NY TSB-A-24(33)S Sales Tax 2024-08-16

For a service delivered to a New York customer but invoiced to an out-of-state address, does New York sales tax follow the delivery location or the billing address?

Short answer: The delivery location. New York sales tax is a destination tax: if a seller has nexus and delivers a taxable service in New York, it must collect tax at the combined State and local rate where delivery takes place, regardless of the out-of-state address on the invoice. (The Department did not decide whether this seller has nexus or whether its IT services are taxable.)

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

A foreign company with no physical presence in the United States provides information technology services to customers whose shipping and postal addresses are in New York, but whose invoice (billing) addresses are in Florida. It asked a narrow question: when those two addresses differ, which one decides whether New York sales tax must be collected — the New York delivery address or the out-of-state billing address?

The Department's answer: the delivery address controls. New York sales tax is a destination tax — the point where the product or service is delivered, or where possession transfers to the purchaser, fixes both whether tax applies and which local rate applies (20 NYCRR 525.2(a)(3)). So if the company has nexus with New York and delivers a taxable service in the State, it must collect tax at the combined State and local rate for the jurisdiction where delivery occurs, even though the invoice shows a Florida address. The billing address is irrelevant to sourcing.

Two important limits the Department flagged: it did not decide whether this particular company has nexus with New York (it can't resolve nexus in an Advisory Opinion), and it did not decide whether the company's IT services are taxable at all (the company gave no detail about them). The opinion answers only the address question. The Department did note in a footnote that a business can have nexus even without physical presence if it regularly or systematically solicits business in New York (Tax Law § 1101(b)(8)(iv)).

What this means for you

Remote and out-of-state sellers

Don't source New York sales tax to your customer's billing address. If you have nexus and you're selling something taxable that is delivered in New York, you collect New York State and local tax based on the delivery/use location, regardless of where the invoice is addressed or where payment comes from. Using the billing address can under- or over-collect and apply the wrong local rate.

Getting the local rate right

Because the rate is set by the delivery jurisdiction, you need the actual New York location where the customer receives the service or property — county and city combinations vary. Build your tax determination off the ship-to/delivery address, not the bill-to address.

Two questions this opinion does NOT answer

Do you have nexus? Physical presence isn't required — regular or systematic solicitation of New York business can create nexus (Tax Law § 1101(b)(8)(iv); economic-nexus thresholds also apply to remote sellers). Evaluate this separately.
Is your service taxable? IT and software-related services vary widely — some are taxable (e.g., prewritten software, certain protective or information services), some aren't. The destination rule only tells you where to source a sale once you know it's taxable.

Accountants and tax professionals

This is a concise restatement of destination sourcing under 20 NYCRR 525.2(a)(3), reinforced by Matter of Hotel Depot, Inc. and Matter of Dipesh Parikh (Tax Appeals Tribunal, Jan. 24, 2020). Use it to rebut any "we bill to another state, so no New York tax" position — billing address has no bearing on sourcing.

Common questions

Q: Customer is billed in Florida but the work is delivered in New York — do I charge New York tax?
A: If you have nexus and the service is taxable, yes. Sales tax is a destination tax sourced to the New York delivery location; the Florida invoice address doesn't change that.

Q: Which local rate applies?
A: The combined State and local rate for the New York jurisdiction where delivery/possession occurs — not where the bill is sent.

Q: Does this mean my IT services are taxable?
A: The opinion doesn't say. It assumed a taxable service and answered only the sourcing question. Whether your specific services are taxable is a separate determination.

Q: I have no physical presence in New York — am I off the hook?
A: Not necessarily. Nexus can arise from regularly or systematically soliciting New York business, and remote sellers can have economic nexus (Tax Law § 1101(b)(8)(iv)). The Department didn't decide nexus here.

Q: Can I rely on this opinion?
A: No. An Advisory Opinion binds the Department only as to the petitioner and the facts presented. It illustrates the Department's reasoning but cannot be relied on by another taxpayer.

Citations and references

Statutes and regulations:
- 20 NYCRR 525.2(a)(3) (sales tax is a destination tax — point of delivery / transfer of possession controls the tax and rate)
- Tax Law § 1101(b)(8)(iv) (nexus from regular or systematic solicitation of business, even without physical presence)

Authority referenced in the opinion: Matter of Hotel Depot, Inc. and Matter of Dipesh Parikh, Tax Appeals Tribunal, January 24, 2020; TSB-M-19(4)S (registration requirements for businesses with no physical presence).

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/24-33s.htm
Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-33s.pdf

Original ruling text

Sales Tax
August 16, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for an Advisory Opinion from [ redacted ] (“Petitioner”). Petitioner asks whether it must include sales tax on invoices for information technology services rendered to clients with shipping and postal addresses in New York State, but with out-of-state addresses on the invoices.

We conclude that sales tax must be collected on the receipts from taxable services delivered in New York State, irrespective of the address on the invoice.

Facts

Petitioner is a foreign company with no physical presence in the United States. Petitioner provides information technology services to customers with shipping and postal addresses in New York State, but with invoice addresses in Florida. Petitioner provided no information about the nature of its services and asks only whether the shipping/postal address or the invoice address controls whether New York State and local sales taxes must be collected.

Analysis

Petitioner states that it has no physical presence in New York State. Petitioner did not ask, nor can we opine in an Advisory Opinion, about whether it has nexus with New York.1 Moreover, Petitioner did not ask whether its information technology services would be subject to sales tax, and it provided no information on which such an opinion could be based. Accordingly, this Advisory Opinion is limited to the question of whether the shipping/delivery address or the invoice address controls whether sales tax must be collected.

Sales tax is a destination tax, meaning that the point of delivery or point at which possession is transferred to the purchaser controls the tax incident and the tax rate. See 20 NYCRR 525.2(a)(3); Matter of Hotel Depot, Inc. and Matter of Dipesh Parikh, Tax Appeals Tribunal, January 24, 2020. Therefore, if Petitioner has nexus with New York State and delivers a taxable service in the State, it must collect sales tax at the combined State and local rate in effect in the jurisdiction where delivery of this service takes place, even if the address on the invoice for that service is outside of the State.

DATED: August 16, 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.

1 We note that a business may have nexus if it regularly or systematically solicits business in New York State, even if it has no physical presence in the State. See Tax Law § 1101(b)(8)(iv); TSB-M-19(4)S.