Does New York sales or use tax apply to a sculpture bought from a NY dealer but delivered abroad and later displayed in New York?

Plain-English summary

A Florida LLC with no New York place of business or employees bought a sculpture (then being made in Germany) from a New York art dealer. It then lent the sculpture to a New York City museum (an exempt organization). The museum arranged a contract carrier to pick the sculpture up directly from the fabricator in Germany; the piece was displayed at the museum (June–October 2014), toured Europe, and was finally delivered to the buyer in Florida.

The Office of Counsel concluded no New York sales or use tax is due:

• Sales tax is a destination tax. What controls is where the buyer (or its designee) takes possession (20 NYCRR 525.2(a)(3)).
• The buyer authorized the museum to retrieve the sculpture; the museum's contract carrier did so. Because the carrier acted on the buyer's behalf, it was the buyer's designee, and it took possession in Germany. So the sale occurred in Germany, outside New York's reach (citing Savemart: an in-state delivery to an out-of-state buyer's private/contract carrier is an in-state transfer — here the pickup was in Germany, so delivery was abroad).
• The buyer's loan to the museum was itself a "sale" — a license/rental supported by consideration (the museum bore transport costs the buyer would otherwise pay) under Tax Law section 1101(b)(5). But it is not taxed, because delivery for the loan also occurred outside New York.
• The buyer owes no use tax on the museum's New York display because the buyer qualified as a nonresident when it purchased the sculpture — the nonresident exemption in Tax Law section 1118(2) applies.
• The museum owes no use tax because it holds an exempt organization certificate (Tax Law section 1116(a)(4)).

A footnote flags that if the carrier had been a common carrier (rather than a contract carrier), the analysis and result could differ.

What this means for you

Buyers taking delivery outside New York

New York taxes by point of delivery, not by where the seller sits. If you (or your designee — including a carrier you arrange) take possession outside New York, the purchase is outside New York sales tax — even if you bought from a New York dealer.

Contract carrier vs. common carrier matters

Where a contract carrier takes possession is treated as the buyer's place of delivery. The opinion expressly cautions that a common carrier can change the analysis, so the carrier's status is a fact worth nailing down.

Nonresident exemption for later New York use

If you were a nonresident when you bought the property, later use in New York (here, lending it to a New York museum) can be covered by the nonresident use-tax exemption in Tax Law section 1118(2).

Common questions

Q: I bought from a New York gallery — why is there no New York tax?
A: Because the carrier (your designee) took possession in Germany. New York's destination tax looks at where delivery/possession occurs, not where the seller is located.

Q: The loan to the museum was a "sale" — why isn't it taxed?
A: Delivery for the loan happened outside New York, and the nonresident exemption covers the buyer's later New York use. The museum is also an exempt organization.

Q: Would a common carrier have changed the result?
A: Possibly — the opinion notes the analysis and conclusion could differ if a common carrier had been used instead of a contract carrier.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1101(b)(5) (definition of sale)
• Tax Law section 1118(2) (nonresident use-tax exemption)
• Tax Law section 1116(a)(4) (exempt organizations)
• Tax Law section 1133(a) (liability for tax at the time of the transaction)
• 20 NYCRR 525.2 (destination tax; point of delivery controls)
• 20 NYCRR 526.15(b) (nonresident exemption)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_17s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel

TSB-A-16(17)S
Sales Tax
May 2, 2016

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE

ADVISORY OPINION PETITION NO. S140611A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTED (“Petitioner”). Petitioner asks whether sales and use tax applies to the
purchase of a sculpture created in Germany and transported to various locations for display,
including New York, before eventually being shipped to the purchaser in Florida. We conclude
that Petitioner’s purchase of the sculpture is not subject to sales tax because the sculpture was
delivered outside New York State and that Petitioner’s subsequent use of the property in New
York is exempt pursuant to the nonresident exemption in Tax Law § 1118(2).
Facts
Petitioner is a limited liability company headquartered in Miami, Florida. Petitioner
entered into a purchase agreement with a New York-based art dealer to purchase a sculpture that
was being created in Germany. The purchase agreement provided that the gallery would deliver
the sculpture to Petitioner by common carrier.
Subsequent to executing the purchase agreement, Petitioner entered into a loan agreement
with a museum located in New York City (“Museum”) that has been issued an exempt
organization certificate by the Department and is therefore an exempt organization for sales tax
purposes pursuant to Tax Law § 1116(a)(4). Pursuant to the loan agreement, Museum arranged
for a carrier (“Carrier”) to pick-up the sculpture directly from the sculpture’s fabricator in
Germany. Petitioner maintains that Carrier is a fine arts contract carrier and is not a common
carrier. Carrier transported the sculpture from the fabricator to Museum where it was put on
display. The sculpture was exhibited at Museum from June 2014 until October 2014, and was
subsequently shown at various venues in Europe. All transportation of the sculpture before and
during the tour was arranged, and paid for, by Museum, except that Petitioner was to reimburse
Museum for any expenses exceeding $20,000 incurred while transporting the sculpture from the
fabricator to Museum. Museum also provided all necessary insurance coverage of the sculpture
from the day the art was picked up in Germany until it was delivered to Petitioner in Florida. At
the conclusion of the tour, the sculpture was delivered to Petitioner in Florida.
At the time it purchased the sculpture, Petitioner had no place of business or employees
in the State and did no business of any kind in New York.

