Are a book distributor's printed catalogs, a rented mailing list used to address them, and the photography/artwork/printing-plate materials used to produce them all exempt from New York sales tax when mailed free to customers?

Plain-English summary

A New York-incorporated book distributor ("Book Company") periodically sends updated catalogs listing its current inventory to customers and prospective customers, mailed for free through a New York printer/mailer. To cut costs, Book Company handles part of the production itself: it buys photographs, artwork, and typography, has its employees create camera-ready mechanicals, sends those to a separation house for color separations, has a plate maker turn the separations into printing plates, and delivers the finished plates to the printer/mailer, which then prints and mails the catalogs. To reach new prospective customers, Book Company also rents a computerized mailing list that the printer/mailer uses to address the catalogs.

New York's "promotional materials" exemption specifically covers catalogs -- they're printed advertising literature squarely within the statutory definition. Under the Department's own 1997 guidance on this exemption, printed promotional materials mailed to destinations within New York are tax-exempt once four conditions are met: they go to customers or prospective customers, they're mailed by common carrier/USPS/similar service (directly or through a printer/mailer acting on the purchaser's behalf), there's no charge to the recipient, and the purchaser gives the seller a completed Form ST-121.2 (Certificate of Exemption for Purchases of Promotional Materials). Book Company's catalogs meet all four, so the catalogs themselves are exempt, with the ST-121.2 due to the printer/mailer within 90 days of delivery.

The rented mailing list gets its own, related exemption: mailing lists used directly in conjunction with exempt promotional materials are themselves exempt from tax -- here, the rented list is used precisely to address the catalogs for mailing, so the rental charge is untaxed (again with a timely ST-121.2 to the list's owner). Finally, the production inputs -- photographs, artwork, typography, color separations, and printing plates -- follow the Department's own published example (TSB-M-97(6)S, Example 2) for materials that a company supplies toward producing exempt promotional materials: because these items are used to produce the exempt catalogs, they too are exempt from sales and use tax, again conditioned on a timely ST-121.2 to each supplier.

What this means for you

Catalog publishers, retailers, and mail-order businesses

Free-mailed catalogs qualify as exempt "promotional materials" under the same framework that covers brochures and other advertising literature -- get the paperwork right (a Form ST-121.2 to every relevant vendor within 90 days) rather than assuming exemption is automatic.

Businesses that self-produce parts of their own marketing materials

Handling design and pre-press work in-house (buying photography, artwork, separations, and plates directly) doesn't forfeit the promotional-materials exemption -- those inputs are exempt too when they go into producing materials that ultimately qualify, following the Department's own Example 2 template.

Businesses renting mailing lists for prospecting

A rented mailing list used to address exempt promotional materials is itself exempt -- but the exemption is tied to that specific use, so keep the connection between the list and the qualifying mailing documented.

Common questions

Q: Does self-producing part of a catalog (buying photography/artwork directly instead of through the printer) change the exemption?
A: No -- as long as those materials are used to produce catalogs that qualify as exempt promotional materials, the production inputs are exempt too, following the Department's own published example.

Q: What paperwork does a company need to claim this exemption?
A: A properly completed Form ST-121.2 (Certificate of Exemption for Purchases of Promotional Materials) given to each relevant seller -- the printer/mailer, the mailing-list owner, and each supplier of photography/artwork/separations/plates -- within 90 days of delivery.

Q: Would this exemption still apply if the catalogs were mailed only to existing customers, not prospects?
A: Yes -- the exemption covers materials mailed to "customers or prospective customers" alike, as long as there's no charge to the recipient and the other conditions are met.

Citations and references

Statutes and guidance:

• Tax Law § 1101(b)(12) (definition of promotional materials)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1115(n)(1) (exemption for promotional materials mailed to out-of-state customers)
• Tax Law § 1115(n)(2) (exemption for mailing-list services on exempt promotional materials)
• Tax Law § 1115(n)(3) (exemption for vendor's separately stated shipping cost)
• Tax Law § 1115(n)(4) (exemption for promotional materials mailed at no charge)
• Tax Law § 1115(n)(5) (exemption for services performed on exempt promotional materials)
• Technical Services Bureau Memorandum TSB-M-97(6)S (August 20, 1997), Expanded Sales and Compensating Use Tax Exemption for Promotional Materials

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_40s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(40)S
Sales Tax
September 17, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S990622B

On June 22, 1999, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Hutton & Solomon LLP, 342 Madison Avenue, Suite 1210, New York, NY 10173.
The issues raised by Petitioner, Hutton & Solomon LLP, are:
1.

Whether the purchase of printed catalogs, which are delivered by mail
to customers or potential customers within New York State, are
exempt from sales and compensating use tax under Section
1115(n)(4) of the Tax Law.

2.

Whether the rental of a mailing list which becomes a critical element
of exempt promotional materials is also exempt from sales and
compensating use tax.

