NY TSB-A-95(18)C Corporation Tax 1995-11-14

When an out-of-state seller ships tangible personal property to a New York customer by common carrier, when are the receipts allocated to New York for the Article 9-A receipts factor across eight shipping/risk/payment scenarios?

Short answer: It depends on the seller's connection to the shipment. Receipts from sales of tangible personal property are allocated to New York where the goods are shipped to points in New York. In Scenario 1 -- where the customer arranges and pays for shipment, bears the risk, and takes delivery outside New York (FOB shipping point) -- the sale is outside New York and not a New York receipt. In Scenarios 2 through 8, the seller has some connection to shipping the goods into New York (bears risk, arranges shipment, or is responsible for paying the carrier), so delivery does not occur outside New York and the receipts are New York receipts. The FOB point and method of billing transportation are irrelevant.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The law firm Alston & Bird asked, for the Article 9-A receipts factor, when receipts from an out-of-state seller's sale of tangible personal property to a New York customer (shipped by common carrier) are allocated to New York. It posed eight scenarios varying who arranges shipment, who pays the carrier, who bears the risk of loss, and the FOB point.

The rule (section 210.3(a)(2)(A); 20 NYCRR 4-4.2) is that receipts are allocated to New York where the goods are shipped to points in New York -- which turns on where delivery occurs, and thus on whether the seller has a connection to shipping the goods into New York:

Scenario 1 -- The customer arranges and pays for shipment, bears the risk, FOB shipping point. The seller has no connection to the shipment; delivery occurs outside New York (like Flexovit, where customer-controlled pickup meant delivery at the factory). Not a New York receipt.
Scenarios 2-8 -- In each, the seller has some connection to shipping the goods into New York: it bears the risk of loss (2, 4, 5, 8), arranges the shipment (3, 4, 7, 8), and/or is responsible for paying the carrier (5, 6, 7, 8). Delivery therefore does not occur outside New York, so the receipts are allocated to New York where the goods are shipped to New York points.

In all scenarios, the FOB point and the way transportation is billed are irrelevant.

What this means for you

Destination controls -- shipments to New York points are New York receipts

For the receipts factor, sales of tangible personal property are sourced to New York when the goods are shipped to a point in New York.

The seller's connection to shipping decides where delivery happens

If the buyer fully controls and pays for the shipment and bears the risk (taking delivery outside New York), the sale is outside New York. If the seller bears the risk, arranges the shipment, or is responsible for paying the carrier, delivery is treated as into New York.

FOB terms and separate freight billing don't matter

Neither the FOB designation nor whether transportation is billed separately changes the allocation.

Common questions

Q: My customer picks up the goods and ships them itself -- is that a New York receipt?
A: No. If the customer arranges, pays for, and bears the risk of shipment (delivery outside New York), it is not a New York receipt.

Q: What if I (the seller) bear the risk of loss in transit?
A: Then you have a connection to the shipment into New York, and the receipt is allocated to New York.

Q: Does shipping FOB shipping point keep the sale out of New York?
A: Not by itself -- the FOB point is irrelevant; the seller's connection to the shipment controls.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 210.3(a)(2)(A) (receipts from sales of TPP allocated to New York where shipments are made to New York points)
- 20 NYCRR 4-4.2 (TPP shipped to a New York point -- via common carrier/taxpayer's truck on the shipping document, or delivered to a purchaser in New York)
- Flexovit USA, Inc., TSB-A-94(18)C (customer controls and pays carrier -> customer takes delivery at the New York factory -> New York receipt)
- F. & M. Schaefer Brewing Co. v Gerosa, 4 NY2d 423 (place of delivery determines local transaction)
- W. A. Krueger Company, TSB-A-87(13)C; Swanknit Inc., TSB-A-93(18)C (shipments to New York points are New York receipts)

Source

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (18) C
Corporation Tax
November 14, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION N0. C950629B