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TSB-A-16(17)S
Sales Tax
May 2, 2016

Analysis
New York sales tax is a transaction tax. Liability for the tax occurs at the time of the
transaction. See Tax Law § 1133(a) and 20 NYCRR § 525.2. Generally, a sale occurs upon the
transfer of title or possession or both of tangible personal property or rendition of services, for
consideration. See Tax Law § 1101(b)(5); 20 NYCRR § 525.2. The time or method of payment
is immaterial. See 20 NYCRR § 525.2. The sales tax is a destination tax. The point of delivery
or point at which possession is transferred by the vendor to the purchaser or designee controls
both the tax incidence and the tax rate. See 20 NYCRR § 525.2(a)(3). Therefore, the key to
determining whether sales tax applies to Petitioner’s purchase of the sculpture is the location
where Petitioner took possession of the sculpture.
Pursuant to the loan agreement, Petitioner authorized Museum to retrieve the sculpture
from the fabricator. Museum satisfied this condition by contracting with Carrier to do so. The
fabricator relinquished physical possession of the sculpture to Carrier at the fabricator’s location
in Germany. Because Carrier was acting on behalf of Museum, and Museum contracted Carrier
to satisfy Museum’s duty to retrieve the sculpture under the loan agreement with Petitioner,
Carrier was acting as Petitioner’s designee when it took possession of the sculpture in Germany.
Upon review of the relevant facts, we conclude that Carrier is a contract carrier. 1 Where a
contract carrier is used to transfer possession from a seller to a purchaser, delivery is deemed to
have occurred at the location where the contract carrier takes physical possession of the item
being sold. See Matter of Savemart, Inc. v State Tax Commission, 105 AD2d 1001 (3rd Dep’t
1984) (Vendor’s in-state delivery of property to an out-of-state customer’s private or contract
carrier is an in-state transfer of possession of purchased goods.) Carrier, as a contact carrier and
Petitioner’s designee, took possession of the sculpture in Germany, which means that the sale of
the sculpture to Petitioner occurred in Germany, and New York’s sales tax does not apply to that
sale. See 20 NYCRR § 525.2(a)(3).
Petitioner’s loan of the sculpture to the Museum would constitute a sale for sales tax
purposes as a license to use or a rental if it was supported by consideration. See Tax Law §
1101(b)(5). Here, the rental or license to use that Petitioner granted the Museum was supported
by consideration because the agreement required the Museum to bear certain expenses associated
with the transportation of the sculpture to Petitioner’s location in Florida from the fabricator’s
location in Germany that Petitioner would otherwise have incurred. See Tax Law § 1101(b)(5);
Sunny Vending Co. v. State Tax Comm’n, 101 AD2d 666. 667 (3d Dep’t 1984) (referring to the
sales definition of “sale” in §1101(b) as “broad and inclusive”).
No New York sales tax is due on the loan of the sculpture, however, because delivery of
the sculpture to the Museum for the loan period occurred outside the State. See 20 NYCRR §
525.2(a)(3) Moreover, Petitioner owes no use tax as a result of the Museum’s use of the
sculpture in New York because Petitioner qualified as a nonresident at the time Petitioner
purchased the sculpture and, thus, the nonresident exemption in Tax Law § 1118(2) applies. See
20 NYCRR § 526.15(b). Accordingly, Petitioner owes no sales or use tax in New York as a
1

Note: if the facts showed that the carrier was a common carrier the analysis and resulting conclusion would differ.

TSB-A-16(17)S
Sales Tax
May 2, 2016

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result of the transaction described in this Advisory Opinion. Museum does not owe any use tax
based on its use of the sculpture in New York because it has been issued an exempt organization
certificate. See Tax Law § 1116(a)(4).

DATED: May 2, 2016

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

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. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.