Does a construction-logistics company that arranges warehousing and delivery of building materials for its customers have to register as a New York sales tax vendor?

Plain-English summary

A.J. Logistics, Inc. helps its customers manage building materials, fixtures, and furniture for construction projects: scheduling receipt of shipments, warehousing them, inspecting and separating items, staging them, and delivering them to the job site as needed. It never takes ownership of the goods -- its customers direct their own vendors to ship materials to a warehouse "care of" A.J. Logistics. A.J. Logistics contracts with local warehouse companies (as its "Service Agent") to actually store and handle the goods, pays those warehouse companies, and then bills its own customers a flat project fee covering its costs plus its service fee. It asked whether it needs to register with New York and collect sales tax on what it charges its customers.

New York taxes the service of storing tangible personal property (other than property held for sale in the ordinary course of business) as an enumerated taxable service. The Department found that A.J. Logistics is really in a chain of buying and reselling storage: it buys warehouse storage services from the warehouse companies (a genuine vendor-vendee relationship under the Service Agent Agreement) and resells that same storage, bundled with its other logistics services, to its customers under the Customer Agreement. Because the warehouse facilities are located in New York, A.J. Logistics is making sales of a taxable service in New York and therefore is a "vendor" required to register and collect state and local sales tax on its charges to customers. On the other side of the transaction, its own purchases of storage from the warehouse companies are exempt as a purchase for resale, as long as it gives each warehouse company a properly completed resale certificate (Form ST-120) within 90 days.

What this means for you

Logistics, fulfillment, and construction-materials-handling companies

If your business model involves contracting with warehouses to store your customers' goods and then billing your customers for that arrangement (even bundled with receiving, staging, and delivery services), you're likely reselling a taxable storage service and need to register as a New York sales tax vendor -- regardless of the fact that you never own the goods yourself.

Construction companies and developers using a logistics/materials-handling vendor

Expect your logistics provider to charge sales tax on its invoices if the warehouse it uses is located in New York, since the underlying service being resold to you is taxable storage.

Accountants and tax professionals

The key mechanical point here is the two-sided resale structure: the logistics company both buys storage for resale (exempt with a resale certificate to its warehouse vendor) and separately sells storage to its own customer (taxable, requiring vendor registration) -- the same "buy for resale, sell as a taxable service" pattern that shows up across many resale-exemption rulings in this corpus, just applied to a storage/logistics business model instead of retail goods.

Common questions

Q: Does A.J. Logistics have to collect tax even though it never owns the materials it's handling?
A: Yes -- ownership of the underlying goods doesn't matter; what matters is that the company is selling a taxable storage service (bundled with related handling services) to its customers.

Q: Can the logistics company avoid paying tax on what it pays the warehouse companies?
A: Yes -- since it's buying that storage exclusively to resell it to its own customers, it can give the warehouse companies a resale certificate (Form ST-120) within 90 days and avoid paying tax on those purchases itself.

Q: What if the warehouse used for a particular project is located outside New York?
A: The opinion's conclusion is specifically tied to storage services where the warehouse facility is located in New York State; different facts (an out-of-state warehouse) would need separate analysis.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(3), (8) (definitions of "receipt"; "vendor")
• Tax Law § 1105(c)(4) (storage of tangible personal property)
• Tax Law § 1131(1) (persons required to collect tax)
• Tax Law § 1132(c) (resale certificates)
• Tax Law § 1134(a)(1)(i) (vendor registration)
• 20 NYCRR § 527.6 (storage of tangible personal property)
• 20 NYCRR § 532.4(d) (resale certificates)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a99_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(1)S
Sales Tax
January 19, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S980219A