3.

Whether the purchase of photographs, artwork, typography,
separations and printing plates used to produce the printed catalogs
are exempt from sales and compensating use tax.

Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner’s client is a distributor of books (the "Book Company"). Book Company was
incorporated and is existing under the laws of the State of New York. Periodically, Book Company
sends updated catalogs, which contain a current listing of the books it sells from inventory, to its
customers and potential customers.
Book Company contracts with a printer/mailer in New York for the purchase of the printed
catalogs and the mailing of such catalogs to its customers and potential customers located within and
without New York State, without charge to such customers. In order to reduce its cost for the
purchase and mailing of these catalogs, Book Company will itself perform certain functions in
creating the finished catalog.
Book Company purchases photographs, artwork and typography from third parties. Its
employees use these items to create camera-ready mechanicals. The mechanicals are then given to
a separation house, which uses them to create color separations. The color separations are sold to
Book Company. Book Company has the separations delivered to a plate maker. The plate maker

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uses the color separations to create printing plates which will be used in the printing of the catalog.
The plate maker will deliver the completed plates, on behalf of Book Company, to the printer/mailer.
Once the printer/mailer is in possession of the printing plates, it will use them to print the catalogs.
Book Company will have the catalogs mailed to its existing customers as well as to
prospective customers. Since it needs assistance in obtaining the names and addresses of prospective
customers, Book Company will rent from a third party a mailing list in computer disk form that will
be supplied to the printer/mailer. The printer/mailer will use the mailing list rented by Book
Company to print the addresses on the catalogs as part of the mailing process and will arrange for
mailing with the U. S. Postal Service.
Book Company will provide the third parties from whom it purchased the artwork,
photographs, typography, separations and printing plates with a properly completed exemption
certificate for the purchase of machinery and equipment. It will also provide the printer/mailer and
the third party from whom the mailing list was rented with a properly completed exemption
certificate for the purchase of promotional materials.
Applicable Laws
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:
*

*

*

(12) Promotional materials. Any advertising literature, other related tangible
personal property (whether or not personalized by the recipient’s name or other
information uniquely related to such person) and envelopes used exclusively to
deliver the same. Such other related tangible personal property includes, but is not
limited to, free gifts, complimentary maps or other items given to travel club
members, applications, order forms and return envelopes with respect to such
advertising literature, annual reports, promotional displays and Cheshire labels but
does not include invoices, statements and the like.
Section 1105(a) of the Tax Law imposes sales tax on the receipts from every retail sale of
tangible personal property, except as otherwise provided.

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Section 1115(n) of the Tax Law provides, in part:
(1) . . . promotional materials mailed, shipped or otherwise distributed from
a point within the state, by or on behalf of vendors or other persons to their customers
or prospective customers located outside this state for use outside this state shall be
exempt from the tax imposed under subdivision (a) of section eleven hundred five
and the compensating use tax imposed under section eleven hundred ten of this
article.
(2) Services otherwise taxable under paragraph one or two of subdivision (c)
of section eleven hundred five of this article relating to mailing lists or activities
directly in conjunction with mailing lists shall be exempt from tax under this article
if such services are performed on or directly in conjunction with promotional
materials exempt under paragraph one or four of this subdivision.
(3) Receipts from the retail sale of promotional materials, receipts from every
sale, except for resale, of services described in paragraph one or two of subdivision
(c) of section eleven hundred five to such promotional materials and consideration
given or contracted to be given for either such materials or such services to such
materials shall be exempt from tax under this article to the extent of the vendor's
separately stated charge to the purchaser of such materials or services for the vendor's
cost to ship or deliver such materials to the purchaser's customers or prospective
customers by means of the United States postal service, paid by the vendor to such
postal service to ship or deliver such materials, but only where the vendor separately
states such charge to ship or deliver (not exceeding the vendor's United States postal
service costs) in a written contract with the purchaser or on a written bill rendered to
the purchaser.
(4) Notwithstanding any contrary provisions of paragraph one of this
subdivision, promotional materials which are printed materials and promotional
materials upon which services described in paragraph two of subdivision (c) of
section eleven hundred five have been directly performed shall be exempt from tax
under this article where the purchaser of such promotional materials mails or ships
such promotional materials, or causes such promotional materials to be mailed or
shipped, to its customers or prospective customers, without charge to its customers
or prospective customers, by means of a common carrier, United States postal service
or like delivery service.

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(5) Services otherwise taxable under paragraph two of subdivision (c) of
section eleven hundred five performed on promotional materials exempt under
paragraph four of this subdivision shall be exempt from tax under this article.
Technical Service Bureau Memorandum, Expanded Sales and Compensating Use Tax
Exemption for Promotional Materials, August 20, 1997, TSB-M-97(6)S, provides, in part:
Promotional Materials Exempt Under Section 1115(n)(4) of the Tax Law
Printed Promotional Materials
Effective March 1, 1997, printed promotional materials mailed or shipped to
destinations in the state are exempt from tax when all of the conditions listed below
are met.
•

The printed promotional materials are ultimately mailed or shipped to
customers or prospective customers of the purchaser of the printed
promotional materials.

