Must an out-of-state book publisher with no New York location register and collect New York sales tax when it sells into the state through a sales agent who solicits customers here?

Plain-English summary

Atlantic Flyway, Inc. and John A. Gambling Enterprises, Inc. (doing business as George Mead's) publishes books in Connecticut and has no place of business in New York. It sells into New York three ways: (1) shipping books directly to retail customers, (2) shipping directly to New York book vendors, and (3) through a sales agent that solicits sales in New York and handles the billing, collection, shipping (from a Maryland warehouse) and bookkeeping. The company asked whether it must register as a vendor and, if so, collect sales tax.

The Department held the company must register and collect.

• Making retail sales delivered in New York triggers vendor duties. Under §§ 1101(b)(8), 1131(1), 1132 and 1134, a person making retail sales of tangible personal property in New York (including sales where the property is delivered to the customer in New York) must register with the Tax Commission and collect the tax.
• Special interstate-vendor rules. A seller located outside New York who solicits sales in New York (or maintains a place of business here) must collect tax on property delivered in New York (20 NYCRR 526.10(e)(1)). By contrast, a seller who only solicits by mailed catalogs and delivers by mail or common carrier — with no place of business and no in-state solicitation — is not required to register (526.10(e)(2)).
• An in-state agent is "soliciting business." A person is soliciting business if it has employees, salesmen, independent contractors or agents soliciting potential customers in the state (20 NYCRR 526.10(d)). The example is squarely on point: an out-of-state company whose sales representative contacts in-state customers is a vendor.
• Result. Because the company makes retail sales delivered in New York and has an agent soliciting customers here, it must register, collect the tax due, remit it, and file returns. Tax is due on the direct retail sales; tax need not be collected on resale sales, but only where the buyer provides a properly completed Resale Certificate (Form ST-120).

What this means for you

An in-state sales agent creates a collection duty, even with no office in New York. If you're an out-of-state seller and someone — an employee, contractor or agent — solicits New York customers on your behalf, you're a vendor and must register, collect and remit New York sales tax on property delivered here.

Pure mail-order without in-state solicitation is treated differently. The regulation carves out sellers who only solicit by mailed catalogs and ship by mail or common carrier, with no place of business or in-state solicitation. The presence of a soliciting agent is what took this seller out of that safe harbor. (Note that nexus standards for remote sellers have changed substantially since 1981; check current law.)

Resale sales require the certificate. You can sell tax-free to buyers purchasing for resale, but only if they give you a properly completed Resale Certificate (Form ST-120). Without it, treat the sale as taxable.

Common questions

Q: We have no office in New York — why do we have to collect its sales tax?
A: Because you make retail sales delivered in New York and have an agent soliciting customers there. Under 20 NYCRR 526.10(d)-(e), that in-state solicitation makes you a vendor required to register and collect.

Q: Would mailing catalogs and shipping by common carrier avoid registration?
A: Under the 1981 regulation, a seller who only solicits by mailed catalogs and delivers by mail or common carrier, with no place of business or in-state solicitation, was not required to register. An in-state soliciting agent removes that protection. (Remote-seller nexus rules have since changed — verify current requirements.)

Q: Do we collect tax on sales to New York bookstores buying for resale?
A: No — but only if the reseller gives you a properly completed Resale Certificate (Form ST-120). Otherwise the sale is taxable.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1101(b)(8) — defines "vendor"
• Tax Law § 1131(1) — identifies persons required to collect the tax
• Tax Law § 1132 — collection of tax by vendors
• Tax Law § 1134 — registration requirement
• 20 NYCRR 526.10(e) — interstate vendors; when out-of-state sellers must (and need not) collect
• 20 NYCRR 526.10(d) — "soliciting business," including through in-state agents
• Resale Certificate (Form ST-120) — required for tax-free resale sales

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h81_120s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-H-81(120)S
Sales Tax
June 15,1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S801224A
PETITION NO. S801224B
PETITION NO. S801224C

On December 24, 1980 three Petitions for Advisory Opinion were received
from Atlantic Flyway, Inc. and John A. Gambling Enterprises, Inc. d/b/a George
Mead's New York, c/o Forman, Kingston, Kops & Dowd, Esqs., 290 Old Country Road,
Mineola, New York 11501. The three Petitions are here consolidated for
disposition.
The issues raised are whether Petitioner is required to register as a
vendor under Article 28 of the Tax Law (Sales and Compensating Use Taxes) and,
if so, whether sales tax is due upon the sales described below.
Petitioner publishes books in Connecticut, and has no place of business in
New York. Petitioner sells books to customers in New York (1) by shipping books
directly to retail customers, (2) by shipping books directly to vendors of books
in New York, and (3) through a sales agent. In the last instance Petitioner's
sales agent does the billing, collection, shipping (from a warehouse in Maryland)
and bookkeeping with respect to the sales it makes, which are to vendors of books
for purposes of resale. Petitioner's sales agent solicits sales in New York.
Article 28 of the Tax Law provides that every person who makes retail sales
of tangible personal property in New York (which includes sales where the
property is delivered to the customer in New York) is required to register with
the Tax Commission and to collect the sales tax due with respect to such sales.
Tax Law, §§110l(b)(8), 1131(1), 1132, 1134. However, special rules apply where
such a vendor is located outside of New York. These rules are set forth in the
Sales and Use Tax Regulations, as follows:
"(e) Interstate vendors. (1) A person outside of this State making sales
to persons within the State, who solicits the sales in New York, as defined in
subdivision (d) of this section, or who maintains a place of business as defined
in subdivision (c) of this section, is required to collect the sales tax on the
tangible personal property delivered in New York or the services performed in New
York.
(2) A person making sales to his customers within the State, who has
solicited such sales by the interstate distribution of catalogs or other
advertising material by mail and who delivers the merchandise through the mail
or by common carrier, and who neither maintains a place of business as defined
in subdivision (c) of this section, nor solicits business as defined in
subdivision (d) of this section, is not required to register as a vendor.
However, if such person registers voluntarily he is under the same obligations
as any other vendor." 20 NYCRR 526.10(e).
The "subdivision (d)" referred to in the foregoing reads, in relevant part,
as follows:
"(d) Soliciting business. (1) A person is deemed to be soliciting business
if he has employees, salesmen, independent contractors, promotion men, missionary
men, service representatives or agents soliciting potential customers in the
State.

TP-8 (4/80)

JAMES H. TULLY, JR., COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

2
TSB-H-81(120)S
Sales Tax
June 15,1981

Example 1: An out of State company that has a sales representative
contacting customers in the State is soliciting business and is a vendor." 20
NYCRR 526.10(d).
Inasmuch as Petitioner makes retail sales of tangible personal property to
customers in New York and has an agent soliciting potential customers in New
York, Petitioner must register as a vendor with the Tax Commission, collect sales
tax where due, remit the same to the Tax Commission, and file sales tax returns.
Sales tax is due on direct sales to retail customers. Sales tax need not be
collected on sales to purchasers buying for the purpose of resale, but only where
such purchasers provide Petitioner with properly completed Resale Certificates
(form ST-120).

DATED: May 29, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau