Must an out-of-state computer seller with no office, employees, salespeople, or advertising in New York collect New York sales tax on computers shipped to New York buyers?

Plain-English summary

Data Intelligence Systems Corp., a computer company based in Cambridge, Massachusetts, sold mini and micro computers, hardware, and software. It had shipped six computers known to be in New York and performed no maintenance on them. It stated that it has no New York office, no New York employees, sends no salespeople into New York, and does not exhibit its product or distribute unsolicited advertising in the State. It asked whether it must collect New York sales tax on tangible personal property sold in Massachusetts for use in New York.

The Department held that, on those facts, it is not required to collect New York tax — but its New York customers owe use tax.

• Who has to collect. New York requires every person who makes retail sales of tangible personal property in the State (including sales delivered to a New York customer) to register and collect the tax. A "vendor" under Tax Law 1101(b)(8) includes a person who solicits business by employees, agents, or by distributing catalogs or other advertising, and thereby makes sales into New York.
• The two nexus triggers. The interstate-vendor rules in 20 NYCRR 526.10(e) require collection by an out-of-state seller that either maintains a place of business in New York — a store, showroom, warehouse, office, etc. (526.10(c)) — or solicits business in New York (526.10(d)) through salespeople, independent contractors, or agents contacting customers; distributing catalogs or advertising in the State; or placing ads in New York media directing orders to New York.
• Neither trigger was present. On the facts submitted, Data Intelligence neither maintained a place of business nor solicited business in New York. So property it sends to New York destinations is not subject to its collection duty if delivered by mail or common carrier, and provided it performs no maintenance on the property in New York.
• The customers still owe use tax. New York purchasers must report the purchases on their returns and pay the applicable State and local compensating use tax.
• If the facts change, so does the answer. If the seller has New York salespeople, distributes catalogs or advertising in New York, or otherwise solicits business there and makes sales as a result, it becomes a vendor under 1101(b)(8) and must collect tax on all its taxable New York sales.

What this means for you

Physical presence and in-state solicitation were the 1985 test. Under the law as it stood, an out-of-state seller that kept no office and sent no salespeople, catalogs, or ads into New York had no duty to collect New York sales tax on mail/common-carrier shipments.

But "no collection duty" never meant "no tax." The New York buyer still owes compensating use tax and must report the purchase. The tax doesn't disappear because the seller is out of state — it shifts to the customer.

This is a pre-Wayfair ruling — do not treat it as current nexus law. Since South Dakota v. Wayfair (2018), New York and other states can require out-of-state sellers to collect based on economic nexus (a dollar or transaction threshold) with no physical presence at all. An out-of-state seller in this position today should check current economic-nexus thresholds rather than rely on the physical-presence analysis here.

Common questions

Q: I'm an out-of-state seller shipping into New York by common carrier. Did I have to collect NY tax under this ruling?
A: Not if you had no New York place of business and did not solicit business in New York (no in-state salespeople, catalogs, or targeted advertising) and performed no maintenance in the State. The buyer owed use tax instead.

Q: My customers didn't pay tax to me. Does New York just lose that revenue?
A: No. New York purchasers must report the purchase and pay State and local compensating use tax themselves.

Q: Is this still how New York nexus works?
A: No — this applies the old physical-presence test. Since the 2018 Wayfair decision, states can require collection based on economic nexus (sales or transaction volume) without any physical presence. Check the current thresholds.

Citations and references

Tax Law:

• 1101(b)(8) — "vendor" includes a person soliciting business by employees, agents, or by distributing catalogs or other advertising, and thereby making taxable sales into New York
• 1131(1) — persons required to collect tax include every vendor of tangible personal property or services
• 1134(a)(1) — a person required to collect tax must file a Certificate of Registration before commencing business

Regulations (20 NYCRR):

• 526.10(c) — "maintaining a place of business" (store, showroom, warehouse, office, etc.)
• 526.10(d) — "soliciting business" (in-state salespeople/agents; distributing catalogs or advertising; placing ads directing orders to New York)
• 526.10(e) — interstate vendors: collection required if the out-of-state seller maintains a place of business or solicits business in New York

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_34s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(34)S
Sales Tax
August 21, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S840502A

