Does a sales agent who only arranges orders have to report the sales or collect New York tax on drop-shipped goods?

Plain-English summary

Edna Jacobs, d/b/a Industrial Sales, takes telephone orders for household appliances and places them, by phone, with suppliers who ship directly to the customer, bill the customer, and collect payment — then pay her a sales commission. She asked whether she must report these sales on her returns, and how a series of interstate delivery scenarios are treated.

Issue 1 — an order-arranger isn't the "vendor." A "vendor" makes sales of taxable property; a "sale" is a transfer of title or possession for consideration. Because Jacobs neither takes title nor bills or receives payment for the goods, she isn't making a retail sale and isn't a "vendor" for those transactions (Mobilehome Marketing, TSB-A-81(11)S). Her sales commissions aren't receipts from sales she made as a vendor, so they don't go on her sales tax return (Box A gross sales / Box B taxable sales reflect the seller's sales, not her commissions).

Issue 2 — the interstate scenarios turn on destination. Sales tax is a "destination tax" — the point of delivery/transfer of possession controls the tax and rate (20 NYCRR 525.2(a)(3)); delivery to a common carrier doesn't change the result (Touche Ross, TSB-A-86(3)S). So:

• Goods delivered out of state aren't New York taxable sales (Box B); they may appear in a seller's gross sales (Box A).
• A supplier that is an "interstate vendor" (soliciting in New York or maintaining a place of business here) delivering into New York must report the sale in both Box A and Box B.
• Customer deposits aren't reportable receipts — the sales tax is a transaction tax due at transfer of the property, so pre-delivery deposits aren't "receipts" (Post Road Caterers).

But an agent can be pulled in as a vendor. The Tax Law lets the Commission treat a salesman or representative as the vendor's agent, jointly responsible for collecting and paying the tax (§ 1101(b)(8)(ii)), and the regulations make an independent representative jointly responsible with its supplier (20 NYCRR 526.10(f); Alan Drey Co.). If the supplier has registered and is meeting its vendor duties, the representative need not register (526.10(f)(3)(ii)). Practical upshot: Jacobs should make sure suppliers delivering into New York collect and remit the tax; if a supplier fails to and she was required to collect, she is personally liable.

What this means for you

Just matching buyers and sellers isn't "selling" for sales tax. If you never take title and never handle the billing or the money — you only place the order and collect a commission — you aren't the vendor, your commission isn't a taxable receipt, and it doesn't belong on your sales tax return. The actual seller carries the vendor duties.

Destination decides taxability, not where the truck picks up. New York taxes by where the goods are delivered. Out-of-state deliveries aren't New York taxable sales; deliveries into New York by a supplier with New York nexus are. Handing goods to a common carrier doesn't change the answer, and customer deposits aren't reportable until the sale happens.

"Not the vendor" isn't the same as "no exposure." New York can treat a manufacturer's rep as jointly responsible with the supplier. If your suppliers ship into New York, confirm they're registered and collecting — because if they don't and you were required to, the tax can land on you personally.

Common questions

Q: I only arrange orders and take a commission — do I report those on my sales tax return?
A: No. If you don't take title or bill/collect from the customer, you aren't the vendor, and your commissions aren't receipts from your own sales, so they don't go on your return.

Q: A supplier ships out of state on my order — is that a New York taxable sale?
A: No. Sales tax is a destination tax; goods delivered out of state aren't New York taxable sales (though they can appear in a seller's gross sales). Delivery to a common carrier doesn't change that.

