Must an out-of-state catalog seller that has retailers, employee visits, and trade-show activity in New York collect New York sales tax on its mail-order sales here?

Plain-English summary

The Orvis Company, Inc., a Vermont corporation selling hunting and fishing equipment, clothing, and gift items, does business in two ways through one corporation: a retail mail-order catalog division and a wholesale division selling to independent retailers. It mails three catalogs a year, ships by U.S. mail or common carrier, and argued it had no New York presence and so should not have to collect New York tax on its mail-order sales to New York customers. This is a Modified Advisory Opinion that revises the original TSB-A-85(48)S (issued October 8, 1985).

The Department held that Orvis does have nexus and must collect New York sales and use tax on its retail mail-order sales here.

• Look at the whole corporation, not just the mail-order division. Because the mail-order and wholesale operations are the same corporate entity, the Department weighed all of Orvis's New York contacts together.
• The contacts are substantial. Catalogs mailed into New York three times a year to solicit orders; at least sixteen New York retailers selling Orvis products; and employees entering the state to inspect retailers, help them prepare opening orders, and accompany them to sportsmen's shows in New York.
• That satisfies the constitutional nexus test. A state may require an out-of-state seller to collect tax when there is a "definite link, some minimum connection" between the seller and the state (Commerce Clause and Due Process Clause; National Geographic Society v. California Board of Equalization; National Bellas Hess; Miller Bros. v. Maryland). Orvis's contacts are "not slight and inconsequential," so requiring collection is constitutional.
• Orvis is a "vendor." A person who solicits business by distributing catalogs and thereby makes sales into the state is a vendor required to collect (Tax Law 1131; 1101(b)(8)(i)(C); 20 NYCRR 526.10(e)(1)).
• The mail-order exception does not save it. An interstate seller that solicits only by mailing catalogs, delivers only by mail/carrier, and neither maintains a place of business nor solicits business as defined, need not register (20 NYCRR 526.10(e)(2)). But Orvis has promotion men, missionary men, or service representatives soliciting in New York (526.10(d)), so it is soliciting business here and falls outside the exception.
• Result. Orvis meets the definition of vendor and the constitutional minimum-contacts test, so it must collect New York State sales and use tax on its retail mail-order sales to New York customers.

What this means for you

Nexus is judged on your company's total footprint in the state. You can't wall off a "mail-order division" and claim it has no presence if the same corporation sends employees, cultivates in-state retailers, and works trade shows here. The Department aggregates all of it.

In-state people and activities are what tip a catalog seller into collection duty. Under this 1986 framework, pure remote catalog selling (mail/carrier only, no in-state place of business, no in-state solicitation by people) could escape collection — but employee visits, retailer support, and trade-show participation are "soliciting business" that creates the duty.

This is a physical-presence-era case — and the law has moved. In 1986 the question was whether the seller had a physical/representational connection to New York. The Department found one for Orvis. See the important caveat below: the constitutional rules for taxing remote sellers changed substantially after this opinion.

Important: This opinion applies the pre-Wayfair physical-presence framework. Its finding of nexus rested on Orvis's people and retailer contacts in New York — a physical presence that still creates nexus today. But the U.S. Supreme Court has since ended the rule that physical presence is required: a remote seller with no New York presence can now be required to collect based on its volume of New York sales (economic nexus). Do not treat this opinion as the current test for when a remote seller must collect; consult a professional about today's thresholds.

Common questions

Q: My mail-order division has no New York office. Does that mean no nexus?
A: Not necessarily. If your mail-order operation is part of a corporation that also sends employees into New York, supports in-state retailers, or works New York trade shows, the Department looks at the whole company's contacts — which here created nexus.

Q: What activities pushed Orvis over the line?
A: Mailing catalogs into New York, having sixteen-plus New York retailers, and sending employees into the state to inspect retailers, assist with opening orders, and attend sportsmen's shows — i.e., representatives soliciting business in New York.

Q: Isn't there a mail-order exception?
A: Yes — 20 NYCRR 526.10(e)(2) exempts a seller that solicits only by interstate catalog mailing, delivers only by mail or carrier, and neither keeps a place of business nor solicits business here. Orvis didn't qualify because it had representatives soliciting in New York.

Q: Does this opinion still state the current law on remote-seller collection?
A: No. Its physical-presence-based finding of nexus remains valid, but the requirement of physical presence has been abolished; remote sellers can now have economic nexus from sales volume alone. See the caveat above.