On February 19, 1998, the Department of Taxation and Finance received a Petition for
Advisory Opinion from A.J. Logistics, Inc., P.O. Box 15268, Ft. Wayne, Indiana 46885. Petitioner,
A.J. Logistics, submitted additional information with respect to the Petition on June 23, 1998.
The issue raised by Petitioner, A.J. Logistics, Inc., is whether Petitioner is required to register
with New York State and collect and pay sales tax on the services it provides to its customers in New
York State.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner provides logistics services to its customers, with respect to its customers'
construction projects. These services include the following:
a) scheduling of all receiving, warehousing and delivery of materials and fixtures;
b) warehousing;
c) receiving of building materials, fixtures and furniture (to be used in construction projects
of its customers);
d) inspection of the materials, fixtures and furniture received;
e) the separation of the materials, fixtures and furniture received and staging of these items
for delivery to the job site as the customer requests;
f) delivery of the materials, fixtures and furniture to the job site as needed; and
g) monitoring projects and trouble shooting as problems develop on projects.
All materials, fixtures and furniture are owned by Petitioner's customers and at no time does
ownership of the goods transfer to Petitioner or the warehouse or shipping companies that Petitioner
hires. Customers contact Petitioner for the purpose of obtaining a quote for the cost of handling
building materials, fixtures and furniture for each project.

-2­
TSB-A-99(1)S
Sales Tax
January 19, 1999

Petitioner provides its customers with its services by entering into Service Agent Agreements
with warehouse companies. These agreements can be for a period of less than thirty days to more
than one year. The sample Service Agent Agreement included with the Petition provides, in part:
A.J. Logistics, Inc. ("Company"), an Indiana corporation, hereby appoints
warehousemen ("Service Agent"), whose name is listed on the reverse/front side
hereof, as its service agent, and Service Agent accepts the appointment, subject to the
limitations and further agreements herein. The scope of this agreement is limited
exclusively to providing Company with warehousing and local delivery services ...
The warehouse companies bill Petitioner and are paid by Petitioner. Petitioner in turn bills
its customers on a flat fee basis per project for its costs and its service fee or profit.
The sample Customer Agreement included with the Petition provides, in part:
Customer hereby contracts for services in accordance with the specification
as fully set forth on the face of this Agreement and AJ Logistics, Inc. (AJL) does
hereby undertake and agree to provide said services utilizing as warehousemen
qualified warehouses with facilities in the general community wherein the services
is [sic] to be performed....To implement this Agreement, Customer agrees to direct
its vendors and suppliers to ship the supplies to Customer as follow: (Customer's
name) c/o AJL warehouse. The furnishings shall be stored by AJ
Logistics/warehousemen awaiting further transportation instructions from the storage
to the destination to the job site or inside as specified by Customer.
Also, in the Schedule of Rates, which is part of the sample Service
Agreement, under the headings of "WAREHOUSE HANDLING IN" and
"WAREHOUSE STORAGE" it is set forth that Petitioner, in part, charges certain
rates as differentiated by a "Pallet Charge", a "Carpet Roll Charge" and a "Ceiling
Charge" for the handling and storage of goods, respectively.
Applicable Law and Regulations
Section 1101(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
TSB-A-99(1)S
Sales Tax
January 19, 1999

(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.
For special rules governing computation of receipts, see section eleven hundred
eleven.
*

*

*

(8) Vendor. (i) The term "vendor" includes:
(A) A person making sales of tangible personal property or services, the
receipts from which are taxed by this article; ...
Section 1105 of the Tax Law provides in part as follows:
§ 1105. Imposition of sales tax. On and after June first, nineteen hundred
seventy-one, there is hereby imposed and there shall be paid a tax of four percent
upon:
*

*

*

(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 1131 of the Tax Law, provides, in part:
§ 1131. Definitions. When used in this part IV,
(1) "Persons required to collect tax" or "person required to collect any tax
imposed by this article" shall include: every vendor of tangible personal property or
services; every recipient of amusement charges; and every operator of a hotel ....

