print
Printed Material to be sent to each of the Financial Institution's customers.
Petitioner prints the Printed Material on paper, inserts the Printed Material

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into envelopes which are later sealed, and then mails the Printed Material to
each of the Financial Institutions' customers.
These customers reside both
within and without New York State.
In order to prepare the Printed Material, Petitioner receives information
from each Financial Institution which consists of the names, addresses and
account numbers of the respective Financial Institution's customers, loan
amounts, interest data and tax information (the "Customer Data").
The
information is furnished to Petitioner either through an on-line transmission
from the Financial Institution's computers to Petitioner's computers, or by
tangible magnetic media. The information is received in a compressed form and
consists of either raw data or data in a print image form.
Petitioner's
computers store this information for the purpose of printing the Printed
Material.
The information in Petitioner's computers is not returned to the
Financial Institution, but is archived for an agreed upon time frame, and then
deleted.
Petitioner provides invoices which separately state the postal charges to
be reimbursed by the Financial Institution. In addition, Petitioner provides
separate bills to the Financial Institutions so as to separately state the
charges for all services related to mailings made outside of New York State and
mailings within New York State.
Petitioner intends to show its sales tax exempt services on its invoices
under the heading "Exempt Services," and also to show the total charge for such
exempt services.
Applicable Law and Regulations
Section 1105 of the Tax Law imposes sales tax upon:
(a) The receipts from every retail sale of tangible
property, except as otherwise provided in this article.
*
(c) The receipts from
following services:
*

*
every

sale,

personal

*
except

for

*

resale,

of

the

*

(2) Producing, fabricating, processing, printing or imprinting
tangible personal property, performed for a person who directly or
indirectly furnishes the tangible personal property, not purchased
by him for resale, upon which such services are performed.
Section 1110(a)of the Tax Law provides, in part:
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
...(D) of any tangible personal property, however acquired, where

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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 1115(d) of the Tax Law provides:
Services otherwise taxable under paragraph (1), (2), (3), (7) or (8)
of subdivision (c) of section eleven hundred five shall be exempt
from tax under this article if the tangible property upon which the
services were performed is delivered to the purchaser outside this
state for use outside this state.
Section 525.2(a)(3) of the Sales and Use Tax Regulations provides that
"[t]he sales tax is a 'destination tax', that is, the point of delivery or the
point at which possession is transferred by the vendor to the purchaser or
designee controls both the tax incident and the tax rate."
Section 527.4(e) of the Sales and Use Tax Regulations provides, in part:
Printing and imprinting. (1)
The services of printing and
imprinting tangible personal property furnished by or on behalf of
a customer of the printer are taxable under section 1105(c)(2) of
the Tax Law; the service of printing or imprinting tangible personal
property which is sold by the person performing the service in
conjunction with the sale is taxable as part of the sale under
section 1105(a) of the Tax Law.
Example 1: A printer prints a form letter on letterhead stationery
furnished by his customer. The printer's services are taxable.
Example 2: A firm addresses envelopes furnished by its customer.
The addressing services are a taxable printing service.
Example 3:
A printer prints business calling cards for his
customer, supplying both the card and the service of printing. This
is the sale of tangible personal property, the total amount being
taxable as such (See section 526.6 of this Title.)
Section 528.23 of the Sales and Use Tax Regulations provides, in part:
Services on tangible personal property which is delivered out of
state. [Tax Law, § 1115(d)] (a) Exemption. The receipts from the
sale of the following services shall be exempt from the sales and
compensating use tax when performed on tangible personal property
which is delivered to the purchaser outside of this State for use
outside of this State:
*

(2)

*

*

the producing, fabricating, processing, printing or imprinting

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of tangible personal property which is not for resale and which was
furnished directly or indirectly to the person performing the
service by the purchaser. . . .
*

*

*

(b) Delivery. (1) Delivery outside of the State shall mean the
tangible personal property upon which the services have been
performed has been delivered by the person performing the services
in his vehicle or by common or contract carrier.
(2)
Delivery to a purchaser or his designee in the State for
immediate transportation outside of the State is not exempt.
Publication 831 (3/97), Collection and Reporting Instructions for Printers
and Mailers provides, in part, as follows:
A printer delivering printed matter to a mailer in New York State is
required to collect the sales tax on the entire charge unless the
printer is furnished with proof of the portion to be mailed to
persons outside of New York State and the destinations of all the
material to be mailed to persons in New York State. If such proof
is furnished, the printer is required to collect tax only on the
charge for that portion of the printed matter that will be mailed to
persons in New York State.
A mailer or printer-mailer is required to collect the statewide and
appropriate local sales taxes on the printing, addressing, and other
taxable charges for printed matter mailed to persons in New York
State, whether mailed from within or outside the state. The mailer
or printer-mailer must maintain records showing the destinations of
all material sent to persons in New York State and the portion of
the material mailed to persons outside New York State.
The statewide tax and local sales taxes, at the rate in effect where
delivery is made, must be collected on the entire charge if printed
matter is delivered to the customer in New York State, even if the
customer will subsequently send some or all of the printed matter to
persons outside New York State.
Publication 842 (12/93) New York State and Local Sales Tax Information for
Printers provides at pages 19 through 21 a detailed listing of tangible personal
property and services and the taxability of such property and services commonly
sold by printers. Among the property and services listed, computer services of
printing letters, labels, etc., printing of envelopes, printing of address
labels, and printing of stationery are subject to sales and use taxes unless sold
for resale, sold to an exempt organization, delivered outside New York State or

are exempt promotional material for use outside New York State.