On June 29, 1995, a Petition for Advisory Opinion was received from Alston & Bird, 1201
West Peachtree Street, Atlanta, Georgia 30309-3424.
The issue raised by Petitioner, Alston & Bird, relates to the allocation of receipts from sales
of tangible personal property under section 4-4.2 of the Business Corporation Franchise Tax
Regulations ("Article 9-A Regulations"). Specifically, Petitioner asks whether receipts from sales
of tangible personal property are allocated to New York State when a seller, located outside New
York State, sells goods to a New York customer under the following fact scenarios.
Scenario 1. Corporation X is an out-of-state corporation which sells tangible personal
property to a New York customer. The goods are shipped from Corporation X's out-of-state location
into New York by common carrier. The customer arranges and pays for shipment by the common
carrier. The goods are shipped FOB shipping point and the customer bears the risk of loss or damage
in transit.
Scenario 2. Corporation X is an out-of-state corporation which sells tangible personal
property to a New York customer. The goods are shipped from Corporation X's out-of-state location
into New York by common carrier. The customer arranges and pays for shipment by the common
carrier. The goods are shipped FOB shipping point, but Corporation X bears the risk of loss or
damage in transit.
Scenario 3. Corporation X is an out-of-state corporation which sells tangible personal
property to a New York customer. The goods are shipped from Corporation X's out-of-state location
into New York by common carrier. The New York customer directs Corporation X to arrange for
shipment by common carrier on behalf of the customer. The common carrier bills the customer
directly for the shipment and the customer is responsible for payment. The goods are shipped FOB
shipping point and the customer bears the risk of loss or damage in transit.
Scenario 4. Corporation X is an out-of-state corporation which sells tangible personal
property to a New York customer. The goods are shipped from Corporation X's out-of-state location
into New York by common carrier. The New York customer directs Corporation X to arrange for
shipment by common carrier on behalf of the customer. The common carrier bills the customer
directly for the shipment and the customer is responsible for payment. The goods are shipped FOB
shipping point, but Corporation X bears all risk of loss or damage in transit.
Scenario 5. Corporation X is an out-of-state corporation which sells tangible
personal property to a New York customer. The goods are shipped from Corporation X's
out-of-state location into New York by common carrier. The New York customer arranges
for shipment by the common carrier. However, Corporation X is responsible

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for payment to the common carrier. The goods are shipped FOB shipping point, but Corporation X
bears all risk of loss or damage in transit. The price of the goods excludes transportation costs but
the customer is billed separately by Corporation X for the cost of the transportation.
Scenario 6. Corporation X is an out-of-state corporation which sells tangible personal
property to a New York customer. The goods are shipped from Corporation X's out-of-state location
into New York by common carrier. The New York customer arranges for shipment by the common
carrier. However, Corporation X is responsible for payment to the common carrier. The goods are
shipped FOB shipping point and the customer bears all risk of loss or damage in transit. The price
of the goods excludes transportation costs but the customer is billed separately by Corporation X for
the cost of the transportation.
Scenario 7. Corporation X is an out-of-state corporation which sells tangible personal
property to a New York customer. The goods are shipped from Corporation X's out-of-state location
into New York by common carrier. The New York customer directs Corporation X to arrange for
shipment by common carrier on behalf of the customer. Corporation X is also responsible for
payment to the common carrier. The goods are shipped FOB shipping point and the customer bears
all risk of loss or damage in transit. The price of the goods excludes transportation costs but the
customer is billed separately by Corporation X for the cost of transportation.
Scenario 8. Corporation X is an out-of-state corporation which sells tangible personal
property to a New York customer. The goods are shipped from Corporation X's out-of-state location
into New York by common carrier. The New York customer directs Corporation X to arrange for
shipment by common carrier on behalf of the customer. Corporation X is also responsible for
payment to the common carrier. The goods are shipped FOB shipping point, but Corporation X
bears all risk of loss or damage in transit. The price of the goods excludes transportation costs but
the customer is billed separately by Corporation X for the cost of transportation.
Section 210.3(a)(2)(A) of the Tax Law provides that, for purposes of computing the receipts
factor of the business allocation percentage, receipts from sales of tangible personal property are
allocated to New York State where shipments are made to points within New York State.
Section 4-4.2 of the Article 9-A Regulations states that:
Receipts from sales of tangible personal property are allocable 100 percent to New
York State where shipments are made to points in this State. Tangible personal
property is considered to be shipped to a point in New York State if:
(a) the property is shipped via common carrier or via taxpayer's truck to a point in
New York State designated on the bill of lading or other shipping document,
regardless of the FOB point; or
(b) the property is delivered to a purchaser at a point in New York State.