Citations and references

Tax Law:

• 1131 — every vendor of tangible personal property or services must collect sales and use tax
• 1101(b)(8)(i)(C) — "vendor" includes a person who solicits business by distributing catalogs or advertising and thereby makes taxable sales in the state

Regulation:

• 20 NYCRR 526.10(c) — what counts as maintaining a place of business in New York
• 20 NYCRR 526.10(d) — what counts as soliciting business (employees, salesmen, contractors, promotion men, service representatives soliciting in the state)
• 20 NYCRR 526.10(e)(1) — an interstate seller must collect if it makes New York sales and either solicits here or maintains a place of business here
• 20 NYCRR 526.10(e)(2) — mail-order exception for a seller that neither maintains a place of business nor solicits business in New York

Court cases cited:

• National Geographic Society v. California Board of Equalization, 430 U.S. 551 — nexus test: a definite link, some minimum connection
• National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753 — due process/commerce-clause nexus for out-of-state sellers
• Miller Bros. Co. v. Maryland, 347 U.S. 340 — minimum-connection language
• Rowe-Genereux, Inc. v. Vermont Department of Taxes, 411 A.2d 1345 (1980) — commerce-clause burden on interstate commerce

Modifies:

• TSB-A-85(48)S (issued October 8, 1985) — the original Orvis advisory opinion, superseded by this modified opinion

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_48_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(48.1)S
Sales Tax
February 20, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
MODIFIED ADVISORY OPINION

PETITION NO. S830104B

On October 8, 1985, an Advisory Opinion was issued to The Orvis Company, Inc., 10
Riverside Road, Manchester, Vermont 05254. Such Advisory Opinion is modified as provided in
this Advisory Opinion.
The issues raised are (1) whether a sufficient nexus exists between Petitioner and New York
State to satisfy the due process and commerce clauses of the U.S. Constitution and (2) whether
Petitioner is a "vendor" for purposes of the New York State Sales and Use Tax and therefore required
to collect New York State Sales and Use Tax on retail mail order sales made to New York
customers.
Petitioner is a Vermont corporation in the business of selling fishing and hunting equipment,
fashion and outdoor clothing, and various gift items. Petitioner sells its various products on a retail
basis through a mail order catalog business and on a wholesale basis to independent retailers.
Petitioner's mail order sales are generated by catalogs distributed via the United States mails.
Three basic catalogs are distributed per year. All mail order merchandise sold by Petitioner is
shipped to the customers via the United States mail or common carrier.
Petitioner receives orders from and ships merchandise to customers in New York State.
However, Petitioner has no property or permanent employees in New York, does not advertise in
New York with the exception of the previously mentioned catalogs, does not solicit sales over the
phone and does not have a telephone listing in the state. Petitioner contends it does not have to
charge New York sales tax on mail order sales because these retail sales are not made within New
York. Petitioner also contends it does not have to collect and remit New York use tax on these retail
sales because it has no place of business in New York and does not solicit mail order sales in New
York.
Petitioner is also engaged in the business of wholesale sales of merchandise. Petitioner's mail
order business and wholesale business are not separate corporate entities but simply different
divisions within the same corporation.
The wholesale business sells to retail establishments located in several states, including New
York. Virtually all of the wholesale orders placed with Petitioner are made by mail or by telephone.
Wholesale orders are shipped to the retailers via mail or common carrier.
There are located in the State of New York several retailers which purchase merchandise
from Petitioner on a wholesale basis for the purpose of resale. As of December 1977, Petitioner sold
merchandise to approximately nine retailers in New York. The number of Petitioner's New York
retailers increased to sixteen by December, 1981.
RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

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

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TSB-A-85(48.1)S
Sales Tax
February 20, 1986
Historically, employees of Petitioner have visited each of their New York retailers at least
once a year, although sometimes less. Petitioner contends the purpose of the visits was to
communicate with the retailers about problems, not to solicit business.
Employees of Petitioner come into New York State on other occasions for various business
related reasons. They do, at times, come to make visual inspections of their retailers' establishments.
While in New York, Petitioner's employees have assisted retailers in preparing their opening orders
with Petitioner. Also, on occasion, employees of Petitioner accompany retailers to sportsmen's shows
in New York State. Petitioner contends that the only purpose of these shows was to promote the
business and sales of the retailers.
ISSUE 1
A state can require an out of state seller to collect the state's sales and use tax only when there
is a sufficient nexus between the seller and the taxing state, as required by the commerce clause (Art.
I, 8, cl. 3) and the due process clause of the Fourteenth Amendment. National Geographic v.
California Equalization Board, 430 U.S. 551.
In most general terms, the due process clause requires that there be some minimum
relationship between the taxpayer or collector and the taxing state that provides a taxable "nexus".
The commerce clause, on the other hand, mandates that there must not be an unreasonable burden
on the free flow of goods across state lines. Rowe-Genereux, Inc. v. Vermont Department of Taxes,
411 A. 2d 1345 (1980). The test whether a particular state exaction is such as to invade the exclusive
authority of Congress to regulate trade between the States, and the test for a state's compliance with
the requirements of due process in this area, are similar. National Bellas Hess, Inc. v. Department
of Revenue, 386 US 753.
"The relevant constitutional test to establish the requisite nexus for requiring an out of state
seller to collect and pay the use tax is not whether the duty to collect the use tax relates to the seller's
activities carried on within the State, but simply whether the facts demonstrate some definite link,
some minimum connection, between [the State and] the person it seeks to tax: National Geographic
Society v. California Board of Equalization, 430 US 551, (quoting Miller Bros. v. Maryland, 347 US
at 344-345. (Emphasis added). The basic question is "whether the state has given anything for which
it can ask in return." National Bellas Hess, Inc. v. Illinois Rev. Dept., 386 U.S. 753, 756 (quoting
Wisconsin v. J.C. Penney Co., 311 US 435, 444).
Petitioner's mail order division is not a separate corporate entity from the wholesale division.
Therefore, it is the Orvis Company Inc., as a whole and its contacts with the state to which we look
in determining whether a sufficient nexus between it and New York State exists.

