New York Advisory Opinion TSB-A-96(40)S: When a printer's invoice for coupons bundles the printing cost with overhead, can the buyer exclude the overhead portion from the sales-tax base?

Plain-English summary

E.C.E. Enterprises buys printed coupons wholesale: $123 for a run of 10,000, or $194 for 20,000. Petitioner did the math and figured the actual printing cost for the extra 10,000 coupons was $71 (the difference between the two prices), and reasoned that the $123 charge for the smaller run must therefore include some pure overhead beyond the direct cost of printing. Petitioner asked whether that overhead slice of the price could be carved out and excluded from sales tax, leaving only the "real" printing cost taxable.

The Department said no. Tax Law § 1101(b)(3) defines the taxable "receipt" as the full sale price of the property, valued in money, with no deduction for the vendor's expenses -- and 20 NYCRR 526.5(e) spells out that "all expenses ... incurred by a vendor in making a sale, regardless of their taxable status and regardless of whether they are billed to a customer[,] are not deductible from the receipts." Since Petitioner is buying tangible personal property (the printed coupons) at a wholesale list price, that entire price -- $123 for 10,000 coupons or $194 for 20,000 -- is the taxable receipt, including whatever portion of it covers the printer's overhead. There's no mechanism to strip out an overhead component and tax only a narrower "cost of goods" figure.

Common questions

Q: Can a buyer ever exclude a vendor's overhead from the sales-tax base?
A: No -- New York taxes the full sale price actually charged, not a cost breakdown. Whether a vendor's price reflects mostly direct materials or mostly overhead and profit margin, the whole amount billed is the taxable receipt.

Q: Does it matter that Petitioner could calculate an implied printing-cost figure from the price difference between two order quantities?
A: No. That kind of after-the-fact cost analysis doesn't change what the taxable receipt is -- the receipt is simply the price paid, full stop, regardless of how a buyer might otherwise allocate it between cost components.

Q: Would a separately stated, itemized overhead or service charge on the invoice change the result?
A: This opinion doesn't address a separately stated line item -- it addresses a single bundled price where Petitioner was trying to back into an implied overhead component after the fact. A vendor's genuinely separate, distinct charge (for a different service entirely) can sometimes be treated differently, but that's not the fact pattern here.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(3) (definition of receipt)
• 20 NYCRR 526.5(a) (definition of receipt)
• 20 NYCRR 526.5(e) (expenses not deductible from receipts)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_40s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-96 (40)S
Sales Tax
July 9, 1996

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S960126A

On January 26, 1996, a Petition for Advisory Opinion was received from E.C.E. Enterprises,
23 Timberline Circle, Port Jefferson, New York 11777. Petitioner, E.C.E. Enterprises, provided
additional information pertaining to the Petition on April 11, 1996.
The issue raised by Petitioner, E.C.E. Enterprises, is whether, with respect to the sale of
printed material, the portion of receipts which reflects overhead costs is subject to the applicable
sales and compensating use tax.
Petitioner makes the following submission of facts.
Petitioner purchases a quantity of ten thousand coupons for $123 and twenty thousand
coupons for $194. Petitioner believes that $123 represents the printing cost for ten thousand coupons
plus overhead. The printing cost element of the total charge ($123) is believed to be $71 which is
derived by subtracting from the cost of 20 thousand coupons ($194) the cost of 10 thousand coupons
($123).
Section 1101(b)(3) of the Sales and Use Tax Law defines "receipt" for purposes of the sales
and compensating use tax, as follows:
Receipt. The amount of the sale price of any property and the charge for any service
taxable under this article, valued in money, whether received in money or otherwise,
including any amount for which credit is allowed by the vendor to the purchaser,
without any deduction for expenses or early payment discounts and also including
any charges by the vendor to the purchaser for shipping or delivery regardless of
whether such charges are separately stated in the written contract, if any, or on the
bill rendered to such purchaser and regardless of whether such shipping or delivery
is provided by such vendor or a third party, but excluding any credit for tangible
personal property accepted in part payment and intended for resale. For special rules
governing computation of receipts, see section eleven hundred eleven. (emphasis
added)
Section 526.5 of the Sales and Use Tax Regulations provides in part:
Receipt. . . . (a) Definition. The word receipt means the amount of the sale price of
any property and the charge for any service taxable under articles 28 and 29 of the
Tax Law, valued in money, whether received in money or otherwise.
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TSB-A-96 (40)S
Sales Tax
July 9, 1996

(e) Expenses. All expenses, including telephone and telegraph and other service
charges, incurred by a vendor in making a sale, regardless of their taxable status and
regardless of whether they are billed to a customer are not deductible from the
receipts. (emphasis added)
In the present case, Petitioner is purchasing tangible personal property. The cost to Petitioner
is the wholesale list price of $123 per 10,000 coupons or $194 per 20,000 coupons. The taxable
receipt is the amount of the sales price of the property valued in money, whether received in money
or otherwise, without any deductions for overhead or other expenses, as stated in Section 1101(b)(4)
of the Tax Law and Sections 526.5(a) and (e) of the Sales and Use Tax Regulations. Accordingly,
the amount subject to the sales and compensating use tax is the $123 per 10,000 coupons or $194
per 20,000 coupons, which includes all the costs of the printer to produce the coupons for sale.

DATED: July 9, 1996

/s/
JOHN W. BARTLETT
Deputy Director
Technical Services Bureau

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