Are receipts from printing and mailing patient billing statements subject to NY sales tax?

Plain-English summary

The petitioner produces, sells, and services medical practice-management systems; under a separate optional agreement it prints and mails patient billing statements for doctors' offices (a third party does the actual printing on paper the petitioner supplies). It asked whether its receipts are taxable. The answer: the printed material is taxable, with several carve-outs.

• The printed statements + envelopes are taxable property. Producing bills from the customer's electronic file and supplying the envelopes is a sale of printed material -- taxable tangible personal property (Tax Law 1105(a); Werthan Industries; MGI Output).
• Destination tax. Sales tax follows the point of delivery (20 NYCRR 525.2(a)(3)). Statements and return envelopes mailed to New York addresses are taxable; those mailed to out-of-state addresses are not -- but only if the petitioner separately states a reasonable charge for the out-of-state pieces. Without that, the entire charge is taxable.
• Outside mailing envelopes are fully NY-taxable. The outer envelopes used to mail from a New York post office are fully taxable at that location (the use occurs in New York), regardless of where the contents are headed.
• Mailing services are exempt if itemized. Charges for sorting, folding, inserting, sealing, metering/affixing postage, bagging/mailing, and postage aren't taxable if reasonable and separately stated. They can be grouped as "non-taxable mailing" or "exempt services" if the invoice itemizes them. If not separately stated from taxable charges, the whole amount is taxable.
• The third-party printer = a printing service bought for resale. Because the petitioner supplies the paper and envelopes, the third party is performing a printing/imprinting service (1105(c)(2)), not selling property. The petitioner buys that service for resale (it resells the printed material) and should give the printer a resale certificate (ST-120) within 90 days.
• Not promotional materials. Patient bills and envelopes aren't promotional materials (1101(b)(12)), so the 1115(n) promotional-materials exemptions don't apply.

What this means for you

Printers and mail houses

Printed pieces you produce and deliver are taxable property, sourced to the mailing destination -- so itemize: separately state (and keep records of) the out-of-state pieces, and separately state the mailing/postage services to keep them nontaxable. Remember the outer envelopes mailed from a NY post office are fully taxable regardless of content destination. When you supply the paper to a sub-printer, that's a printing service you can buy for resale.

Customers buying print-and-mail

Expect tax on the printed statements going to New York recipients. Ask for an itemized invoice that breaks out out-of-state pieces and mailing/postage so you aren't taxed on the nontaxable portions.

Common questions

Q: Is printing and mailing my customers' statements taxable?
A: The printed statements and envelopes are taxable property. Pieces mailed to NY addresses are taxable; out-of-state pieces aren't, if separately stated and reasonable.

Q: Are the mailing and postage charges taxable?
A: Not if they're reasonable and separately stated (they can be grouped as 'non-taxable mailing'/'exempt services' if itemized). Bundled into a single taxable charge, they become taxable.

Q: My sub-printer prints on paper I supply -- am I buying property or a service?
A: A printing/imprinting service (1105(c)(2)), which you can buy for resale with a Form ST-120 since you resell the printed material.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1105(c)(2) (tax on printing/imprinting tangible personal property)
• Tax Law section 1132(c) (resale certificate; single charge for taxable plus non-taxable)
• Tax Law section 1101(b)(12) (definition of promotional materials)
• 20 NYCRR section 525.2(a)(3) (destination tax)
• Werthan Industries, Inc., TSB-A-97(73)S (printed material; mailing)
• Publication 831 (collection and reporting for printers and mailers)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2010.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a10_43s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(43)S
Sales Tax
September 22, 2010

