If a nationwide outdoor-goods retailer opens a New York retail store, does that create sales-tax nexus for a separate, related mail-order catalog partnership that has no independent physical presence in New York?

Plain-English summary

Bass Pro Outdoor World, L.L.C. operates retail stores in ten states and was considering opening one in New York (which it acknowledged would create nexus and require it to register and collect New York tax on its own store sales). A related company, BPS Catalog, L.P. — a separate Missouri limited partnership under common ownership (Bass Pro, Inc. owns both the retail LLC and holds a 99% limited-partner stake in the catalog partnership) — runs a mail-order catalog business selling to New York residents purely by mail/common-carrier solicitation and delivery, with no independent New York presence. Bass Pro asked whether opening its own New York retail store would drag the separate catalog partnership into New York's tax net too.

The Department applied the constitutional nexus framework (citing Quill Corp. v. North Dakota and National Bellas Hess): pure mail-order solicitation and delivery from out of state, with no other in-state activity, isn't enough nexus on its own. But nexus law also recognizes that an out-of-state seller can acquire nexus through a related company's in-state presence in two specific ways: (1) if the in-state entity performs sales-related activities on the out-of-state entity's behalf (accepting catalog returns, taking catalog orders, distributing catalog materials, referring customers, fulfilling catalog orders), that in-state activity counts as solicitation for the catalog business; or (2) if the two companies are so commingled (shared inventory, shared accounting/legal staff, intertwined advertising) that they're really operating as each other's "alter ego" rather than genuinely separate entities, their combined activities create nexus for both.

Based on the facts presented — the retail LLC and catalog partnership are represented as operating as genuinely separate and distinct entities, with the retail store performing no activities on the catalog partnership's behalf — the Department concluded neither entity would be required to collect tax on the catalog partnership's separate mail-order sales, as long as those facts hold. But the opinion is explicit that this conclusion is fact-dependent going forward: if the retail store ever starts assisting catalog sales, or if the companies' operations become commingled enough to look like alter egos, that would flip the answer and require the catalog partnership to register and collect New York tax too.

What this means for you

Multi-channel retailers with separate corporate entities for stores vs. catalog/e-commerce

Keeping genuinely separate legal entities for different sales channels can preserve each entity's independent nexus analysis — but only if the separation is real in practice, not just on paper. Avoid having store employees perform any catalog-related tasks (accepting returns, taking orders, distributing catalog materials) if you want to keep the catalog entity's nexus analysis independent of the store's.

Businesses under common ownership with multiple sales channels

Common ownership alone (even 99% ownership) doesn't automatically create combined nexus — the key factors are whether the entities' operations are actually commingled (shared inventory, staff, advertising) and whether one performs sales activities for the other, not simply who owns what.

Accountants and tax professionals

This opinion is a useful, fact-specific illustration of the "alter ego" and "in-state solicitation through an affiliate" doctrines applied to a store-plus-catalog corporate structure — a good reference for any client considering opening a physical location while operating a separate mail-order/e-commerce entity.

Common questions

Q: If a company opens a physical store in New York, does that automatically create nexus for its separate mail-order affiliate too?
A: Not automatically — as long as the two entities remain genuinely separate, with the store performing no sales activities on the mail-order affiliate's behalf and the companies not operating as each other's alter ego.

Q: What kinds of in-state store activities would create nexus for a separate mail-order business?
A: Accepting returns of mail-order merchandise, taking mail-order phone/in-person orders, distributing mail-order catalogs or discount coupons, referring customers to the mail-order business, or fulfilling mail-order sales at the store.

Q: Does common ownership between a retail store and a catalog business create nexus by itself?
A: No — common ownership alone isn't enough; what matters is whether the companies' actual operations are commingled to the point of being alter egos, or whether one performs sales activities for the other.

Q: Can this ruling be relied on if the facts change later?
A: No — the Department explicitly notes that changed circumstances (the store starting to assist catalog sales, or increased commingling between the entities) could flip this conclusion and create nexus for the catalog business.