•

The printed promotional materials are mailed or shipped by the purchaser of
the materials using a common carrier, the U.S. Postal Service or a like
delivery service. (This requirement is also met if the mailing or shipping is
arranged by a third party (such as a printer/mailer) on behalf of the
purchaser of the promotional materials.)

•

There is no charge to the purchaser's customer or prospective customer
(ultimate recipient) for the promotional materials, or for mailing or shipping
them.

•

The purchaser of the promotional materials gives a properly completed Form
ST-121.2, Certificate of Exemption for Purchases of Promotional Materials,
to the seller of the promotional materials.
*

*

*

(For purposes of examples 1, 2, 3, 4, 7, and 8 of this TSB-M, it is assumed
that the purchaser of the exempt promotional materials or exempt services will
furnish the seller of the exempt promotional materials or exempt services a properly
completed Form ST-121.2, Certificate of Exemption for Purchases of Promotional
Materials. It is also assumed that the promotional materials will be delivered to the

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purchaser’s customers or prospective customers [ultimate recipients] without charge
to those customers or prospective customers.)
*

*

*

Example 2. A New York company contracts with a printer/mailer located
in New York to produce brochures (promotional materials) to be sent to customer’s
in and out of New York via the U. S. Postal Service. Under the agreement, the New
York company furnishes the printer/mailer the paper, ink, and printing plates to print
the brochures, and envelopes in which the brochures will be mailed. The New York
company also purchases a mechanical (artwork) and color separations for use in
producing the printing plates supplied to the printer. The ink will also be used to
print the company’s logo on the envelopes in which the brochure will be mailed. In
addition, the New York company provides the printer/mailer a customer/prospective
customer mailing list in the form of address labels. The printer/mailer prepares the
brochures, prints the New York company’s logo on the envelopes, affixes the address
labels, stuffs the brochures into the envelopes, and arranges for mailing with the
Postal Service.
The paper, ink, mechanical (artwork), color separations and printing plates
used in producing the promotional materials printed for the New York company by
the printer are exempt from sales tax. The envelopes and address labels may be
purchased exempt from tax by the New York company as these items qualify as
exempt promotional materials, based on the use described above. The
printer/mailer’s charges for printing the brochures, printing the New York company’s
logo on the envelopes, and affixing the address labels to the envelopes are exempt
from sales tax. The printer/mailer’s charges for inserting the brochures into the
envelopes and for mailing (postage) are not subject to tax.
Opinion
With respect to issue 1, the term "promotional materials" as defined in Section 1101(b)(12)
of the Tax Law includes catalogs. Catalogs are printed promotional materials. In accordance with
Technical Services Bureau Memorandum, Expanded Sales and Compensating Use Tax Exemption
for Promotional Materials, TSB-M-97(6)S, supra, printed promotional materials to be delivered by
mail to customers or potential customers within New York, without charge to such customers, are
not subject to sales and compensating use tax pursuant to Section 1115(n)(4) of the Tax Law.
Therefore, the Book Company’s purchase of the catalogs will not be subject to tax. The Book
Company, however, must furnish its printer/mailer with a properly completed Form ST-121.2,
Certificate of Exemption for Purchase of Promotional Materials, within 90 days of delivery.

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Concerning issue 2, pursuant to Section 1115(n)(2) of the Tax Law, mailing lists are exempt
from sales tax imposed under Section 1105(c) of the Tax Law if such mailing lists are used directly
in conjunction with exempt promotional material. The mailing list rented by the Book Company
is used directly in conjunction with printing the address labels in order for the catalogs described
above to be mailed to customers and prospective customers. Accordingly, the rental by Book
Company of the mailing list used to address the catalogs will not be subject to sales and
compensating use tax. The Book Company, however, must furnish the third party from which it
rented the mailing list with a properly completed Form ST-121.2, Certificate of Exemption for
Purchase of Promotional Materials within 90 days of delivery.
As for issue 3, in accordance with Example 2 of Technical Services Bureau Memorandum,
Expanded Sales and Compensating Use Tax Exemption for Promotional Materials, TSB-M-97(6)S,
supra, the purchase by the Book Company of photographs, artwork, typography, separations and
printing plates used to produce the catalogs described above which are exempt promotional materials
and which are purchased by the Book Company from a printer/mailer are not subject to sales and
compensating use tax. The Book Company, however, must furnish its printer/mailer and the third
parties from whom it purchased the photographs, artwork, typography, separations and printing
plates with a properly completed Form ST-121.2, Certificate of Exemption for Purchase of
Promotional Materials within 90 days of delivery.

DATED: September 17, 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.