Are purchases made by New York City teachers under the Teacher's Choice Program exempt from sales tax?

Plain-English summary

Under the New York City Board of Education's Teacher's Choice Program, individual educators receive a check for a set amount to buy materials for their classroom or office. Participants get an Accountability Booklet explaining the program's rules, must fill out a Statement of Purpose before receiving the check, and must submit invoices and an accountability form to the school principal afterward. Everything purchased belongs to the school, not the teacher personally, and unspent balances must go back to the Board of Education. The Board's purchasing office asked the Department whether these teacher purchases are exempt from sales tax.

The Department said yes -- because the purchases are really being made on behalf of the Board of Education, a tax-exempt political subdivision of New York State under Tax Law § 1116(a)(1), the same rule that exempts government agencies generally. But as with the companion ruling on school Custodians (TSB-A-98(30)S), exemption alone isn't enough; the transaction needs the right paperwork. Government entities like a Board of Education exercise their exemption through government purchase orders, not through the nonprofit-style Exempt Organization Certification used by charitable or educational organizations that have their own separate exempt-organization number.

Where a purchase order isn't practical for a classroom-materials purchase, the Department laid out an acceptable substitute: a letter on Board of Education letterhead, signed by the teacher, identifying the teacher and school, stating the dollar amount authorized under the program and that the purchase (together with prior purchases in the period) doesn't exceed that allocation, confirming the purchase is paid for with Board funds, and acknowledging that purchases beyond the authorized amount or for personal use remain taxable and that misuse can carry civil or criminal penalties. Vendors need to keep these letters and tie them to the specific sales invoices they support.

What this means for you

Teachers and school staff buying materials under a district allowance program

If you're purchasing classroom materials with district-provided funds under a program like Teacher's Choice, your purchases can be tax-exempt -- but you need to give the vendor a government purchase order, or (if one isn't issued) a signed letter on district letterhead identifying your authorization, the dollar limit, and confirming the funds are the district's, not your own.

School districts designing employee-purchase programs

Model your program's exemption paperwork on government purchase orders or an equivalent authorization letter, not a generic nonprofit exempt-organization certificate -- that certificate category doesn't fit a government entity and using it risks the exemption being challenged. This mirrors the guidance issued the same day for school Custodians' purchases (TSB-A-98(30)S).

Vendors selling to teachers under district purchase programs

Retain the purchase order or authorization letter and make sure your records tie it to the corresponding sales invoice -- that documentation is what protects your good-faith exemption if it's later questioned.

Common questions

Q: Are teacher purchases under a district materials-allowance program automatically tax-exempt?
A: Only if made on behalf of the district using proper documentation -- a government purchase order, or a substitute authorization letter -- within 90 days of delivery. Without that documentation, the purchase is taxable.

Q: Can a teacher use an Exempt Organization Certification instead of a purchase order?
A: No. That certificate is designed for nonprofit organizations with their own exempt-organization number, not for a government entity like a Board of Education.

Q: Does this ruling apply to my school district's teacher-purchase program?
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. It shows how the Department reasons, but your facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 1116(a)(1) (exempt organizations; government entities)
• Tax Law § 1132(c)(1) (presumption of taxability; exemption documentation)
• 20 NYCRR § 529.1(d)(1) (exemption documentation requirements)
• 20 NYCRR § 529.2(b) (governmental entities as purchasers)
• 20 NYCRR § 532.4(b) (burden of proof; good-faith acceptance of exemption documentation)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_31s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(31)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970715A

On July 15, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Valerie Reilly, New York City Board of
Education, Office of Financial Operations, Purchasing Management, 44-36 Vernon
Blvd., Long Island City, New York 11101.
The issue raised by Petitioner, Valerie Reilly, is
purchases made by school teachers are exempt from sales tax.

whether

certain

Petitioner submits the following facts as the basis for this Advisory
Opinion.
Under the Teacher’s Choice Program, educators are allocated a sum of money
paid by check from the New York City Board of Education (the Board of Education)
to purchase materials for use in their classroom or office assignments. All
participants in the program are provided with a Teacher’s Choice Accountability
Booklet that explains all aspects of the program and clearly defines the
purchasing guidelines established for the program.
Participants are fully
accountable for the materials purchased with their individual allocations and
must complete the Statement of Purpose section of an Accountability Form prior
to receiving their checks. After purchases have been completed and brought into
their schools, teachers must complete the accountability section of the form and
submit it, together with purchase invoices, to the school principals.
All
materials are the property of the school and not of the individual teacher.
Teachers must return unspent balances to the Board of Education.
Applicable Tax Law and Regulations
Section 1105(a) of the Tax Law imposes sales tax on “[t]he receipts from
every retail sale of tangible personal property, except as otherwise provided in
this article.”
Section 1116 of the Tax Law provides, in part,
Exempt organizations. (a) Except as otherwise provided in
this section, any sale . . . to any of the following . . . or any
use . . . by any of the following shall not be subject to the sales
and compensating use taxes imposed under this article:
(1)
The state of New York, or any of its agencies,
instrumentalities,
public
corporations
(including
a
public
corporation created pursuant to agreement or compact with another
state or Canada) or political subdivisions where it is the
purchaser, user or consumer, or where it is a vendor of services or
property of a kind not ordinarily sold by private persons;
*

