Must an exempt organization that sells books through a room with a cash register and by mail collect sales tax, and can it refund tax it already collected to customers?

Plain-English summary

The C.G. Jung Foundation for Analytical Psychology, Inc., an exempt organization under Tax Law 1116(a)(4), keeps books and pamphlets on analytical psychology for members to read in its M. Esther Harding Room in its New York City offices — and also sells listed titles to members and lecture attendees. As sales grew, it installed a cash register in the room and mailed its publications list to members and others on request, charging separately for postage and handling. Told by the Department to collect tax, it did — but held the money separately and asked (1) whether it could refund that tax to customers and (2) whether it must collect tax on future sales, arguing it isn't really running a shop or store.

The Department held the money must go to the State (not back to customers), and the Foundation must collect tax because it operates a shop or store.

• Issue I — over-collected tax goes to the State. Under 20 NYCRR 534.8(b)(1), when a person required to collect tax collects it on receipts — even receipts not subject to tax — the tax collected must be paid over to the Tax Commission. The Foundation's failure to remit was improper; it must remit the money and not refund it to customers. A customer who paid tax erroneously may apply to the Tax Commission for a credit or refund (20 NYCRR 534.2).
• Issue II — this is a shop or store. Sales by 1116(a)(4) organizations are generally exempt (1116(a)), but the exemption does not apply to sales made through a shop or store (1116(b)(1)). A "shop or store" is any place where goods are sold from display with a degree of regularity, frequency, and continuity (20 NYCRR 529.7(i)(2)).
• Result. The Foundation is operating a shop or store and must collect and remit tax on its Harding Room and its mail-order sales. That some titles are sold by mail is not material — an organization can't avoid the tax by routing otherwise taxable sales through the mail.

What this means for you

Being a tax-exempt nonprofit doesn't make your retail sales tax-free. New York exempts a qualifying organization's occasional or fundraising sales, but the moment you run a shop or store — selling goods from display regularly and continuously — those sales are taxable and you must collect.

A cash register and a regular sales operation look like a store. The test isn't the size of the space; it's the regularity, frequency, and continuity of selling goods from display. A dedicated selling setup crosses the line.

If you collect tax you weren't sure you owed, send it to the State — don't hand it back. Once you've collected sales tax, the law requires you to remit it. You can't decide later to refund it to buyers yourself; a customer who overpaid must seek a refund from the Tax Commission.

Common questions

Q: Our nonprofit sells books and merchandise regularly. Do we have to charge sales tax?
A: If you sell from display with regularity, frequency, and continuity, you're running a shop or store, and the exemption for your sales doesn't apply — you must collect and remit tax.

Q: We sell mostly by mail. Does that avoid the tax?
A: No. Selling through the mail doesn't let you circumvent the tax on otherwise taxable sales. If you operate a shop or store, mail-order sales are taxable too.

Q: We collected tax while unsure whether we owed it. Can we just refund it to our customers?
A: No. You must remit the collected tax to the Tax Commission. A customer who paid tax in error can apply to the Tax Commission for a credit or refund.

Citations and references

Tax Law:

• 1105(a) — taxes receipts from every retail sale of tangible personal property
• 1116(a)(4), 1116(a) — exempt organizations; their sales are generally not taxable
• 1116(b)(1) — the exemption does not apply to sales made through a shop or store

Regulations (20 NYCRR):

• 529.7(i)(2) — "shop or store" means any place where goods are sold from display with a degree of regularity, frequency, and continuity
• 534.8(b)(1) — tax collected (even on non-taxable receipts) must be paid over to the Tax Commission
• 534.2 — a customer's remedy is to apply to the Tax Commission for a credit or refund

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_24s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(24)S
Sales Tax
June 24, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S840827C

On August 27, 1984 a Petition for Advisory Opinion was received from C.G. Jung
Foundation for Analytical Psychology, Inc., 28 East 39th Street, New York, New York 10016.
The issues raised are: (1) whether Petitioner may refund to its customers sales tax it has
collected on its sales of books and pamphlets and (2) whether Petitioner is required to collect sales
tax on its future sales of books and pamphlets.
Petitioner is an exempt organization as described in section 1116(a)(4) of the Tax Law.
Petitioner maintains a room (the M. Esther Harding Room) in its New York City offices
which is used for meetings, lectures and reading. Books and pamphlets concerned with analytical
psychology and closely related fields are made available to Foundation members for reading in this
room. Petitioner maintains a list of publications that are available for sale to members and persons
attending Foundation lectures. As a consequence of making hard-to-find titles available, Petitioner's
sales have increased and a cash register has been installed in the Harding Room. Petitioner's list of
publications is also sent through the mail to Foundation members and other interested persons who
request the list. A separate charge is made for postage and handling on mail order sales.
Pursuant to directions received from the Sales Tax Instructions and Interpretations Unit of
the Technical Services Bureau, Petitioner has been collecting sales tax on its mail order and Harding
Room sales. However, Petitioner avers that it should not be required to collect such tax because: (1)
it is an exempt organization (2) the publications sold are not easily commercially available and (3)
the publications are made primarily available to members. Petitioner believes, based on items (2) and
(3), it is not operating a shop or store requiring the collection of sales tax.
Petitioner states that it has collected the sales tax and accounted for such funds separately,
pending resolution of the question of whether collection of sales tax was required. If not required,
Petitioner intends to refund to purchasers any moneys actually collected.
Issue I
The Sales and Use Tax Regulations provide that "Where a person required to collect tax,
collects tax on receipts...not subject to tax,... the tax collected must be paid over to the State Tax
Commission..." 20 NYCRR 534.8(b)(1). Accordingly, Petitioner's failure to remit the tax collected
was improper, notwithstanding the fact that there was doubt on Petitioner's part as to the taxability

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85(24)S
Sales Tax
June 24, 1985

of its sales. Petitioner must therefore remit to the State Tax Commission any moneys purportedly
collected in accordance with Articles 28 and 29 of the Tax Law and not refund such moneys to its
customers. Any customer who has made an erroneous, illegal or unconstitutional payment of tax to
Petitioner may apply to the Tax Commission for a credit or refund in accordance with 20 NYCRR
534.2.
Issue II
The Tax Law imposes a tax on the receipts from every retail sale of tangible personal
property with certain exceptions. Tax Law 1105(a).
Sales made by organization's described in section 1116(a)(4) of the Tax Law are generally
not subject to tax. Tax Law 1116(a). However, if such organizations make sales of tangible personal
property through a shop or store the exemption does not apply. Tax Law 1116(b)(1)
The Sales and Use Tax Regulations describe a shop or store to include "...any place or
establishment where goods are sold from display with a degree of regularity, frequency and
continuity... "20 NYCRR 529.7(i)(2).
Petitioner is operating a shop or store within the meaning and intent of Tax Law 1116(b)(1)
and 20 NYCRR 529.7(i)(2). Petitioner is therefore required to collect and remit tax on its mail order
and Harding Room sales. The fact that some of the publications are sold via mail order is not
material. It would be contrary to the intent of Tax Law 1116(b)(1) to allow a taxpayer to circumvent
the collection of tax by the simple expedient of conducting otherwise taxable transactions through
the mail.

DATED: June 4, 1985

FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth herein.