Does a free-brochure publisher, whose revenue comes only from selling ads printed in the brochures, owe sales tax on its own printing costs even though it gives the brochures to the State for free?

Plain-English summary

JMF Publishing produces brochures and maps that promote New York State campgrounds, parks, and hiking trails. It gives the finished publications to the State free of charge, and the State in turn distributes them free of charge to the public at Department of Environmental Conservation locations. JMF's own revenue comes from selling advertising space printed inside the brochures -- it's not charging the State or the public for the brochures themselves. JMF asked whether it owes sales tax on the tangible personal property and printing services it purchases to produce these brochures and maps.

New York taxes retail sales of tangible personal property, and its regulations specifically address free giveaways: property purchased and then given away without charge for promotion or advertising purposes is NOT purchased for resale -- it's a retail sale TO the person who bought it, not a sale by that person to the recipient. Applying that rule here, the Department explained that JMF isn't selling the brochures and maps at all; instead, it's providing an advertising service to the businesses whose ads appear in the brochures, which are then distributed free of charge. Because JMF never resells the brochures and maps themselves, the tangible personal property and printing/other services it buys to produce them can't be purchased exempt as items bought "for resale." JMF, not the State or the public, is legally the final user/consumer of the printing services and materials -- so JMF owes sales tax on those purchases.

What this means for you

Advertising-supported free publications (brochures, directories, maps, coupon books)

Just because your finished product is given away for free doesn't mean your OWN purchases to produce it escape tax -- quite the opposite. If you're not reselling the physical publication to anyone (your revenue instead comes from advertisers), you're the final consumer of your own printing costs, and you owe sales tax on those purchases, even though nobody ever pays you directly for the physical item.

Government agencies and nonprofits receiving free promotional publications

Receiving a free brochure or map from a private publisher doesn't create any sales tax exposure on your end -- the tax liability here falls on the publisher's own printing purchases, not on the free transfer to you or your further free distribution to the public.

Accountants and tax professionals

This is a clean, short application of the "purchased and given away for promotion is not purchased for resale" rule (20 NYCRR § 526.6(b)(4)(i)) to an advertising-supported free-publication business model -- useful any time a client's revenue model separates "who pays" (advertisers) from "who receives the physical product" (the public, for free).

Common questions

Q: Does JMF owe tax on selling advertising space in the brochures?
A: This opinion doesn't address the taxability of JMF's advertising sales themselves -- it focuses specifically on JMF's own purchases of printing services and materials used to produce the brochures and maps.

Q: Would the answer change if JMF charged even a small fee for the brochures?
A: This opinion is based on facts where the brochures are given away entirely free of charge by both JMF and the State; charging even a nominal fee could change the resale analysis, which isn't addressed here.

Q: Can another advertising-supported publisher rely on this ruling?
A: No. This advisory opinion binds the Department only with respect to JMF Publishing and the specific free-distribution facts it described.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4) (definition of retail sale)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c)(2) (tax on producing, fabricating, processing, printing, or imprinting tangible personal property)
• 20 NYCRR § 525.2 (sales tax as transactions/destination/consumer tax)
• 20 NYCRR § 526.6(b)(4)(i) (property purchased and given away without charge is not purchased for resale)
• 20 NYCRR § 527.1(a) (imposition on retail sales delivered in-state)

Prior rulings and cases referenced:

• None cited in this opinion.

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_71s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-96 (71) S
Sales Tax
December 4, 1996

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S960709A

On July 9, 1996, a Petition for Advisory Opinion was received from JMF Publishing, 30 Burr
Avenue, PO Box 1, New York Mills, New York 13417.
The issue raised by Petitioner, JMF Publishing, is whether it is liable for payment of sales
tax on its purchases of tangible personal property or services for printing of brochures and maps
which are distributed free of charge to the State of New York.
Petitioner submits the following facts as the basis for this Advisory Opinion. Petitioner
produces brochures and maps which promote use of State campgrounds, parks and hiking trails.
Petitioner gives the publications free of charge to the State, which distributes the publications free
of charge to individuals. Petitioner's revenue is generated from the sale of advertising in the
brochures.
Section ll01(b) of the Tax Law provides, in part:
(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such or as a physical component part of tangible
personal property, or (B) for use by that person in performing the services subject to
tax under paragraphs (1), (2), (3), (5), (7) and (8) of subdivision (c) of section eleven
hundred five where the property so sold becomes a physical component part of the
property upon which the services are performed or where the property so sold is later
actually transferred to the purchaser of the service in conjunction with the
performance of the service subject to tax .... (Emphasis added.)
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax.--On and after June first, nineteen hundred seventy­
one, there is hereby imposed and there shall be paid a tax of four percent upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
*
*
*
(c) The receipts from every sale, except for resale, of the following
services:
*

*

*

-2­
TSB-A-96 (71) S
Sales Tax
December 4, 1996
(2) Producing, fabricating, processing, printing or imprinting tangible
personal property, performed for a person who directly or indirectly furnishes the
tangible personal property, not purchased by him for resale, upon which services are
performed.
Section 525.2 of the Sales and Use Tax Regulations provides, in part:
(a)(1) The sales tax is imposed on the receipts, unless specifically exempt,
from every retail sale of tangible personal property, from every retail sale of
specifically enumerated utility services, from every retail sale of other specifically
enumerated services ....
(2) The sales tax is a "transactions tax," liability for the tax occurring at the
time of the transaction. Generally speaking, the taxed transaction is an act resulting
in the receipt of consideration for the transfer of title, or possession or both to
property or rendition of services from one person to another .... (Emphasis added.)
(3) The sales tax is a "destination tax," that is, the point of delivery or which
possession is transferred by the vendor to the purchaser or designee controls both the
tax incident and the tax rate.
(4) The sales tax is a "consumer tax," that is, the tax is imposed on the retail
sale of tangible personal property and certain services and is collected from the
person who purchases at retail--the consumer . . . . (Emphasis added.)
Section 526.6 of the Sales and Use Tax Regulations provides, in part, as follows:
(a) The term retail sale or sale at retail means the sale of tangible personal
property to any person for any purpose, except as specifically excluded.
*
*
*
(b)(4)(i) Tangible personal property which is purchased and given away
without charge, for promotion or advertising purposes is not purchased for resale.
It is a retail sale to the purchaser thereof, and is not a sale to the recipient of the
property. (Emphasis added.)
Section 527.1(a) of the Sales and Use Tax Regulations provides:
Imposition. The sales tax is imposed on the receipts from every retail sale of
tangible personal property delivered by the vendor to the purchaser or the purchaser's
designee in this State, unless specifically exempt or excluded under the Tax Law.

-3­
TSB-A-96 (71) S
Sales Tax
December 4, 1996
In this case, Petitioner produces brochures and maps used to promote campgrounds, parks
and hiking in New York State. Petitioner gives the brochures or maps free of charge to the State.
Petitioner is not selling tangible personal property. Petitioner is providing an advertising service to
businesses by printing advertisements in the brochures being distributed free of charge at various
locations operated by the New York State Department of Environmental Conservation. Since
Petitioner is not selling the brochures and maps, the tangible personal property and printing or other
services which it purchases in order to produce the brochures and maps cannot be purchased for
resale. For purposes of Article 28 of the Tax Law, Petitioner is the final user of the property and
services purchased and is liable for sales tax on these purchases.

DATED: December 4, 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.