*

*

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TSB-A-98(31)S
Sales Tax

Section 1132(c)(1) of the Tax Law provides in part:
For the purpose of proper administration of this article and
to prevent evasion of the tax hereby imposed, it shall be presumed
that all receipts for property . . . of any type mentioned in
subdivisions (a) . . . of section eleven hundred five . . . are
subject to tax until the contrary is established and the burden of
proving that any receipt . . . is not taxable hereunder shall be
upon the person required to collect tax or the consumer. Except as
provided in subdivision (h) or (k) of this section, unless . . . the
purchaser, not later than ninety days after delivery of the property
. . . furnishes to the vendor: any affidavit, statement or
additional
evidence,
documentary
or
otherwise,
which
the
commissioner may require demonstrating that the purchaser is an
exempt organization described in section eleven hundred sixteen, the
sale shall be deemed a taxable sale at retail.
Where . . . an
affidavit, statement or additional evidence referred to in the
previous sentence is received within the time limit set forth
therein, but is deficient in some material manner, and where such
deficiency is thereafter removed, the receipt of . . . such
affidavit, statement or additional evidence shall be deemed to have
satisfied all of the requirements of the preceding sentence. Where
such . . . an affidavit, statement or additional evidence has been
furnished to the vendor, the burden of proving that the receipt . .
. is not taxable hereunder shall be solely upon the customer. The
vendor shall not be required to collect tax from purchasers who
furnish . . . such an affidavit, statement or additional evidence in
proper form . . . .
Section 529.1(d)(1) of the Sales and Use Tax Regulations provides, in part:
Any person or organization claiming exemption from tax must
furnish its vendor with documentation substantiating its right to
the exemption claimed before it may purchase exempt from tax . . .
. In addition, the billing must be made directly to the person or
organization and paid for [sic.] from the funds of such person or
organization, except as otherwise provided in this Title.
Any
transaction which is not supported by proper documentation is
subject to tax at the time of purchase. See Part 532 (Collection of
Tax) of this Title.
Section 529.2(b) of the Regulations provides:
As purchaser. (1) New York State, or any of its agencies,
instrumentalities, public corporations or political subdivisions
(hereinafter referred to as New York State governmental entities)
are not subject to sales or use tax when they are the purchaser,
user, or consumer of tangible personal property . . . .

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Sales Tax

(2)
New York State governmental entities as purchasers,
users, consumers . . . must exercise their right to exemption
through the issuance of governmental purchase orders or the
appropriate exemption document.
Section 532.4(b) of the regulations provides in part:
Burden of Proof. (1) The burden of proving that any receipt
. . . is not taxable shall be upon the person required to collect
the tax and the customer.
(2) A vendor who in good faith accepts from a purchaser a
properly completed exemption certificate or, as authorized by the
Department, other documentation evidencing exemption from tax not
later than 90 days after delivery of the property . . . is relieved
of liability for failure to collect the sales tax with respect to
that transaction.
The timely receipt of the certificate or
documentation itself will satisfy the vendor’s burden of proving the
nontaxability of the transaction and relieve the vendor of
responsibility for collecting tax from the customer.
(i) A certificate or other document is “accepted in good
faith” when a vendor has no knowledge that the exemption certificate
or other document issued by the purchaser is false or is
fraudulently presented.
If reasonable ordinary due care is
exercised, knowledge will not be imputed to the seller required to
collect the tax.
Opinion
Governmental entities that are exempt from tax under Section 1116(a)(1) of
the Tax Law may use government purchase orders, affidavits and other evidence of
exemption to make exempt purchases. Organizations that are exempt from tax under
Section 1116(a)(4) of the Tax Law may use the Exempt Organization Certification
(Form ST-119.1). Under the Teacher’s Choice Program, teachers may make exempt
purchases by providing vendors, within 90 days of the delivery date, with a
government purchase order or other appropriate exemption document.
If a government purchase order is not available, teachers may make exempt
purchases under the Teacher’s Choice Program by furnishing vendors with a letter
on the Board of Education’s letterhead, signed by the teacher, which reads
substantially as follows:
I, [name of teacher], a teacher at the [name of school], am
authorized under the Teacher’s Choice Program to purchase
instructional materials for the Board of Education of The City of
New York (the “Board of Education”) up to the amount of [dollar
amount of allocation under the Teacher’s Choice Program], and I am
purchasing these materials from [name of vendor] on behalf of the

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TSB-A-98(31)S
Sales Tax

Board of Education pursuant to this Program. This purchase is being
paid for from funds made available by the Board of Education. The
total of this purchase and prior allowable purchases made by me
under this Program during the period from [applicable purchasing
period under the Teacher’s Choice Program] does not exceed the
amount specified above.
I understand that any purchases I make in excess of the amount
specified above, or any purchases for personal use, rather than for
use as instructional materials at my school, are subject to sales
tax. I understand that civil and /or criminal penalties may result
from the misuse of this document.
Vendors should retain these letters to prove the exempt status of sales
made under the Teacher’s Choice Program, and must be able to associate the
letters with particular sales invoices. See Section 533.2 of the Sales and Use
Tax Regulations. Sales invoices must indicate that the purchases are being made
on behalf of the Board of Education.

DATED: May 20, 1998

NOTE:

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

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