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Example:

A taxpayer has its factoryin New York State. A customer located in
New Jersey comes into New York State in its own truck or one rented
by it and picks up its purchase at the taxpayer's factory. The receipts
from such sale must be allocated to New York State.

In the Matter of F. & M. Schaefer Brewing Co. v Gerosa, 4 NY2d 423, (1958), the Court of
Appeals held that the City of New York could, under its General Business and Financial Tax Law,
tax receipts from sales by petitioner, a domestic corporation, made to out-of-state distributors. The
customer's truck would be loaded at petitioner's brewery in Brooklyn and, after the load had been
checked by the driver and one of petitioner's employees, the truck would be "sealed" and driven to
the distributor's place of business. Some distributors own their own trucks or lease them while
others use contract motor carriers or motor vehicle common carriers. The trucker taking delivery
of the beer was selected by the distributor and had no connection with the brewery. No employee
or representative of petitioner handled the beer or accompanied it once it left the brewery and it
assumed no responsibility for the beer from that time on. Since the customer took delivery in
Brooklyn, it was a local transaction and the receipts from such sales are taxable. See also, Matter of
F. & M. Schaefer Brewing Co. v Gerosa,
(1964) 14 NY2d 25.
In W. A. Krueger Company, Adv Op St Tax Comm, May 29, 1987, TSB-A-87(13)C, it was
held that where books, magazines and catalogs are shipped by the petitioner to its customers located
in New York State or to designees of its customers located in New York State, in bulk, via common
carrier or through the mails, the receipts from such sales are properly allocated to New York State
and must be included in the numerator of the petitioner's receipts factor.
In Swanknit Inc., Adv 0p Comm T & F, October 18, 1993, TSB-A-93(18)C, it was held that
where the petitioner manufactured clothing that it shipped via common carrier to its customers or
its customers' designees throughout the United States, the receipts from the sales where such
shipments are to points within New York State must be included in the numerator of the petitioner's
receipts factor.
In Flexovit USA, Inc., Adv Op Comm T & F, December 27, 1994, TSB-A-94(18)C, it was
held that where it is petitioner's customer that contracts with a common carrier for the pickup of
material at the petitioner's factory in New York State and exercises complete control over the
common carrier by providing the place, date and time the shipment must be at the destination outside
New York and makes payment for such shipment, it is the customer that is shipping the material, not
the petitioner. Where the customer is shipping the material from the petitioner's factory in New York
State, the customer is taking delivery of the material at the factory in New York State and the
receipts from such sale are allocated to New York State pursuant to section 4-4.2 of the Article 9-A
Regulations.
Herein, the facts under Scenario 1 are similar to Flexovit, supra. The goods are delivered to
a purchaser at a point outside New York State, and it is the purchaser that is shipping the goods into
New York State. The receipts of Corporation X from the sales of such tangible personal property
are receipts from sales outside New York State and are not included in the numerator of the receipts
factor.

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Based on section 210.3(a)(2)(A) of the Tax Law, section 4-4.2 of the Article 9-A
Regulations, and the above court cases and advisory opinions, the facts in Scenarios 2 through 8
indicate that Corporation X, the seller, has some connection with the shipping of the goods into New
York State and therefore, the delivery of the goods to the purchaser does not take place outside New
York State. Specifically, in Scenario 2, Corporation X bears the risk of loss or damage in transit.
In Scenario 3, Corporation X arranges for the shipment by common carrier. In Scenario 4,
Corporation X arranges for the shipment by common carrier and bears all risk or loss or damage in
transit. In Scenario 5, Corporation X is responsible for payment to the common carrier and bears
all risk of loss or damage in transit. In Scenario 6, Corporation X is responsible for payment to the
common carrier. In Scenario 7, Corporation X arranges for shipment by common carrier and is
responsible for payment to the common carrier. In Scenario 8, Corporation X arranges for shipment
by common carrier, is responsible for payment to the common carrier and bears all risk of loss or
damage in transit.
Note that in all Scenarios, the FOB point and method of billing the purchaser for
transportation costs is irrelevant.
Accordingly, the receipts from the sale of the goods in Scenarios 2 through 8 must be
included in the numerator of Corporation X's receipts factor where the goods are shipped to points
in New York State.

DATED: November 14, 1995

NOTE:

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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