Are advertising-printed envelopes used to mail promotional material out of state, but mailed from New York, subject to New York sales or use tax?

Plain-English summary

Publishers Clearing House mails promotional material from a New York location to recipients outside New York. The outer envelopes carry promotional advertising printed on both the front and back. PCH argued the envelopes are themselves promotional materials and should get the same tax treatment as the promotional material mailed inside them.

The Department held the envelopes are subject to New York sales or use tax.

• The tax reaches goods sold and used here. Section § 1105(a) taxes receipts from retail sales of tangible personal property, and § 1110 imposes a complementary use tax on property used in New York by someone who bought it here without paying tax.
• The bulk-reshipment refund doesn't apply. Section § 1119(a)(2) refunds tax on bulk property that is stored and not used in New York and is later re-shipped out of state for use outside the state. But these envelopes are used in New York — they are mailed from points within New York through a New York post office. Department Form ST-152 confirms that "outside mailing envelopes used to mail printed matter from a point in New York State, through a New York Post Office, are fully taxable as their use occurs in New York State." So the § 1119(a)(2) refund is unavailable, and tax is due.
• The printing doesn't change the result. The advertising on the envelopes has no effect on their tax status. Their primary function is to serve as the delivery vehicle for the printed matter inside; any advertising benefit is merely incidental. For that reason, TSB-M-79(9)S (which PCH cited) is not germane.

What this means for you

Where the item is used, not where it's sent, controls. An outer envelope is "used" when you mail it — and mailing it from a New York post office is a New York use. That the letter travels to another state doesn't move the envelope's taxable use out of New York.

Printing ads on the envelope doesn't convert it into exempt promotional material. The Department looks at the item's primary function. An envelope's job is to carry and deliver what's inside; advertising on it is incidental, so it's taxed as a mailing envelope, not as the promotional insert.

The bulk-reship refund needs the property to leave unused. Section 1119(a)(2) is for goods bought in bulk, stored, and shipped out of state for out-of-state use. Once you consume the item in New York (by mailing it here), that refund is off the table.

Common questions

Q: We mail to out-of-state customers from New York. Are the envelopes taxable?
A: Yes. The envelopes are used in New York when mailed from a New York post office, so New York sales or use tax applies — even though the recipients are out of state.

Q: The envelopes have our ads printed on them. Doesn't that make them exempt promotional material?
A: No. Their primary function is to deliver the printed matter inside; the advertising is incidental. They're taxed as mailing envelopes, not as the promotional insert.

Q: Can we get the § 1119(a)(2) bulk-reshipment refund?
A: No. That refund applies to bulk property stored and re-shipped out of state for use outside New York. These envelopes are used in New York when mailed here, so the refund doesn't apply.

Citations and references

Statutes and guidance:

• Tax Law § 1105(a) — tax on receipts from retail sales of tangible personal property
• Tax Law § 1110 — compensating use tax on property used in New York
• Tax Law § 1119(a)(2) — refund/credit for bulk property stored and not used in New York, later re-shipped out of state for out-of-state use
• Form ST-152 (Collection and Reporting Instructions for Printers and Mailers) — outer mailing envelopes mailed from a New York post office are fully taxable as used in New York
• TSB-M-79(9)S — cited by the petitioner; held not germane

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_1s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-83(1)S
Sales Tax
January 31, 1983

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S820419A

On April 19, 1982 a Petition for Advisory Opinion was received from Publishers Clearing
House, 382 Channel Drive, Port Washington, New York 11050.
The issue raised is whether certain envelopes used by Petitioner to mail promotional material
to recipients outside New York State are subject to New York State Sales or Use Tax when mailed
from a New York State location. It is concluded herein that they are so subject to tax.
The envelopes which Petitioner uses to mail promotional material to recipients located
outside New York State have promotional advertising printed on both the front and back sides. It is
Petitioner's contention that the envelopes are themselves promotional materials and should receive
the same sales tax treatment as the promotional material mailed in such envelopes.
Tax Law section 1105(a) imposes a sales tax on "the receipts from every retail sale of
tangible personal property . . . " A complementary compensating use tax is imposed, under section
1110 of the Tax Law, on the use of tangible personal property in this State by a person who
purchased the same while a resident of New York, but who did not pay tax on the purchase. Section
1119(a)(2) of the Tax Law provides for a refund or credit of tax with respect to "the sale or use of
tangible personal property purchased in bulk, or any portion thereof, which is stored and not used
by the purchaser or user within this state if that property is subsequently re-shipped by such
purchaser or user to a point outside this state for use outside this state, . . .". (Emphasis added)
Form ST-152 (5/77), Collection and Reporting Instructions For Printers and Mailers, states
in part as follows: "NOTE: . . . Outside mailing envelopes used to mail printed matter from a point
in New York State, through a New York Post Office, are fully taxable as their use occurs in New
York State." (Emphasis added)
As the envelopes in question are used by Petitioner to mail printed matter from points within
New York State, Petitioner is considered to be using the envelopes within New York State.
Accordingly, the above-quoted provisions of section 1119(a)(2) of the Tax Law are not applicable
to Petitioner, and sales or use tax is thus due. The fact that the envelopes contain promotional
advertising on their front and back has no effect on their sale or use tax status as their primary
function is to serve as vehicles for delivery of the promotional printed matter contained in them, and
any advertising benefit derived from their use is merely incidental. For this reason, Technical
Services Bureau Memorandum TSB-M-79(9)S, cited by Petitioner, is not germane to the matter at
hand.
DATED: January 14, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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