On May 2, 1984 a Petition for Advisory Opinion was received from Data Intelligence
Systems Corp., 19 Monsignor O'Brien Highway, Cambridge, Massachusetts 02144.
The issue raised is whether a vendor operating a business corporation in Massachusetts is
required to collect New York State Sales Tax on tangible personal property sold in Massachusetts
for use within New York State.
Petitioner sells mini and micro computers, hardware, software, and hardware and software
maintenance. Petitioner states that it has sold six computers which are known to be in New York
State and that it performs no maintenance service on these units.
Petitioner further alleges that it does not operate an office in New York State, has no
employees residing in New York State, sends no salesmen into New York territory on sales calls,
and does not exhibit its product or distribute unsolicited advertising brochures within the State.
Article 28 of the Tax Law provides that every person who makes retail sales of tangible
personal property in New York (which includes sales where the property is delivered to the customer
in New York) is required to register with the Tax Commission and to collect the sales tax due with
respect to such sales.
The Tax Law contains, in part, the following definitions:
Section 1101(b)(8) "Vendor. (i)(C) A person who solicits business either by
employees, . . . agents or other representatives or by distribution of catalogs, or other advertising
matter and by reason thereof makes sales to persons within the state of tangible personal property
or services, the use of which is taxed by this article;. . . .
Section 1131 (1). . . "person required to collect any tax imposed by this article" shall
include: every vendor of tangible personal property or services; . . . (4) "Property and services the
use of which is subject to tax" shall include: (a) all property sold to a person within the state, whether
or not the sale is made within the state, . . .
The Tax Law further provides in Section 1134(a)(1): "Every person required to collect
any tax imposed by this article commencing business, or opening a new place of business, . . . shall
file with the Tax Commission a Certificate of Registration, in a form prescribed by it, at least twenty
days prior to commencing business. . . .
Special rules applicable to vendors located outside New York State are set forth in Sales and
Use Tax Regulations Section 526.10:
RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

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

-2­
TSB-A-85(34)S
Sales Tax
August 21, 1985
"(e) Interstate vendors. (1) A person outside of this State making sales to persons
within the State, who solicits the sales in New York, as defined in subdivision (d) of
this section, or who maintains a place of business as defined in subdivision (c) of this
section, is required to collect the sales tax on the tangible personal property delivered
in New York or the services performed in New York.
The "subdivision (c) and subdivision (d)" referred to in the foregoing reads, in relevant part,
as follows:
"(c) Maintaining a place of business. A vendor shall be considered to
maintain a place of business in the State if he, either directly or through a subsidiary,
has a store, salesroom, sample room, showroom, distribution center, warehouse,
service center, factory, credit and collection office, administrative office or research
facility in the State.
"(d) Soliciting business. (1) A person is deemed to be soliciting business if
he has employees, salesmen, independent contractors, promotion men, missionary
men, service representatives or agents soliciting potential customers in the State.
Example 1:

An out of State company that has a sales
representative contracting customers in the State is
soliciting business as a vendor.

Example 2:

An out of State company that has an independent
salesman contacting customers in the State is solic­
iting business and is a vendor. The fact that the
independent salesman represents other companies as
well is irrelevant.

Example 3:

An out of State company that has a booth at a trade
fair, staffed by its promotion men, is soliciting
business in the State and is a vendor.

(2) A person is deemed to be soliciting business in New York if he distributes catalogs or
other advertising material, in any manner in the State.
(3) A person is deemed to be soliciting business if he places advertisements in New York
newspapers or over New York radio or television stations, and either requests that orders, payments
or inquiries be sent to a New York address or delivers orders to New York in vehicles that he
controls."
The information submitted by Petitioner indicates that, at the time the Advisory Opinion was
requested, Petitioner neither maintained a place of business nor solicited business in New York State,
as defined in subdivision (c) and (d) of Regulations Section 526.10. If Petitioner's sales operations
are consistent with the facts stated in the Petition, property sent to New York destinations is not
subject to sales tax if delivery is made by mail or common carrier, and provided that petitioner
performs no maintenance service on the property at the New York location.

-3­
TSB-A-85(34)S
Sales Tax
August 21, 1985
Accordingly, Petitioner would not be required to collect New York State or local sales or use
taxes on sales sent to New York destinations under such circumstances.
Petitioner's customers, however, must report the purchase of such property on their returns
and must pay the applicable State and local compensating use taxes.
However, if Petitioner has salesmen in New York State, distributes catalogs or other
advertising matter in this state or otherwise solicits business in this state and by reason thereof makes
sales to persons within this state, then Petitioner is a vendor within the meaning of section
1101(b)(8) of the Tax Law and is required to collect sales tax on all of its taxable sales sent to New
York destinations.

DATED: July 30, 1985

s/ANDREW F. MARCHESE
Chief of Advisory Opinions

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