Does a UK business owe New York sales tax on US motor parts that are consolidated by a New York entity before export, when the parts are bought for resale?

Plain-English summary

A UK business buys motor parts from various US suppliers. Every two weeks, the suppliers ship the orders to a New York entity that consolidates them and forwards them to the buyer in the UK, which resells the parts. It asked whether it owes New York sales tax. The Department's answer: the sale happens in New York, but it's exempt because the parts are bought for resale — if the buyer documents it.

Why New York is the point of sale. Sales tax is a destination tax: the place of delivery / transfer of possession controls (Tax Law § 1105(a); 20 NYCRR 525.2(3)). The New York consolidator appears to be the buyer's designee, so delivery — and thus the sale — occurs in New York. That would make the purchases taxable unless an exemption applies.

Why it's exempt. A "retail sale" excludes purchases for resale (Tax Law § 1101(b)(4)(i); "sale" and "tangible personal property" are defined in § 1101(b)(5)–(6)). Because the buyer resells the parts in the UK, its purchases aren't retail sales and aren't subject to New York sales tax.

The catch — documentation. To buy exempt for resale, the UK business must give each US supplier a properly completed Resale Certificate (Form ST-120) (TSB-M-93(3)S). Without it, the supplier should treat the sale as taxable.

What this means for you

Exporters, resellers, and drop-ship/consolidation arrangements

Routing goods through a New York consolidator or freight forwarder can put the point of sale in New York — even when the ultimate buyer is overseas — because the consolidator can be your designee. That alone doesn't create tax if you're buying for resale, but you have to prove it.

Always issue the resale certificate

The resale exemption is documentation-driven. Give your suppliers a properly completed Form ST-120. Skip it and your "for resale" purchases can be billed as taxable retail sales, leaving you to chase refunds.

Accountants and tax professionals

Two moving parts: sourcing (destination/designee under § 1105(a) and 20 NYCRR 525.2) and the resale exclusion (§ 1101(b)(4)(i)). For consolidation/export setups, confirm whether the New York entity is the buyer's designee, then make sure resale certificates are on file with every supplier.

Common questions

Q: Does a foreign buyer owe New York sales tax on goods consolidated in New York?
A: The sale can be sourced to New York if the consolidator is the buyer's designee. But if the goods are bought for resale, the purchases are exempt — provided the buyer gives suppliers a Form ST-120.

Q: Why is the sale "in New York" if the buyer is in the UK?
A: Sales tax is a destination tax. Delivery to the buyer's designee — here, the New York consolidator — makes New York the point of sale.

Q: What do I have to do to claim the resale exemption?
A: Provide each supplier a properly completed Resale Certificate (Form ST-120). That documents that the purchase is for resale and not a taxable retail sale.

Q: Can my business rely on this opinion?
A: Not as binding. A TSB-A advisory opinion binds the Department only as to the petitioner and the exact facts described. Use it to understand the reasoning, then check your own facts.

Citations and references

New York Tax Law and regulations:
- Tax Law § 1105(a) — sales tax on retail sales of tangible personal property
- Tax Law § 1101(b)(4)(i) — "retail sale" excludes purchases for resale
- Tax Law § 1101(b)(5) — definition of "sale"
- Tax Law § 1101(b)(6) — definition of tangible personal property
- 20 NYCRR 525.2(3) — sales tax is a destination tax; point of delivery controls

Guidance cited:
- Form ST-120 — Resale Certificate (required to buy for resale exempt)
- TSB-M-93(3)S — resale certificate requirements

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao.htm
• Opinion: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales/24-21s.htm
• Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-21s.pdf

Original ruling text

Sales Tax
August 2, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ redacted ] (Petitioner). Petitioner asks whether it is required to pay New York State and local sales tax on its purchase of motor parts. We conclude that to the extent that Petitioner purchases these motor parts for resale, its purchases are not subject to Sales Tax.

Facts

Petitioner is a business in the United Kingdom (UK) that purchases motor parts from various suppliers in the United States (US). Every two weeks the orders that Petitioner places in the US are sent by its suppliers to an entity in New York State that consolidates and ships them to Petitioner. Petitioner indicates that it resells these motor parts in the UK.

Analysis

Sales tax applies to the receipts from every retail sale of tangible personal property (TPP) See Tax Law § 1105(a). A “retail sale” includes any sale of TPP to any person for any purpose, other than for resale as such. See Tax Law § 1101(b)(4)(i). A “sale” is any transfer of title or possession or both in exchange for a consideration. See Tax Law § 1101(b)(5). TPP is “[c]orporeal personal property of any nature.” Tax Law § 1101(b)(6).

Sales tax is a destination tax. See 20 NYCRR 525.2(3). The point of delivery or point at which possession is transferred by the vendor to the purchaser, or the purchaser’s designee, controls both the tax incidence and the tax rate. See id.

Petitioner purchases motor parts from various suppliers in the US. These parts are dispatched to an entity in New York that consolidates and ships them to Petitioner in the UK. No more information about this entity is provided by Petitioner. However, this entity appears to be a designee of Petitioner, thus making New York State the point where Petitioner’s purchases are delivered. We find that the sale of these parts, therefore, occurs in New York State, and would be subject to sales tax unless an exemption applies.

Petitioner indicates that it resells the motor parts in the UK. Because Petitioner is purchasing these motor parts for resale, those purchases would not be retail sales for sales tax purposes and would not be subject to sales tax. When making such purchases, however, Petitioner must furnish its suppliers with a properly completed Resale Certificate (Form ST-120). See TSB-M-93(3)S.

DATED: August 2, 2024

Mary Ellen Ladouceur
Principal Attorney

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.