Citations and references

Statutes and regulations:

• Tax Law § 1101(a) (person definition), § 1101(b)(8) (vendor definition)
• Tax Law § 1131(1) (persons required to collect tax)
• 20 NYCRR § 526.10 (vendor; persons included)

Cases and prior rulings referenced:

• National Bellas Hess, Inc. v. Illinois, 386 US 753
• Quill Corp. v. North Dakota, 504 US 298
• Nelson v. Sears, Roebuck and Co., 312 US 359
• Nelson v. Montgomery Ward, 312 US 373
• Scripto, Inc. v. Carson, 362 US 207
• International Shoe Co. v. Washington, 326 US 310
• National Geographic Society v. California Board of Equalization, 430 US 551
• Franklin Mint Corp. v. Tully, 94 AD2d 877, aff'd 61 NY2d 980
• Aldens, Inc. v. Tully, 49 NY2d 525
• Spencer Gifts, Inc., TSB-A-86(37)S
• Harfred Operating Corporation, TSB-A-86(28)S
• Miller Brothers Co. v. Maryland, 347 US 340
• Orvis Company, Inc. v. Tax Appeals Tribunal, 86 NY2d 165
• Matter of Hammacher Schlemmer Co., Inc., TSB-D-00(17)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_25s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(25)S
Sales Tax
June 11, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S030422A

On April 22, 2003, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Bass Pro Outdoor World, L.L.C., 2500 East Kearney, Springfield, Missouri 65898.
The issues raised by Bass Pro Outdoor World, L.L.C., is whether the opening of a retail store
in New York will require a related partnership currently making mail order sales to New York
residents to register and collect New York State and local sales and use taxes.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a Missouri limited liability company currently operating retail stores in
Missouri, Michigan, Georgia, Florida, Texas, Illinois, North Carolina, Tennessee, Ohio and
Maryland. Petitioner is exploring the opportunity of opening a retail store in New York. BPS
Catalog, L.P. (“Catalog L.P.”) is a Missouri limited partnership, operating a mail order catalog
business. A Delaware corporation, Bass Pro, Inc., is a 99% limited partner of Catalog L.P. and is
the sole owner of Petitioner. Mail order sales are made by Catalog L.P. to New York residents by
catalog solicitation and fulfillment by the use of common carriers and the United States Postal
Service. If Petitioner opens a retail store in New York it would register and remit to New York all
applicable sales and use taxes owed by Petitioner. Petitioner represents that it is operated as a
separate and distinct entity from Catalog L.P.
Petitioner represents that Catalog L.P. currently does not have nexus with New York. It is
assumed for purposes of this Advisory Opinion that prior to the commencement of Petitioner’s
activities in New York that Catalog L.P. does not have employees or representatives, or any other
physical presence, in New York that creates nexus with the state.
Applicable Law and Regulations
Section 1101 of the Tax Law provides, in part:
(a) When used in this article the term "person" includes an individual,
partnership, limited liability company, society, association, joint stock company,
corporation, estate, receiver, trustee, assignee, referee, and any other person acting
in a fiduciary or representative capacity, whether appointed by a court or otherwise,
and any combination of the foregoing.
*

*

*

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(b)(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;
(B) A person maintaining a place of business in the state and making sales,
whether at such place of business or elsewhere, to persons within the state of tangible
personal property or services, the use of which is taxed by this article;
(C) A person who solicits business either:
(I) by employees, independent contractors, agents or other representatives;
or (Emphasis added)
(II) by distribution of catalogs or other advertising matter, without regard to
whether such distribution is the result of regular or systematic solicitation, if such
person has some additional connection with the state which satisfies the nexus
requirement of the United States constitution;
and by reason thereof makes sales to persons within the state of tangible
personal property or services, the use of which is taxed by this article;
(D) A person who makes sales of tangible personal property or services, the
use of which is taxed by this article, and who regularly or systematically delivers
such property or services in this state by means other than the United States mail or
common carrier;
(E) A person who regularly or systematically solicits business in this state by
the distribution, without regard to the location from which such distribution
originated, of catalogs, advertising flyers or letters, or by any other means of
solicitation of business, to persons in this state and by reason thereof makes sales to
persons within the state of tangible personal property, the use of which is taxed by
this article, if such solicitation satisfies the nexus requirement of the United States
constitution;
*

*

*

(ii) (A) In addition, when in the opinion of the commissioner it is necessary
for the efficient administration of this article to treat any salesman, representative,
peddler or canvasser as the agent of the vendor, distributor, supervisor or employer
under whom he operates or from whom he obtains tangible personal property sold
by him, or for whom he solicits business, the commissioner may, in his discretion,

