Which New York taxes apply when a licensed tobacco distributor and retailer sells chewing tobacco to customers inside and outside New York?

Plain-English summary

A company licensed in New York as both a tobacco-products distributor and a retail dealer, and that manufactures chewing tobacco here, asked which New York taxes apply to its retail chewing-tobacco sales — inside and outside the state. Two different taxes are in play, and they behave differently across the state line.

Sales tax: Chewing tobacco is tangible personal property, so retail sales to New York customers are subject to New York State and local sales tax. Sales delivered to customers outside New York are not subject to New York sales tax.

Tobacco products excise tax: This tax falls on tobacco products possessed in New York for sale. As a New York distributor that manufactures or imports the product, the company owes the excise tax on all the chewing tobacco it holds here for sale, regardless of whether the eventual sale is in-state or out-of-state. It reports and pays monthly on Form MT-203. The relief is on the back end: the distributor may claim a refund or credit of the excise tax it paid on product later sold to out-of-state customers — but only if possession of the goods is transferred to the customer at a point outside New York and the out-of-state sale is properly documented and separately accounted for.

What this means for you

Tobacco distributors and retailers

Treat the two taxes separately. Collect sales tax on in-state retail sales; don't collect New York sales tax on goods delivered out of state. For the excise tax, expect to pay it on everything you hold in New York for sale, then recover it on documented out-of-state sales through a refund/credit on your MT-203.

Documentation is the whole ballgame for the refund

The out-of-state excise refund/credit depends on (1) possession actually transferring to the customer outside New York and (2) keeping records that prove it. Separately account for out-of-state sales on each monthly MT-203.

Accountants and tax professionals

Note the structural difference: sales tax keys off the delivery/destination of each sale, while the excise tax keys off possession in New York for sale, with an out-of-state refund mechanism (Tax Law §§ 474, 476). File MT-203 monthly even if no tax is due.

Common questions

Q: Do I charge New York sales tax on chewing tobacco shipped to an out-of-state customer?
A: No. Retail sales delivered to customers outside New York are not subject to New York State and local sales tax.

Q: Do I owe excise tax on tobacco I'll ultimately sell out of state?
A: Yes, when you hold it in New York for sale. You can then claim a refund or credit of that excise tax on the documented out-of-state sales.

Q: What do I file?
A: Form MT-203 monthly, reporting product imported/manufactured and sold, including separately accounting for out-of-state sales. File even if no tax is due.

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 and licensing.

Citations and references

Statutes and guidance:
- Tax Law § 1105(a) (sales tax on tangible personal property)
- Tax Law § 470(2), (5), (9), (12) (tobacco products; retail sale; retail dealer; distributor)
- Tax Law §§ 471, 471-b (excise tax on tobacco products held for sale)
- Tax Law § 473-a (monthly Form MT-203 return); §§ 474, 476 (refund/credit for out-of-state sales)
- Tax Bulletin TB-ST-740; Form MT-203 and MT-203-I instructions

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/multitax/a20-1m1s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(1)M, (1)S
Excise Tax
Sales Tax
January 17, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

The Department of Taxation and Finance received a Petition for Advisory Opinion from
[ REDACTED ]. Petitioner asks which New York State taxes apply to retail sales of chewing tobacco
made to customers in New York State. Petitioner also asks if retail sales of chewing tobacco made to
customers located outside of the State are subject to any New York State taxes.
We conclude that Petitioner’s receipts from retail sales of tobacco products made to customers
within the State are subject to New York State and local sales taxes. In addition, all tobacco products,
including chewing tobacco, possessed by Petitioner in this State for sale are subject to New York State
tobacco products excise tax. However, Petitioner may claim a refund of tobacco products excise tax
paid on its receipts from retail sales of tobacco products made to customers outside of the State as long
as possession of the tobacco products is transferred to the customer(s) at a point outside of the State
and Petitioner properly documents the out-of-state sale.
Facts
Petitioner is licensed as a distributor and retail dealer of tobacco products in New York State
and operates a chewing tobacco manufacturing facility located in New York State. Petitioner sells
some of its product to retail customers both inside and outside of the State.
Analysis
Tax Law § 1105(a) subjects the sale of tangible personal property, including tobacco products,
to New York State and local sales taxes. See Tax Bulletin TB-ST-740, Quick Reference Guide for
Taxable and Exempt Property and Services. Because tobacco products are tangible personal property,
Petitioner’s receipts from retail sales of tobacco products made within this State are subject to New
York State and local sales taxes. Receipts from Petitioner’s retail sales of tobacco products delivered
to customers located outside of the State are not subject to New York State and local sales taxes. See
Tax Law § 1105(a).
Tax Law §§ 471 and 471-b impose an excise tax on both cigarettes and tobacco products that
are possessed by any person for sale in New York State. Tax Law § 470(5) defines “retail sale” or
“sale at retail” as a sale to a consumer or to any other person for any purpose other than resale.
Tobacco products are any cigar or tobacco, other than cigarettes, intended to be smoked, chewed or
used as snuff. See Tax Law § 470(2). Petitioner’s chewing tobacco is considered a tobacco product
and sales to its customers for any purpose other than for resale are considered retail sales. A retail

-2-

TSB-A-20(1)M, (1)S
Excise Tax
Sales Tax
January 17, 2020

dealer is any person other than a wholesale dealer engaged in selling cigarettes or tobacco products.
See Tax Law § 470(9). A distributor is any person who imports or causes to be imported into this
State any tobacco product (in excess of fifty cigars or one pound of tobacco) for sale, or who
manufactures any tobacco product in this State, and any person within or without the State who is
authorized by the Commissioner of Taxation and Finance to make returns and pay the tax on tobacco
products sold, shipped or delivered by him to any person in the State. See Tax Law § 470(12).
Based on the facts provided, Petitioner is both a distributor and retail dealer of tobacco
products. As a licensed distributor and retail dealer of tobacco products in this State, Petitioner is
liable for payment of the tobacco products excise tax on tobacco products which he “[i]mports or
causes to be imported into the State, or which he manufactures in the State” regardless of whether the
product is sold inside or outside of the State. See Tax Law § 471-b(1) and (2). Each month, Petitioner
is required to file with the Department Form MT-203, Distributor of Tobacco Products Tax Return,
showing the quantity and wholesale price of all tobacco products imported or caused to be imported,
or manufactured in the State, and all tobacco products sold, shipped or delivered into New York State
during the prior month. See Tax Law § 473-a. Petitioner must pay the excise tax due on tobacco
products with the filing of the MT-203 return, and must file a return even if no tax is due. See MT203-I, Instruction for Form MT-203.
Petitioner may claim a refund or take a credit on its MT-203 return for tobacco products excise
tax paid on receipts from its retail sales of chewing tobacco made to customers outside of the State.
Petitioner may only claim a refund or take a credit for tobacco products tax paid on receipts from retail
sales to out-of-state customers if possession of the tobacco products is transferred to the customers at a
point outside of the State and Petitioner properly documents the out-of-state sale. See Tax Law §§ 474
and 476. These out-of-state sales should be separately accounted for on Petitioner’s monthly MT-203
returns. See Tax Law § 473-a.
DATED: January 17, 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.