NY TSB-A-11(23)S Sales Tax 2011-08-19

When a NY vendor ships taxable goods by common carrier, is sales tax based on the rate where the vendor is located or where the buyer takes delivery?

Short answer: The rate is the combined state and local rate in effect where the buyer takes delivery. New York sales tax is a 'destination tax': under Tax Law 1213 the vendor collects the city, county, and school-district tax for the jurisdiction where delivery occurs, and delivery by a common carrier (UPS, FedEx, USPS) is treated as delivery by the seller -- regardless of FOB or other shipping terms. So the marina's parts vendor must charge tax at the rate where the marina receives the parts, not where the vendor is located. If the vendor collects the wrong (lower) rate, the buyer still owes the full correct amount and must report the difference on its own sales and use tax return.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The petitioner is a marina in one New York sales-tax jurisdiction that buys forklift repair parts (admittedly taxable) from a vendor in a different New York jurisdiction. The vendor ships the parts by UPS, FedEx, or the U.S. Postal Service. The vendor argued that possession passes when the goods are handed to the carrier, so the vendor's local rate applies; the marina argued the rate should be where it takes delivery. Because the state rate is the same in both places, the dispute was about the local rate.

The Office of Counsel sided with the buyer:

Destination tax. Tax Law 1213 directs the vendor to collect the city, county, and school-district taxes for the jurisdiction where delivery occurs -- delivery being the transfer of possession to (and receipt by) the purchaser. New York sales tax is, except where specifically provided otherwise, a destination tax: the point of delivery controls both the tax incidence and the rate.
Common-carrier delivery = seller's delivery. Regardless of the contract's shipping terms (FOB, FAS, etc.), for sales-tax purposes delivery by common carrier is treated as delivery by the seller (20 NYCRR 525.2(a)(3); TSB-A-08(53)S). So the vendor must collect at the combined state and local rate where the marina takes delivery, not where the vendor sits. (Deliveries within the MCTD also carry the additional state tax under section 1109.)
Buyer's backstop liability. If the vendor fails to collect the correct rate, the buyer remains liable for the full tax and must report the additional amount on its own sales and use tax return.

What this means for you

Buyers receiving shipped goods

The right sales-tax rate is the combined state + local rate where you take delivery -- not the seller's location and not wherever the goods were shipped from. If a seller charges you a lower out-of-jurisdiction rate, you still owe the difference and must self-report it. Watch this when you buy from vendors in lower-rate jurisdictions.

Sellers shipping by carrier

Collect tax based on the customer's delivery address, not your own location, and don't rely on FOB/shipping terms to fix the rate -- common-carrier delivery counts as your delivery to the buyer. Use accurate destination-based rates to avoid leaving your customers with a self-reporting obligation.

Common questions

Q: Whose local rate applies when goods are shipped to me -- the seller's or mine?
A: Yours -- the combined state and local rate where you take delivery. New York sales tax is a destination tax.

Q: Does "FOB shipping point" change the rate?
A: No. Regardless of FOB or other terms, delivery by common carrier is treated as delivery by the seller, so the destination rate applies.

Q: The seller charged me a lower rate than my area's -- am I off the hook?
A: No. You remain liable for the full correct tax and must report the difference on your own return.

Citations and references

Tax Law section 1213 (local tax based on jurisdiction of delivery)
Tax Law section 1109 (additional MCTD tax)
20 NYCRR section 525.2(a)(3) (destination tax; point of delivery)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2011.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a11_23s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-11(23)S
Sales Tax
August 19, 2011

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

PETITION NO. S110503B

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name redacted. Petitioner asks whether the New York State and local sales taxes, collected and
reported by a vendor from whom Petitioner purchases taxable personal property, should be based
on the rates in effect in the sales tax jurisdiction where the property is delivered to Petitioner.
We conclude that the sales taxes required to be collected by the vendor are the combined
State and local rates in effect where the common carrier delivers the property.
Facts
Petitioner is a marina located in New York State and purchases parts to repair its forklift
from a vendor that is located in a different sales tax jurisdiction within New York State.
Petitioner concedes that these parts are subject to State and local sales and compensating use
taxes. The vendor ships the property to Petitioner by UPS (United Parcel Service), FedEx
(Federal Express), or the US Postal Service. The vendor claims that possession of the property is
transferred to Petitioner when the property is turned over to the common carrier for shipping, and
thus the sale is subject to the sales taxes applicable in the vendor’s tax jurisdiction. Petitioner
disagrees and believes that the applicable rate is the combined State and local rates in effect
where Petitioner takes delivery of the property.
Analysis
Because the State sales tax rates are the same in both Petitioner’s and the vendor’s tax
jurisdictions, the crux of the issue is the difference in the local tax rates. Section 1213 of the Tax
Law directs a vendor to collect the city, county, or school district sales or compensating use taxes
based on the rate imposed in the taxing jurisdiction in which the delivery occurs.1
Where a sale of tangible personal property…is made in any city, county or school
district, but the property sold…will be delivered to the purchaser elsewhere, such
sale shall not be subject to tax by such city, county or school district. [T]he
vendor shall be required to collect from the purchaser…the aggregate sales or
compensating use taxes imposed by the city, if any, county and school district in
which delivery occurs…. For purposes of this section delivery shall be deemed to
1

The additional State sales and use tax imposed by Section 1109 of the Tax Law would also apply to deliveries
made within the Metropolitan Commuter Transportation District.

-2-

TSB-A-11(23)S
Sales Tax
August 19, 2011

include transfer of possession to the purchaser and the receiving of the property
…by the purchaser.
Except as specifically provided otherwise, the sales tax is a “destination tax.” The point
of delivery or point at which possession is transferred by the vendor to the purchaser controls
both the tax incidence and the tax rate.2 Regardless of the contract terms of sale (e.g., FOB,
FAS., etc.), for purposes of the incidence of the sales tax, delivery by common carrier is deemed
to be delivery by the seller. (See TSB-A-08(53)S.) Therefore, the Petitioner is correct in that the
vendor must collect and remit sales tax based on the combined State and local sales tax rate in
effect in the taxing jurisdiction where Petitioner takes delivery of the property from the common
carrier.
To the extent that the vendor fails to collect the correct rate of tax, the Petitioner remains
liable for the full amount of tax owed. Petitioner must report this additional tax along with its
own sales and use tax return.

DATED: August 19, 2011

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy 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.

20 NYCRR §525.2(a)(3)