When does a bridal shop owe sales tax on a wedding dress, at the deposit or when the dress is finished?

Plain-English summary

A bridal shop offers two ways to buy a wedding dress: (1) a 50% non-refundable deposit when the dress is chosen, with the balance paid when alterations and fitting are done; or (2) the full non-refundable price (including sales tax) paid up front. Either way, the dress is ordered from the manufacturer, altered at the shop, and the customer takes it once it's complete. Title passes when the dress is fully paid for. The shop asked when it owes the sales tax it collects.

The answer: a taxable sale happens when title (or possession) transfers, and the tax accrues then. So:

• Deposit plan (Scenario 1): The customer doesn't have title or possession at the deposit stage — title passes only at full payment. The sale occurs, and the shop collects the tax, when the dress is fully paid for.
• Pay-in-full plan (Scenario 2): Title passes when the customer pays in full up front — even if the dress stays at the shop for alterations. The shop must collect all the sales tax at that point.

Once the sale has occurred, the shop must remit the collected tax by the due date of the sales tax return for the reporting period in which the sale happened (20 NYCRR 533.4).

What this means for you

Bridal shops and any retailer taking deposits on made-to-order goods

The trigger is the transfer of title or possession, not the deposit. If your terms pass title only at final payment, the sale (and the tax) lands at final payment. If the customer pays in full and you keep the item for alterations or later pickup, title has already passed — collect the full tax then.

Don't confuse "we still have the dress" with "no sale yet"

Holding the goods for alterations doesn't postpone the sale once the customer has paid in full and title has passed. The sale is complete; remit on the return for that period.

Accountants and tax professionals

Map the contract terms to the moment of title/possession transfer (20 NYCRR 527.1(a)). Tax accrues at that moment; remittance follows the normal return due date for that period (20 NYCRR 533.4). A non-refundable deposit alone, with no transfer of title or possession, is not yet the taxable event here.

Common questions

Q: Do I collect sales tax on a wedding-dress deposit?
A: Under the deposit plan in this opinion, no — the sale occurs at full payment when title passes, and that's when you collect the tax.

Q: The customer paid in full but left the dress for alterations. Is it taxed yet?
A: Yes. Title passed at full payment, so the sale is complete; collect and later remit all the tax for that period.

Q: When do I send the tax to the State?
A: By the due date of the sales tax return for the reporting period in which the sale occurred.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner, but it applies a basic rule (title-transfer timing). Confirm your own sale terms.

Citations and references

Statutes and regulations:
- Tax Law § 1105(a) (tax on retail sales of tangible personal property)
- 20 NYCRR 527.1(a) (definition of sale; transfer of title or possession)
- 20 NYCRR 533.4 (remittance by the return due date for the period of sale)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-10s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE

TSB-A-20(10)S
Sales Tax
June 2, 2020

ADVISORY OPINION
The Department of Taxation and Finance (“the Department”) received a Petition for Advisory
Opinion from [ REDACTED ] (hereinafter “Petitioner”). Petitioner asks when it should remit sales tax
to New York State when one of its customers purchases a wedding dress.
FACTS
Petitioner owns and operates a bridal shop. A customer of the shop has two options when
purchasing a wedding dress: (1) pay a 50% non-refundable down-payment on the purchase of a dress
when the dress is originally chosen, and pay the balance upon completion of the alterations and fitting of
the dress; or (2) pay the entire non-refundable purchase price up front, including sales tax. Once an option
is chosen, the customer’s dress is ordered from the manufacturer and shipped to Petitioner’s store. When
the dress is received by the store, alterations to the dress are made (if needed); once the dress is complete,
the customer pays any outstanding balance due and takes possession of the dress. Transfer of title of the
dress occurs when customer has fully paid for the dress. Petitioner seeks guidance on when to remit the
sales tax it collects on the sale of the dress in New York State.
ANALYSIS
Tax Law § 1105(a) states that sales tax is imposed upon the receipts from every retail sale of
tangible personal property, except as otherwise provided.
The words “sale” or “purchase” mean “any transaction in which there is a transfer of title or
possession or both of tangible personal property for a consideration. 20 NYCRR 527.1(a). Sales tax is
imposed on the receipts from “every retail sale of tangible personal property delivered by the vendor to
the purchaser…” 20 NYCRR 527.1(a).
Under the first scenario, a customer makes a 50% down-payment on a dress and Petitioner then
orders the dress. Once the dress is received by Petitioner, alterations (if necessary) are made to the dress.
The customer does not yet have title to or possession of the dress. The customer obtains title to the dress
only when the customer has fully paid for the dress. The customer takes possession of the dress after it is
fully paid for and alterations are complete. Therefore, a sale occurs when title of the dress is transferred to
the customer, i.e., when the dress is fully paid for. Sales tax accrues and Petitioner must collect the tax at
that time.

-2-

TSB-A-20(10)S
Sales Tax
June 2, 2020

Under the second scenario, a customer pays the entire non-refundable sales price for the dress up
front, including sales tax. In that case, the customer takes title to the dress when this full payment is
made. Even if a customer leaves a dress with Petitioner for alterations, with the intention of taking
possession of the dress at a later date, a sale has still occurred because title has passed to the customer.
Therefore, Petitioner must collect all sales tax due from the customer when it receives the customer’s full
payment for the dress.
Petitioner must pay the sales tax collected to the Department on or before the due date for the
filing of the return for the reporting period in which the sale occurred. 20 NYCRR 533.4.

DATED: June 2, 2020

/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.