Moreover, as

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provided at pages 23, 24 and 25, ingredients or components which become part of
the product to be sold, computers used directly and predominantly for typesetting
and/or other production operations, paper stock and printing ink which are
components of the printed matter to be sold may be purchased without the payment
of sales tax.
Opinion
Morton L. Coren, P.C., Adv Op Comm T & F, March 6, 1997, TSB-A-97(12)S,
held that the charges for the services of sorting printed material to prepare for
mailing, folding letters and inserting them in envelopes, sealing the envelopes,
affixing postage or metering mail, bagging and mailing the letter, and the cost
of postal charges were not subject to sales tax if segregated from the taxable
receipts on the customer's bill. However, the receipts from the printing of
letters and address labels and affixing such labels to the printed material or
envelopes were subject to sales tax if mailed to New York addresses. Charges for
printing letters were not taxable if the printed material was being mailed to
addresses outside of New York State and if these charges were separately stated
on the invoice.
MGI Output Technologies, Inc., Adv Op Comm T & F, December 31, 1996,
TSB-A-96(77)S, held that printing monthly statements, confirmation notices and
invoices for various financial institutions constituted the service of printing
and imprinting tangible personal property under Section 1105(c)(2) of the Tax Law
or, alternatively, the sale of tangible personal property under Section 1105(a)
of the Tax Law, and thus, the receipts from printing were subject to sales and
use taxes. However, the receipts from the services of printing, imprinting and
processing tangible personal property or from the sale of printed matter as
tangible personal property, otherwise taxable under Section 1105(a) or Section
1105(c)(2) of the Tax Law, are not subject to sales and use taxes if the printed
material is delivered outside of New York State for use outside the State.
Accordingly, with respect to issue "l", pursuant to Morton L. Coren, P.C.,
supra, and Publication 842, Petitioner's services listed as items a, c, d, e,
f, and g are not subject to State or local sales and use taxes. However, item
b is subject to State and local sales and use tax, if the Printed Material is
mailed to New York addresses. See MGI Output Technologies, Inc., supra. It is
noted that if Petitioner's customers furnish the paper, Petitioner's printing of
the Printed Material constitutes the service of printing or imprinting tangible
personal property under Section 1105(c)(2) of the Tax Law and Section 527.4(e)
of the Sales and Use Tax Regulations. Therefore, the receipts from the sale of
these services are subject to sales and use taxes. Also, in accordance with
Section 1105(c)(2) of the Tax Law and Section 527.4(e) of the Sales and Use Tax
Regulations, if the customer furnishes the outside envelopes, the printing or
application of address labels is either a printing or processing service subject
to such sales and use taxes.
Alternatively, if Petitioner provides the paper and envelopes for printing
and addressing, then Petitioner's sales of the Printed Material and envelopes are
sales of tangible personal property subject to tax under Section 1105(a) or
Section 1110 of the Tax Law.

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With respect to issue "2", pursuant to Section 525.2(a)(3)of the Sales and
Use Tax Regulations and Publication 831, Printed Material mailed by Petitioner
to the Financial Institution's customers is considered to be used at the point
to which it is mailed. Therefore, no tax is due on Printed Material that is
mailed out of the State by the Petitioner to the Financial Institution's
customers.
If Petitioner performs a printing or imprinting service for a
Financial Institution rather than make a sale of tangible personal property, this
service will be exempt from tax under Section 1115(d) of the Tax Law if the
Printed Material is mailed out of the State to the Financial Institution's
customer. However, outside mailing envelopes and address labels used to mail
printed matter from a point in New York State through a post office located in
New York are fully taxable at the location from which they are mailed as their
use occurs in New York State, even though all or a portion of the contents may
be subject to tax based on mailing destination. (See Morton L. Coren, P.C.,
supra.)
Concerning issue "3", pursuant to Morton L. Coren, P.C., supra, and George
Silver, Adv Op St Tx Comm, April 24, 1986, TSB-A-86(15)S, if the charges for
taxable and nontaxable property and/or services are separately stated on the
invoice, then sales tax need only be collected on the taxable receipts.
In
addition, exempt services may be combined in a single amount under the
designation of "non-taxable mailing" or "exempt services" where the invoice
includes an itemized list of the exempt services provided.

DATED: December 4, 1997

NOTE:

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

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