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S100615A

On June 15, 2010, the Department of Taxation and Finance received a Petition for Advisory Opinion from
Petitioner, address redacted. Petitioner asks whether its receipts from printing and mailing patient billing
statements, as described below, are subject to sales tax.
We conclude that Petitioner’s receipts are subject to sales tax, provided that separately stated, reasonable
charges made for printed materials that are mailed to addresses outside New York State, other than the outside
mailing envelopes, would not be subject to tax.
Facts
Petitioner is a New York corporation that produces, sells, and services medical practice management
computer systems to doctors’ offices. Petitioner, under a separate optional agreement, also prints and mails patient
billing statements for its customers. Pursuant to the optional agreement, Petitioner’s customer (a doctor’s office)
selects patients to be billed using the medical billing software system Petitioner licenses to its customer. The
customer uses the software system to create an electronic file with patients’ billing information, and sends the file
electronically to Petitioner’s server. Petitioner’s computers run a mathematical computation and analysis program
on the file to ensure proper format and content, and to check for erroneous or corrupt data. A file compression
program then combines the files from different customers into a compressed file. Petitioner transmits the
compressed file to a third party printer-mailer. The third party runs a decompression program on the file, converts
the customer files into a single continuous print file, and verifies the integrity of the print file. The third party then
prints the patient bills, inserts the bills into mailing envelopes, applies postage, and mails the bills to the customers’
patients. Petitioner provides generic printed invoice paper and envelopes to the third party to print and mail the
bills. Petitioner pays the third party for printing and mailing the bills, and for postage. Petitioner, in turn, bills its
customers for its services, including processing, printing, paper supplies, and postage.
Petitioner submitted a sample contract in which Petitioner agrees to perform printing and mailing for the
customer with respect to the customer’s patient bills. Under the contract, Petitioner charges a fixed price per
patient billing statement, plus an additional amount for additional pages included in the mailing.
Analysis
Petitioner contracts with its customers to print and mail their patient billing statements. When Petitioner
charges its customers for billing statements produced from the customers’ electronic files, Petitioner is charging its
customers for the sale of printed material. The envelopes provided by Petitioner are also included in its charges to
its customers. These sales of printed material and envelopes are sales of tangible personal property subject to sales
tax under Tax Law §1105(a). See Werthan Industries, Inc., Adv Op Comm T&F, December 4, 1997,
TSB-A-97(73)S; MGI Output Technologies, Inc., Adv Op Comm T & F, December 31, 1996, TSB-A-96(77)S.
The sales tax is a “destination tax.” The point of delivery controls both the tax incidence and the tax rate.
See 20 NYCRR §525.2(a)(3). Accordingly, Petitioner’s sales of printed materials (i.e., patient billing statements
and return envelopes included in the mailing) will be subject to sales tax if the printed materials are mailed to
New York addresses. Petitioner’s sales of the printed materials will not be taxable if they are mailed to addresses
outside New York. However, outside mailing envelopes used to mail printed matter from a post office located in

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TSB-A-10(43)S
Sales Tax
September 22, 2010

New York are fully taxable at the location from which they are mailed, because use of those envelopes occurs in
New York State, even though all or a portion of their contents may be subject to tax or exempt, based on mailing
destination. Petitioner must maintain records showing the destinations of all printed materials mailed to persons in
New York State and of the materials mailed to persons outside New York State. Petitioner must collect sales tax on
its entire charges to customers for printed materials, unless Petitioner separately states a reasonable charge on
invoices to its customers for those patient billing statements and any return envelopes included in the mailing
envelope that are mailed to addresses outside New York. See Collection and Reporting Instructions for Printers
and Mailers, Publication 831 (5/10); Werthan Industries, supra; MGI Output Technologies, supra.
Charges for the services of sorting printed material to prepare for mailing, folding printed material and
inserting it in envelopes, sealing the envelopes, affixing postage or metering mail, bagging and mailing the printed
material, and the cost of postal charges are not subject to sales tax if those charges are reasonable and separately
stated from the charges for taxable services on the customer's bill. The charges for these non-taxable services may
be combined in a single amount under the designation of "non-taxable mailing" or "exempt services" if the invoice
includes an itemized list of the exempt services provided. See George Silver, Adv Op St Tx Comm, April 24, 1986,
TSB-A-86(15)S; Morton L. Coren, P.C., Adv Op Comm T & F, March 6, 1997, TSB-A-97(12)S; Werthan
Industries, supra. However, if Petitioner’s invoices to its customers do not separately state reasonable charges for
these "non-taxable mailing" or "exempt services” from taxable charges, the entire amount Petitioner charges its
customers will be taxable.
Petitioner pays a third party printer-mailer for printing and mailing the printed material, and for postage.
Because Petitioner provides the invoice paper and envelopes, the third party is performing printing or imprinting
services for Petitioner under Tax Law §1105(c)(2) rather than selling tangible personal property. See Werthan
Industries, supra. Petitioner’s purchases of the printing or imprinting services are excluded from tax as purchases
for resale, because Petitioner resells the printed material to its customers. Petitioner, if registered for sales tax
purposes, should provide the third party with a properly completed resale certificate (Form ST-120) within 90 days
of the rendition of the services in order to purchase the services exempt from sales tax. See Tax Law, §1132(c); 20
NYCRR §532.4. Separately stated, reasonable charges by the third party to Petitioner for the "non-taxable mailing"
or "exempt services” discussed above and for postage are not taxable.
The billing statements and mailing envelopes, and any return envelopes that may be included in the
mailings, are not promotional materials as defined in Tax Law §1101(b)(12). Thus, the exemptions applicable to
promotional materials in Tax Law §1115(n) are not applicable here.

DATED: September 22, 2010

NOTE:

/S/
DANIEL SMIRLOCK
Deputy Commissioner and Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set forth
therein and is binding on the Department only with respect to the person or entity to whom it is issued
and only if the person or entity fully and accurately describes all relevant facts. An Advisory Opinion is
based on the law, regulations, and Department policies in effect as of the date the Opinion is issued or for
the specific time period at issue in the Opinion.