Q: Could I still be on the hook if a supplier ships into New York?
A: Yes. New York can treat a representative as jointly responsible with the supplier. Make sure suppliers delivering into New York collect and remit the tax — if one fails to and you were required to collect, you can be personally liable.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(8) — "vendor," including the Commission's discretion to treat a salesman/representative as the vendor's agent, jointly responsible for the tax
• Tax Law § 1105(a) — taxes retail sales of tangible personal property
• 20 NYCRR 525.2 — sales tax as a destination tax and a transaction tax (deposits/timing)
• 20 NYCRR 526.10 — interstate vendors (soliciting/place of business); independent representatives jointly responsible with suppliers, with a registration carve-out when the supplier complies

Rulings and cases cited:

• Mobilehome Marketing, Inc., TSB-A-81(11)S — an order-arranger without title/billing isn't a vendor
• Touche Ross & Co., TSB-A-86(3)S — delivery to a common carrier doesn't change the destination result
• Post Road Caterers, TSB-H-80(207)S — customer deposits aren't reportable receipts
• Alan Drey Co. v. State Tax Commission, 67 A.D.2d 1055 — a broker intermediary responsible for collecting and paying over the tax

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1986.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a86_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-86(13)S
Sales Tax
March 26, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S851025A

On October 25, 1985, a Petition for Advisory Opinion was received from Edna Jacobs D/B/A
Industrial Sales, Post Office Box 76 Gedney Station, White Plains, N.Y. 10605.
The issues raised are (1) whether Petitioner is required to report on its sales tax returns sales
of tangible personal property it arranges between a buyer and seller; and (2) whether sales of
merchandise in certain hypothetical situations described by Petitioner must be included on its sales
tax return.
Issue 1.
Petitioner accepts telephone orders for household appliances and places them, also by
telephone, with suppliers who deliver the goods directly to the purchasers from their stock of
merchandise. The purchasers are billed by, and make payment to the suppliers who then pay a sales
commission to the Petitioner.
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 Tax Law states that the term "receipt" shall mean "[t]he amount of the sale price of any
property and the charge for any service taxable under this article, valued in money...". The terms
"sale, selling or purchase" are defined as "[a]ny transfer of title or possession or both... for a
consideration, or any agreement therefor...". The term "vendor" is defined, in part, as "[a] person
making sales of tangible personal property or services, the receipts of which are taxed by this
article...". (Tax Law 1101[b][3], [5]; [8] [A]).
Therefore, when Petitioner merely accepts an order and directs a supplier to deliver goods
to a customer, and Petitioner neither takes title to the property nor bills or receives payment for the
merchandise, it is not itself making a retail sale, and therefore is not a "vendor" with respect to such
transaction. See Mobilehome Marketing, Inc., State Tax Commission Advisory Opinion, July 31,
1981, TSB-A-81(11)S.
Department of Taxation and Finance Form ST-150.1, Instructions for ST-100 (Quarterly
return), enumerates, on page four, transactions that must be reported on the sales tax return, as
follows:
"Box A - Gross sales and services.

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

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

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Sales Tax
March 26, 1986
Enter the total amount of sales made by the business . . ., including those exempt
from sales taxes. Do not include the amount of sales taxes collected. Include all
sales made within New York State (even if for delivery outside New York State) and
sales made at business locations outside New York State for delivery into New York
State. Do not include sales made at business locations outside New York State which
do not involve deliveries into New York State.
Box B - Taxable sales and services.
Enter the total dollar amount of the sales subject to New York State and local sales
taxes . . . ."
Accordingly, since sales commissions paid to the Petitioner are not receipts from sales made
by it as a "vendor", such amounts should not be included on its sales tax return.
Issue 2.
Petitioner questions whether transfers of merchandise under the following conditions must
be reported by Petitioner on its sales and use tax return:
A.
Both the supplier and the customer are located outside New York State and the
property is delivered outside the state.
B.

Same as "A", except that,
1)

the trucking company has an office in New York State, or

2)

the customer mails a deposit for goods ordered to the Petitioner, prior
to their delivery by the supplier.

C.
The supplier is located within New York State and the delivery is made to the
customer outside of New York State.
D.
The supplier is located outside of New York State and the merchandise is delivered
to a customer in New York 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;. . . ."

