In a leased-department arrangement where the host store collects the money, who is responsible for the sales tax?

Plain-English summary

Peter Knych holds a license to sell goods at another business's store location, buying the goods from an unrelated third party. Under the license, the host business provides selling space and collects all payments — including sales tax — then turns the money over to Knych, who pays the host 10% of the sales price for its services and the license. He asked who must collect and remit the sales tax: himself, the licensor, or his supplier.

The Department applied the leased-department/concession rules.

• This is a leased department that accounts to the host. Under 20 NYCRR 526.10(g), a person selling from a concession or department leased from a vendor is itself a vendor. Where the concession accounts for and pays its receipts over to the lessor-vendor (526.10(g)(3)), the lessor-vendor must report and remit the tax with its own return.
• The licensor collects and remits; the licensee still files. So Knych's licensor is required to collect and remit the sales tax on all of Knych's taxable sales. Knych must still file a sales tax return reporting only his sales, stating that he is a leased department, that the licensor is responsible for reporting sales and remitting tax, and identifying the licensor by name, address and vendor ID number.
• Both are jointly liable. Knych and the licensor are jointly liable for the collection of sales tax on his sales.
• The supplier isn't liable — give it a resale certificate. The unrelated third party that sells goods to Knych isn't liable for tax on Knych's sales. Knych should give that supplier a properly completed Resale Certificate (Form ST-120) so his purchases for resale are exempt.

What this means for you

Selling inside someone else's store makes you both responsible. A leased department or concession is a vendor in its own right. When the host collects the customers' money and pays you, the host reports and remits the tax — but you're not off the hook: you both stay jointly liable, and you still have to file a return tied to the host's vendor ID.

Match the filing to who holds the cash. New York's rule turns on whether the concession accounts to the host. If the host collects and pays you over (as here), it remits; if you collected and accounted for sales independently, you'd carry the full vendor duties yourself. Set up your returns to reflect the actual money flow.

Buy your stock for resale. Your purchases from your supplier are for resale, so give the supplier an ST-120 and don't pay tax on them — the tax belongs on the eventual retail sale to the customer, which the arrangement already covers.

Common questions

Q: The store collects the money and the tax — am I still responsible?
A: Yes. In a leased-department arrangement where the host accounts for the sales, the host reports and remits, but you and the host are jointly liable, and you must still file a return identifying the host as the responsible party.

Q: Do I file a sales tax return at all?
A: Yes. You file a return reporting only your sales, stating you're a leased department/concession and identifying the licensor (name, address, vendor ID) as responsible for remitting the tax.

Q: Does my supplier charge me tax?
A: No — your purchases are for resale. Give the supplier a Resale Certificate (Form ST-120) so it doesn't collect tax on your stock.

Citations and references

Regulation and statute:

• 20 NYCRR 526.10(g) — leased departments and concessions: a concession is a vendor; where it accounts to the lessor-vendor, the lessor-vendor reports and remits, the concession files an identifying return, and both are jointly responsible for collecting and remitting the tax
• Tax Law § 1105(a) — taxes retail sales of tangible personal property

Form:

• Form ST-120 (Resale Certificate) — supports the licensee's tax-free purchases of stock for resale

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_8s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-86 (8)S
Sales Tax
January 30, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S851023A

On October 23, 1985, a petition for advisory opinion was received from Peter Knych, 25
Rawley Street. Rochester, New York 14607.
Petitioner has been granted a license by a business allowing petitioner to resell tangible
personal property at the location of the licensor. The tangible personal property sold by Petitioner
is purchased by Petitioner from an unrelated third party.
The terms of the license agreement require the business to provide the Petitioner with selling
space at the business' store location. Furthermore, under the license agreement, all payments,
including sales tax, made pursuant to the sale of the Petitioner's product will be made to and
collected by the business/licensor. The business/licensor will then turn over the payments to the
Petitioner who in consideration for the business/licensor's services and grant of license will pay the
business/licensor ten-percent (10%) of the sales price.
Petitioner asks whether he, his licensor or the third party who sells tangible personal property
to him is liable for the collection and remittance of sales tax on Petitioner's sales of tangible personal
property.
Section 526.10(g) of the Sales and Use Tax regulations provide as follows:
(g) Leased departments and concessions. (1) Every person making sales from
a concession or department leased from a vendor and operated under the name of
another vendor, is for sales tax purposes a vendor required to register and file returns
with the bureau.
(2) Leased departments and concessions which collect and account for their
sales independently from the lessor-vendor must undertake all the responsibilities of
a vendor, as listed in subdivision (b) of this section.
(3) If a leased department or concession must account for and pay over its
receipts to the lessor-vendor, the lessor-vendor must report and remit the tax thereon
to the bureau with its return. The leased department or concession must also file a
return reporting only its sales and have attached thereto a statement to the effect that
(i) it is a leased department or concession; (ii) the lessor-vendor is responsible for
reporting sales and remitting tax due; and (iii) identifying the lessor-vendor by name,
address and vendor identification number. Both the leased department or concession
and the lessor-vendor shall be jointly responsible for the collection and remitting of
the taxes on the sales made by the leased department or concession.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

-2­
TSB-A-86 (8)S
Sales Tax
January 30, 1986

Petitioner and his licensor fall within the provisions of paragraph (3) above. Accordingly,
Petitioner's licensor is required to collect and remit sales tax on all of Petitioner's taxable sales.
Petitioner is required to file a sales tax return reporting its sales and identifying itself as a leased
department, identifying the licensor as the person responsible for reporting sales and remitting tax
due and identifying the licensor by name, address and vendor identification number.
Both Petitioner and the licensor are jointly liable for the collection of sales tax on Petitioner's
sales of tangible personal property.
An unrelated third party who sells tangible personal property to Petitioner will not be liable
for the collection or remittance of sales tax with respect to Petitioner's taxable sales. However,
Petitioner should supply to the unrelated third party a properly completed Resale Certificate (form
ST-120) to establish the exemption of Petitioner's purchases for resale.

DATED: January 30, 1986

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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