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treat such agent as the vendor jointly responsible with his principal, distributor,
supervisor or employer for the collection and payment over of the tax. . . .
Section 1131(1) of the Tax Law provides, in part:
“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 . . . .
Section 526.10 of the Sales and Use Tax Regulations provides, in part:
(a) Persons included. (1)(i) A person making sales of tangible personal
property the receipts from which are subject to tax is a vendor.
*

*

*

(2)(i) A person maintaining a place of business in the State making sales,
whether at such place of business or elsewhere, to persons within the State of
tangible personal property or services, the use of which is tax[ed], is a vendor.
(ii) A person shall be considered to be maintaining a place of business in the
State if it, either directly or through a subsidiary, has a store, salesroom, sample
room, showroom, distribution center, warehouse, service center, factory, credit and
collection office, administrative office or research facility in the State.
(3) A person who solicits business by employees, independent contractors,
agents or other representatives and by reason thereof makes sales to persons within
the State of tangible personal property or services, the use of which is subject to tax,
is a vendor.
Opinion
Petitioner, a Missouri limited liability company wholly owned by Bass Pro, Inc., currently
operates retail stores in ten other states across the country and is contemplating opening a retail store
in New York. Catalog L.P. is a Missouri limited partnership, which includes Bass Pro, Inc. as a 99%
limited partner, and currently operates a mail order catalog business. Catalog L.P. currently does
not have nexus with New York. In order to determine if the opening of a retail store in New York
by Petitioner will create a sales and use tax liability for Catalog L.P., the facts must be examined to
establish whether sufficient “nexus” will exist between Catalog L.P. and New York State to satisfy
the Commerce Clause of the United States Constitution.

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A state can require an out-of-state seller to collect the state's sales or use tax only when there
is a sufficient nexus between the seller and the taxing state, as required by the Commerce Clause
of the United States Constitution. National Bellas Hess, Inc. v. Illinois, 386 US 753; Quill Corp.
v. North Dakota, 504 US 298.
The operation of in-state retail stores of an out-of-state corporation is sufficient nexus to
require the out-of-state corporation to collect state taxes on its catalog sales to persons within such
state. See Nelson v. Sears, Roebuck and Co., 312 US 359; Nelson v. Montgomery Ward,
312 US 373. Likewise, the presence of independent contractors or agents of an out-of-state
corporation in the state is sufficient nexus to require the corporation to collect tax on its sales
shipped and delivered into the state. See Scripto, Inc. v. Carson, 362 US 207; International Shoe
Co. v. Washington, 326 US 310.
A corporation operating in-state offices is responsible to collect and remit sales tax on its
mail order sales to persons within that state, even though the activities in those in-state offices are
unrelated to the corporation's mail order activities. See National Geographic Society v. California
Board of Equalization, 430 US 551. In addition, if the affairs of affiliated corporations are so
dominated and controlled by their parent or by each other that the dominated and controlled
company is the alter ego of the other, then the nexus of one with New York State for sales tax
jurisdiction purposes provides sufficient nexus with New York State for the other. See Franklin
Mint Corp. v. Tully, 94 AD2d 877, aff'd, 61 NY2d 980; Aldens, Inc. v. Tully, 49 NY2d 525;
Spencer Gifts, Inc., Adv Op St Tx Comm, September 18, 1986, TSB-A-86(37)S; Harfred Operating
Corporation, Adv Op St Tx Comm, July 18, 1986, TSB-A-86(28)S.
Activities in a state that have been held insufficient to establish the necessary nexus to
impose the duty to collect sales tax include: mail order sales where the solicitation of sales (by
catalogs and other advertising materials) and the delivery of the goods were made from out-of-state
by common carrier or United States mail; and over the counter sales made in a bordering state to
state residents with only occasional deliveries being made into that state. See Quill Corp. v. North
Dakota, supra; National Bellas Hess, Inc. v. Illinois, supra; and Miller Brothers Co. v. Maryland,
347 US 340. Such activities alone failed to establish the requisite relationship between the state and
the out-of-state seller to permit the state to impose sales tax registration and collection requirements
upon the out-of-state entity.
In Orvis Company, Inc. v Tax Appeals Tribunal, 86 NY2d 165, 178, the court stated with
respect to the requirements for nexus:
“While a physical presence of the vendor is required, it need not be
substantial. Rather, it must be demonstrably more than a ‘slightest presence’ . . .
And it may be manifested by the presence in the taxing State of the vendor’s
property or the conduct of economic activities in the taxing State performed by the
vendor's personnel or on its behalf.”