-4­
TSB-A-99(1)S
Sales Tax
January 19, 1999

Section 1134(a)(1)(i) of the Tax Law provides, in part:
Every person required to collect any tax imposed by this article, ... shall file
with the commissioner a certificate of registration, in a form prescribed by the
commissioner, at least twenty days prior to commencing business or opening a new
place of business or such purchasing, selling or taking of possession or payment,
whichever comes first ....
Section 527.6 of the Sales and Use Tax Regulations provides, in part:
Storage of tangible personal property. (Tax Law, § 1105(c)(4)) (a)
Definition. Storage is the provision of a place for the safekeeping of goods, without
regard to the manner of payment or length of time of the service.
(b) Imposition. (1) The tax is imposed on the sale, except for resale, of the
service of storing tangible personal property, and the rental of safe deposit boxes and
similar space.
(2) While the tax is imposed on the service of providing storage space, it is
not imposed on the lease of real property for storage. A lease can be distinguished
from the provision of storage space, in that under a lease, the tenant contracts for a
certain amount of footage in a specific location, the tenant has unlimited control of
access to the space, and may supply his own racks, cabinets and other physical
facilities.
*

*

*

Example 2: A person stores his goods at a warehouse, in whatever space the
warehouse company has available. The charges for such storage are taxable.
Example 3: A person stores his goods in a specific space in a building, and
no other person has access to the space assigned. This is storage of tangible personal
property and the charges are taxable.
*

*

*

(c) Exclusions. The storage of property held for sale in the regular course of
business, and the sale of the service of storage for resale is not taxable.

-5­
TSB-A-99(1)S
Sales Tax
January 19, 1999

Example 1: A furniture store maintaining part or all of its inventory in a
public warehouse is not liable for tax on the storage charges because the tangible
personal property is held for resale in the regular course of business.
Example 2: A cleaning establishment offering clothing storage services to its
customers has the articles stored in the facilities of a public warehouse. Since the
storage service acquired by the cleaning establishment is resold, no tax is due on the
charge by the warehouse to the cleaning establishment. When billing the customer
for storage services, the cleaning establishment must charge sales tax at the rate in
effect at the point where the clothing is accepted for storage (either the customer's
residence or location of the business) even though the storage facility may be located
in an area having a different tax rate.
Opinion
A significant element of Petitioner's business activity is the provision of warehouse storage
services to its customers. Petitioner provides these services by purchasing them directly from
warehouse companies under the Service Agent Agreement, which creates a vendor-vendee
relationship between Petitioner and the warehouse company. The services purchased by Petitioner
are billed to and paid directly by Petitioner. The Service Agent Agreement designates the warehouse
company as Petitioner’s service agent.
Petitioner, in turn, resells the warehouse storage services to its customers under the Customer
Agreement. It should be noted that under Section 1.03 of the Customer Agreement it is stated "To
implement this Agreement, Customer agrees to direct its vendors and suppliers to ship the supplies
to Customer as follows: (Customers name) c/o AJL warehouse. The furnishings shall be stored by
AJ Logistics/warehousemen awaiting further transportation instructions from the storage point to
the destination to the job site or inside as specified by Customer."
The warehouse storage service provided by Petitioner to its customers is an enumerated
taxable service under Section 1105(c)(4) of the Tax Law. Where the warehouse facility is located
in New York State, Petitioner is a person making sales of taxable services in New York State, and
Petitioner is a vendor as defined in Section 1101(b)(8) of the Tax Law. Therefore, Petitioner is a
person required to collect the sales tax in accordance with Section 1131 of the Tax Law.
Accordingly, Petitioner is required to register with New York State for sales tax purposes pursuant
to Section 1134 of the Tax Law.
The purchases of services by Petitioner from the warehouse companies are excepted from
the imposition of sales tax in accordance with Section 1105(c) of the Tax Law as they represent
purchases of services by Petitioner for resale to its customers. In order to purchase these services
without payment of tax, Petitioner should present a warehouse company with a properly completed

-6­
TSB-A-99(1)S
Sales Tax
January 19, 1999

resale certificate (Form ST-120) within 90 days of the date of sale. See Section 1132(c) of the Tax
Law and Section 532.4(d) of the Sales and Use Tax Regulations.

DATED: January 19, 1999

NOTE:

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

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