-3­
TSB-A-85(48.1)S
Sales Tax
February 20, 1986
Petitioner's contacts with New York are not slight and inconsequential. Three times a year
merchandise catalogs are mailed into New York State for the purpose of soliciting orders and
stimulating sales. Also, located in New York are at least sixteen retail establishments selling
Petitioner's products to customers in New York State. Employees of Petitioner come into the state
to inspect the retail establishments selling their goods. They also enter the state to assist retailers in
preparing their opening order with Petitioner. In addition, employees of Petitioner accompany
retailers to sportsmen's shows in New York State, in hopes of promoting the business and sales of
the retailer, which would inevitably increase the sales made by Petitioner to the retailer.
In consideration of the numerous contacts with and benefits derived from carrying on
business in New York State, it is evident a sufficient nexus exists between Petitioner and the state.
The existence of this nexus satisfies the requirements of the commerce clause and due process
clause, thereby making the requirement to collect the sales and use taxes constitutional.
Issue 2
Section 1131 of the New York State Tax Law requires, in pertinent part, that every vendor
of tangible personal property or services is required to collect sales and use taxes imposed under
Article 28. Tax Law 1131(1). As further provided under Section 1101(b)(8)(i) of the Tax Law, the
term "vendor" is defined to include among others
(C)

A person who solicits business either by employees, independent contractors, 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. . . .

Petitioner is clearly a person who solicits business by distribution of catalogs and by reason
thereof makes sales to persons within the State of tangible personal property the use of which is
taxed by Article 28 of the Tax Law.
Regulation section 526.10, issued in accordance with the foregoing, expounds upon what
activities bring a person within the definition of "vendor".
In the case of interstate vendors, section 526.10(e)(1) of the sales tax regulations specifically
provides that a person outside New York is required to collect sales tax on tangible personal property
delivered in New York if that person:
(1) makes sales to persons within the state, and
(2) either (a) solicitssuch sales in New York as defined in regulation
526.10(d), or
(b) maintains a place of business in New York
as defined in regulation 526.10(c).

-4­
TSB-A-85(48.1)S
Sales Tax
February 20, 1986
For purposes of regulation section 526.10(d), a person is deemed to be soliciting business if
"he distributes catalogs or other advertising material, in any manner in the state." Petitioner is clearly
a person who makes sales to persons within the State who solicits such sales in New York by the
distribution of catalogs in the state.
However, regulation section 526.10(e)(2) provides, in part:
A person making sales to his customers within the State, who has solicited such sales
by the interstate distribution of catalogs or other advertising material by mail and
who delivers the merchandise through the mail or by common carrier, and who
neither maintains a place of business as defined in subdivision (c) of this section, nor
solicits business as defined in subdivision (d) of this section, is not required to
register as a vendor....
Regulation section 526.10(d) provides, in part:
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....
Inasmuch as Petitioner has promotion men, missionary men or service representatives
soliciting potential customers in the State, Petitioner is not a person who "neither maintains a place
of business... nor solicits business as defined in subdivision (d)...." Thus, Petitioner does not fall
within the exception to the requirement to register which is provided by regulation section
526.10(e)(2).
Accordingly, since Petitioner falls within the definition of "vendor" as defined in section
1101(b)(8)(i) of the Tax Law and section 526.10(e)(1) of the sales tax regulation and since Petitioner
does not fall within the exception provided by section 526.10(e)(2), Petitioner is a vendor for
purposes of the sales and use taxes imposed under Articles 28 and 29 of the Tax Law. Furthermore,
since Petitioner satisfies the minimum contacts requirements of the commerce clause and the due
process clause of the Fourteenth Amendment, Petitioner is required to collect New York State sales
and use tax on its retail mail order sales made to customers in New York.

DATED: February 20, 1986

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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