When a printer produces magazines or sports programs for (or on behalf of) a tax-exempt organization, which of its purchases and sales are taxable?

Plain-English summary

Delta Design, Ltd. d/b/a Designers, II, publishes magazines and sports programs. It asked about two situations: (1) it contracts directly with a tax-exempt organization; and (2) it contracts with a corporation that acts on behalf of an exempt organization — the corporation raises funds for the organization and uses them to pay the printer. In each case the printer buys materials and services to fulfill the contract.

The Department broke the answer into the printer's purchases and its sales.

On what the printer buys:

• Resale materials and services are tax-free. Items the printer resells to the customer — the paper and ink that become part of the finished product — fall under the resale exclusion (§ 1101(b)(4)) and are not taxed. The printer gives suppliers a Resale Certificate (Form ST-120). The same resale treatment covers purchased services (like outside printing) used to produce the final product.
• Production machinery and supplies are exempt. Machinery, equipment, tools, and supplies used predominantly in production are exempt under § 1105-B and § 1115(a)(12) — covering things like artwork, illustrations, layouts, drawings, paintings, mechanicals, overlays, designs, photographs, and paste-ups (see TSB-M-79(7.1)S). The printer uses an Exempt Use Certificate (Form ST-121). Note: this production exemption does not apply to the New York City sales tax (§ 1107).

On what the printer sells:

• Newspapers and periodicals are exempt. If the publication is a "newspaper or periodical," the sale is exempt (the opinion cites § 1115(a)(15); the terms are defined at 20 NYCRR § 528.6) — under either contract.
• If it is not a newspaper/periodical, the buyer's status controls. A sale directly to an exempt organization under § 1116(a)(4) is exempt, on receipt of the organization's Exempt Organization Certificate (Form ST-119.1). The same result applies to a sale to an intermediary corporation acting as agent for the exempt organization (see TSB-M-78(3)S for what proves an agency purchase).
• A non-exempt, non-agent intermediary is taxable — unless it buys for resale. A sale to an entity that is neither exempt itself nor acting as agent is taxable under § 1105(a). The exception: if that intermediary buys the printed materials for resale to the exempt organization and gives a Resale Certificate, the printer's sale to it is not taxed.

What this means for you

"For an exempt customer" isn't one answer — separate your buys from your sells. Your input purchases (resale materials, production equipment) and your output sales (to the exempt org or an intermediary) each have their own rule. Don't assume the customer's exempt status flows through to everything.

Exempt status doesn't automatically pass through a middleman. Selling to a corporation that merely acts for an exempt organization is only exempt if that corporation is truly the organization's agent (prove it per TSB-M-78(3)S) or buys for resale to the organization with a resale certificate. A non-exempt intermediary acting on its own account is a taxable sale.

Newspaper/periodical status can exempt the sale outright. If the finished publication meets the § 528.6 definition of a newspaper or periodical, the sale is exempt regardless of who the customer is — worth checking before you analyze the buyer.

Watch the New York City carve-out on production equipment. The § 1115(a)(12)/§ 1105-B production exemption does not reach the New York City sales tax. Factor that in if you produce in the City.

Common questions

Q: I print a magazine for a nonprofit. Can I buy the paper and ink tax-free?
A: Yes — those become part of the product you sell, so they're bought for resale (Form ST-120). Your production equipment and supplies are also exempt under § 1105-B/§ 1115(a)(12) (Form ST-121), except for New York City tax.

Q: The nonprofit's fundraising corporation pays me, not the nonprofit. Is my sale still exempt?
A: Only if that corporation is acting as the nonprofit's agent (provable per TSB-M-78(3)S) or buys the printing for resale to the nonprofit with a resale certificate. Otherwise the sale to it is taxable.

Q: What if the publication is a newspaper or periodical?
A: Then the sale itself is exempt under the newspaper/periodical exemption (the opinion cites § 1115(a)(15); see 20 NYCRR § 528.6 for the definitions), under either contract.