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TSB-A-86(13)S
Sales Tax
March 26, 1986
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 Sales and Use Tax Regulation states that the term "vendor" includes "[a]n independent
manufacturers representative representing many clients and acting on his own behalf [who] solicits
orders from New York State customers . . . ." (20 NYCRR 526.10 [a][1][i], example 3).
Provisions governing vendors located outside New York State are set forth in Regulation
Section 526.10, as follows:
"(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 section provide 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 soliciting 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.

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Sales Tax
March 26, 1986
(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."
Regulation Section 525.2 states that "[t]he sales tax is a "destination tax", where "the point
of delivery or point at which possession is transferred by the vendor to the purchaser or designee
controls both the tax incident and the tax rate". (20 NYCRR 525.2 [a] [3]).
Accordingly, a sale is taxable at the place where the tangible personal property is delivered,
or at the location where possession is transferred by the vendor to the purchaser or his designee. The
point of delivery of the goods to the common carrier has no effect upon the tax consequence. See
Touche Ross & Co., State Tax Commission Advisory Opinion, Jan. 9, 1986, TSB-A-86(3)S.
Thus, a vendor who sells and delivers goods from either within or without New York State
to a purchaser at an out-of-state location would not include that sale in taxable sales (box B) on its
tax return; however, it may have to be included in gross sales (box A) of the return in accordance
with the foregoing instructions.
If a supplier who, within the purview of the foregoing regulations, is considered an "interstate
vendor" delivers merchandise to a customer in New York State, it must include the sale in both box
A and box B of its tax return.
Regulation 525.2 states, in part, that "[t]he sales tax is a "transaction tax", liability for the tax
occurring at the time of the transaction. . . . The time or method of payment is immaterial, since the
tax becomes due at the time of transfer of property . . . . (20 NYCRR 525.2[a][2]).
Consequently, amounts representing customer deposits for merchandise ordered need not be
reported on Petitioner's sales tax return, because they do not constitute "receipts" pursuant to the Tax
Law and Regulations. See also Matter of Post Road Caterers, Decision of the State Tax
Commission, Oct. 3, 1980, TSB-H-80(207)S.
In general, whether or not a person who solicits business as an agent or other representative
is required to report a sale on its return will depend on whether, in the light of the provisions above,
it is the "vendor", and therefore the person required to collect the tax with respect to such transaction.
In this regard it must be noted that the Tax Law, in defining the term "vendor", includes the
following provision:
"...when in the opinion of the tax commission it is necessary for the efficient
administration of this article to treat any salesman, representative, peddler or canvasser as
the agent of the vendor, distributor, supervisor or employer under whom he operates or from
whom he obtains tangible personal property sold by him or for whom he solicits business,

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Sales Tax
March 26, 1986
the tax commission may, in its discretion, treat such agent as the vendor jointly responsible
with his principal, distributor, supervisor or employer for the collection and payment over
of the tax." (Tax Law, 1101(b)(8)(ii)).
In addition, the sales and use tax regulations state, in part, that. . .[e]very person . . . operating
as an independent contractor representing a particular supplier selling tangible personal property is
a vendor for sales tax purposes and must collect the tax on merchandise sold by him. . . . Both the
representative and his supplier shall be jointly responsible for the collection and remitting of taxes
and filing returns. (20 NYCRR 526.10[f][1], [2][ii]).
Consistent with these provisions is the decision reached in the Matter of Alan Drey Company
v. State Tax Commission (67 AD2d 1055), that a broker acting as intermediary between a supplier
and purchaser was responsible for the collection and payment over of tax.
The Regulations further state that ". . . [an] independent contractor whose supplier has
registered and is complying with the responsibilities of a vendor shall not be required to register as
a vendor." (20 NYCRR 526.10(f)[3][ii]).
Accordingly, Petitioner should ascertain that its suppliers, when delivering goods to New
York destinations, collect and remit the applicable State and local sales taxes. If, for any reason,
Petitioner's suppliers fail to do so, then it is Petitioner's responsibility to see that such taxes are
collected. If Petitioner fails to collect tax when required to do so, Petitioner will be personally liable
for the tax due.

DATED: March 26, 1986

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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