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Petitioner, as a result of the proposed retail store operation in New York, will have an interest
in real property (by lease or otherwise) in New York, employees (sales clerks, cashiers, stock clerks,
managers, etc.) within the state, and will be making sales at a location in the state. Petitioner,
therefore, will clearly have nexus with New York. Petitioner will be a vendor for purposes of
New York State’s sales and use taxes and will be required to register to collect New York State and
local sales and use taxes on all its sales delivered in New York. Section 1101(b)(8)(i) of the Tax
Law.
Catalog L.P. will not operate directly in New York State. It will not have any offices or
other physical presence in this state and all of its sales will be made from an out-of-state location
to be delivered to New York by common carrier or U.S. mail.
The question, however, is whether Catalog L.P. will have established a physical presence
in New York through the retail store operation of Petitioner in New York. For example, if Petitioner
acts as a salesperson or independent contractor for Catalog L.P., Catalog L.P. would then have sales
representatives (whether as agents, independent contractors or otherwise) within the state and would
be required to register as a vendor and collect New York’s sales and use tax. (See section
1101(b)(8)(i)(C)(I) of the Tax Law). Therefore, if Petitioner at its New York retail location, for
example, assisted the sales of Catalog L.P. by referring customers to Catalog, L.P., by accepting
returns of merchandise from catalog customers, by soliciting names and addresses of customers for
the catalog mailing list, by distributing catalogs or catalog discount coupons, by accepting orders
for purchases from Catalog L.P. from store customers when a product is unavailable at the retail
store, or by fulfilling sales ordered from Catalog L.P., Catalog L.P. would be considered as having
a presence in New York through the activities of Petitioner acting as its New York salesperson or
independent contractor. See Matter of Hammacher Schlemmer Co., Inc., Dec Tx App Trib.,
November 22, 2000, TSB-D-00(17)S and Orivs, Company, Inc., supra for discussion of activities
that may potentially create nexus. Such activities by Petitioner’s employees at the in-state retail
location would be in-state solicitation on behalf of Catalog L.P. beyond the mere contact by U.S.
mail and common carrier permitted under the nexus standards set forth in Quill Corp., supra, and
National Bellas Hess, Inc., supra. Such solicitation activities by Petitioner on behalf of Catalog L.P.
would make Catalog L.P. a vendor for purposes of the sales and use taxes imposed by article 28 of
the Tax Law and would require it to register and collect tax on sales to persons within New York.
Similarly, if Petitioner and Catalog L.P. were to share a common inventory, common
accounting and legal staffs, etc., and their activities, such as advertising or solicitation of sales, were
so commingled that they were considered to be operated as alter egos of each other rather than
separate legal entities, their combined activities would create nexus for Catalog L.P. (See Franklin
Mint Corp. v. Tully, supra; Harfred Operating Corporation, supra.)
The facts of this Petition represent that Petitioner and Catalog L.P. are operated as separate
and distinct entities even though Bass Pro, Inc. has a controlling ownership interest in each. Based
upon the facts presented in this Petition and the assumptions that Petitioner does not perform

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activities on behalf of Catalog L.P. and that Petitioner and Catalog L.P. are not operating as the alter
ego of each other, or of Bass Pro, Inc., neither Petitioner nor Catalog L.P. will be required to collect
New York State sales or use tax on Catalog L.P.’s sales shipped to a New York address. See
Spencer Gifts, Inc., supra.
However, as discussed above, changed circumstances which would demonstrate that
Petitioner is the alter ego of Catalog L.P., or that Petitioner is performing services whether as agent,
independent contractor, or otherwise on behalf of Catalog L.P., could warrant a conclusion that there
was sufficient nexus to compel Catalog L.P. to collect New York State and local sales and use taxes
on Catalog L. P.’s sales shipped to a New York address. See Spencer Gifts, Inc., supra.

DATED: June 11, 2003

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

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