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on receipts from retail sales of tangible personal property
• Tax Law § 1101(b)(4) — retail sale excludes property bought for resale as such or as a physical component part
• Tax Law § 1105-B and § 1115(a)(12) — exemption for machinery, equipment, tools, and supplies used predominantly in production (not applicable to the NYC sales tax under § 1107)
• Tax Law § 1115(a)(15) — exemption for the sale of a newspaper or periodical (as cited in the opinion; terms defined at 20 NYCRR § 528.6)
• Tax Law § 1116(a)(4) — exemption for sales made to exempt organizations

Regulations:

• 20 NYCRR § 528.6 — definitions of "newspaper" and "periodical"

Authority cited:

• Technical Services Bureau Memorandum TSB-M-79(7.1)S — production machinery/equipment exemption for printing inputs
• Technical Services Bureau Memorandum TSB-M-78(3)S — requirements to establish a purchase as an agent for another

Forms referenced:

• Form ST-120 — Resale Certificate
• Form ST-121 — Exempt Use Certificate
• Form ST-119.1 — Exempt Organization Certificate

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_39s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(39)S
Sales Tax
October 28, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S820210A

On February 10, 1982 a Petition for Advisory Opinion was received from Delta Design, Ltd.
d/b/a Designers, II, 691 Walt Whitman Road, Melville, New York 11746.
Petitioner inquires as to its Sales Tax obligations with respect to two contracts. In the first
instance, Petitioner contracts to publish a magazine or sports program for an exempt organization.
In the second instance, Petitioner contracts to publish a magazine or sports program for a corporation
which is acting on behalf of an exempt organization. Such corporation solicits funds on behalf of the
exempt organization and uses these funds to pay Petitioner. In this second case, Petitioner's contract
is with the corporation rather than with the exempt organization. In each case Petitioner purchases
materials and services necessary to the fulfillment of its contract.
Section 1105(a) of the Tax Law imposes a tax on "the receipts from every retail sale of
tangible personal property, except as otherwise provided in this article." The term "retail sale" is
defined, in relevant part, in section 1101(b)(4) of the Tax Law as "A sale of tangible personal
property to any person for any purpose, other than (A) for resale as such or as a physical component
part of tangible personal property. . . ." Accordingly, those items purchased by Petitioner which are
resold to its customer, such as the paper and ink incorporated into the product so sold, are subject
to the resale exclusion described above, and the receipts from such sales are not subject to tax. In
order to avail itself of the benefit of this exclusion, Petitioner should provide its suppliers with a
properly completed Resale Certificate (Form ST-120). The resale exclusion here described is
similarly applicable to Petitioner's purchases of services, such as printing, utilized in producing the
final product sold to its customer.
Further, the receipts from Petitioner's purchases of machinery, equipment, tools and supplies
used predominantly in the production of the product sold to its customer are exempt from tax
pursuant to Tax Law, §§ 1105-B and 1115(a)(12). (It may be noted that such exemption provisions
are not applicable to the New York City sales tax, imposed under section 1107 of the Tax Law) This
exemption would apply to such items as artwork, illustrations, layouts, drawings, paintings,
mechanicals, overlays, designs, photographs and paste-ups. S ee T echnical S er vices Bur eau
Memorandum TSB-M-79(7.1)S. To avail itself of the benefits of the exemption Petitioner should
present its supplier with a properly completed Exempt Use Certificate (Form ST-121).
The foregoing considerations are applicable to both of the contracts described by Petitioner.
In addition, where the publication sold constitutes a "newspaper or periodical," the receipts from the
sale thereof would, under either contract, be exempt from tax pursuant to section 1115(a)(15) of the
Tax Law.

ROBERT W. BOUCHARD, ACTING COMMISSIONER
GABRIEL B. DiCERBO , DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)

-2­
TSB-A-82(39)S
Sales Tax
October 28, 1982

(The Sales and Use Tax Regulations set forth the applicable definition of the terms "newspaper" and
"periodical." See 20 NYCRR 528.6.) However, where the publication does not constitute a
newspaper or periodical, the sales tax implications of the sales by Petitioner to its customers would
be as follows. Where Petitioner's customer is an organization described in section 1116(a)(4) of the
Tax Law, (viz., any of various "exempt" organizations) the receipts from sales made directly to such
organization would be exempt from tax pursuant to the terms of such statutory exemption provision.
To make sales on such an exempt basis, Petitioner must be provided with a copy of the customer's
Exempt Organization Certificate (form ST-119.1). The same result would arise from sales made to
an intermediary corporation acting as agent for the exempt organization. For the requirements which
must be met in order to establish a purchase as constituting a purchase by an agent for another, see
Technical Services Bureau Memorandum TSB-M-78(3)S. Sales made to an entity which is not itself
exempt under section 1116 of the Tax Law, nor acting as agent for such an organization, would be
subject to tax under section 1105(a) of the Tax Law. An exception to this rule would arise, however,
where the intermediary corporation purchased the printed materials for resale to the exempt
organization, and supplied Petitioner with a properly completed Resale Certificate.

DATED: October 13, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau