Is a print-and-mail company's service of printing financial statements, confirmations, and invoices and mailing them to customers subject to New York sales tax?

Plain-English summary

MGI Output Technologies is hired by banks, brokerages, and other businesses to produce three kinds of mailed documents: monthly account statements, trade confirmations, and invoices. In each case, the client sends MGI the underlying data (account numbers, transactions, prices) electronically or on magnetic media; MGI's own computers reformat that data into a readable layout, and MGI's laser printers print the finished document on paper, insert it into an envelope, seal it, and either mail it directly or hand it off to a third-party mailer or back to the client for mailing. MGI doesn't do any of the financial calculations itself. MGI asked whether these printing-and-mailing services are subject to New York sales tax.

New York taxes "producing, fabricating, processing, printing or imprinting" tangible personal property under Tax Law § 1105(c)(2) when the customer furnishes the material being worked on (here, the paper). Since MGI's clients typically supply -- or are treated as effectively furnishing -- the underlying content and, in this fact pattern, MGI performs the actual printing service, MGI's printing charges are taxable services, and printing address labels on customer-furnished envelopes is likewise taxable as printing or processing. But New York's sales tax is a "destination tax": Tax Law § 1115(d) and its regulations exempt printing services performed on property that's delivered out of state for use out of state. Because MGI's statements, confirmations, and invoices go to recipients both inside and outside New York, MGI only has to collect tax on the portion of its charge attributable to documents actually mailed to New York addresses -- provided it keeps records showing which pieces went where. If MGI can't document the split and instead delivers a batch of printed matter to a mailer located in New York, it has to collect tax on the entire charge unless proof of the out-of-state portion is furnished.

There's a separate wrinkle if MGI itself supplies the paper and envelopes (rather than just printing on material the client furnishes): then the whole transaction becomes a straightforward taxable sale of tangible personal property under § 1105(a), still governed by the same destination-of-delivery rule. And on the purchasing side, MGI's own purchases of paper/envelopes used in a taxable resale can be bought exempt as purchases for resale, and machinery, equipment, tools, and supplies used more than 50% of the time directly in producing the printed matter can qualify for New York's production exemption (with an added carve-out: as of September 1, 1996, tools and supplies were also freed from the extra 4% NYC local tax).

What this means for you

Print-and-mail service providers (statements, confirmations, invoices, billing)

Whether your service is taxed -- and how much -- depends on two things: who supplies the paper/envelopes, and where the finished pieces are actually delivered. If your client furnishes the paper, you owe tax only on the portion mailed to New York addresses (with documentation); if you supply the paper and envelopes yourself, the whole transaction becomes a taxable sale, still measured by delivery destination. Keep destination records for every mailing run -- that documentation is what lets you avoid taxing out-of-state mail.

Banks, brokerages, and businesses outsourcing statement/invoice printing

Ask your print-and-mail vendor how they're allocating tax between in-state and out-of-state recipients, and understand that if the vendor delivers a batch to a New York mailer without documenting the out-of-state split, the vendor may have to charge tax on the whole batch.

Accountants and tax professionals

This opinion is a clean walkthrough of the interaction between the printing-services tax (§ 1105(c)(2)), the destination-tax rule, and the out-of-state delivery exemption (§ 1115(d)/§ 528.23) -- plus a good pointer to Publication 831's specific collection instructions for printers and mailers, worth citing directly to any client in this business.

Common questions

Q: Does it matter whether MGI mails the documents itself or hands them to a third-party mailer or back to the client?
A: Yes -- if MGI is both printer and mailer, it collects tax only on the New York-bound portion; if it delivers printed matter to a mailer located in New York without proof of the out-of-state destinations, it must collect tax on the entire charge; and if it delivers to its client in New York, tax applies to the entire charge regardless of where the client later sends the material.

Q: Are MGI's own purchases of paper and envelopes always taxable?
A: No -- if MGI supplies the paper and envelopes as part of a taxable resale, those purchases can be made exempt as purchases for resale, and equipment used mostly (over 50%) directly in production can qualify for the separate production exemption.

Q: Can another print-and-mail company rely on this ruling?
A: No. This advisory opinion binds the Department only with respect to MGI Output Technologies, Inc. and the exact facts it described.

Citations and references

Statutes and regulations:

• 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)
• Tax Law § 1115(d) (out-of-state delivery exemption for certain enumerated services)
• 20 NYCRR § 525.2(a)(3) (destination tax rule)
• 20 NYCRR § 527.4(e) (printing and imprinting services)
• 20 NYCRR § 528.23 (services on tangible personal property delivered out of state)
• Tax Law § 1105-B, § 1115(a)(12) (production exemption for machinery/equipment/tools/supplies)
• Publication 831 (2/96), Collection and Reporting Instructions for Printers and Mailers

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_77s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (77) S
Sales Tax
December 13, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S960209B

On February 9, 1996, the Department of Taxation and Finance received a Petition for
Advisory Opinion from MGI Output Technologies, Inc., 101 Prestige Park Road, East Hartford, CT
06108-1919.
The issues raised by Petitioner, MGI Output Technologies, Inc., are:
1.

Whether the service of printing monthly statements on paper, inserting the
statements into envelopes and mailing the statements is subject to New York
State and local sales and use taxes.

2.

Whether the service of printing confirmation notices on paper, inserting the
confirmations into envelopes and mailing the confirmations is subject to New
York State and local sales and use taxes.

3.

Whether the service of printing invoices on paper, inserting the invoices into
envelopes and mailing the invoices is subject to New York State and local
sales and use taxes.

Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is retained by various financial institutions to create monthly statements to be sent
to each financial institution's customers. Each monthly statement contains the name, address and
account number of the institution's customer and sets forth purchase, sale, redemption, dividend and
interest transactions and cash deposits and withdrawals which occurred in the account during the
preceding month. Petitioner prints the monthly statements on paper, inserts the statements into
envelopes which are later sealed, and then mails, or arranges for a third party to mail, the statements
to each institution's customers both inside and outside New York. In some cases, a copy is also
mailed to the institution's customer's representative (i.e., broker), who may be inside or outside New
York.
In order to prepare the monthly statements, Petitioner receives information each month from
each financial institution which consists of the names, addresses and account numbers of the
institution's customers and all transactions which occurred in the customers' accounts. The
information is furnished to Petitioner either through an on-line transmission from the institution's
computers to Petitioner's computers or by tangible magnetic media. Petitioner does not make any
computation of the financial data it receives from the financial institutions. The information is
received in a compressed form and consists of either raw data or data in a print image form.
Petitioner's computers store this information for purposes of printing and, eventually, instructing

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Petitioner's laser printers to print out the information in English in an easily readable tabular format.
The information in Petitioner's computers is not returned to the financial institution, but is archived
for an agreed time frame, then deleted.
In addition, Petitioner is retained by various financial institutions to create confirmations to
be sent to each financial institution's customers. Each confirmation contains the name, address and
account number of the institution's customer and sets forth the name of the security purchased or sold
by the customer, the quantity of the security and the aggregate purchase or sales price. Petitioner
prints the confirmations on paper, inserts the confirmations into envelopes which are later sealed,
and then mails, or arranges for a third party to mail, the confirmations to each institution's customers
both inside and outside New York. In most cases, Petitioner also mails a copy of the confirmation
to the broker of the institution's customer who placed the trade. The broker may be inside or outside
New York.
In order to prepare the confirmations, Petitioner either (1) receives information from the
financial institution which consists of the names, addresses, and account numbers of the financial
institution's customers and the details of the particular securities transaction being confirmed, or (2)
receives the information from a data processing company. In the latter case, the financial institution
has hired the data processing company to perform certain bookkeeping with respect to its customers'
accounts, but has hired Petitioner to prepare and mail the confirmations. The information furnished
by the data processing company relates only to the transactions of the financial institution's
customers and is not made available to other clients of the data processing company. The
information is received in a compressed form and consists of either raw data or data in a print image
form. Petitioner's computers store this information for purposes of printing and, eventually,
instructing Petitioner's laser printers to print out the confirmation in English in an approved format.
The information in Petitioner's computers is not returned either to the financial institution or to the
data processing company, but is archived for an agreed time frame, then deleted.
The information is furnished to Petitioner through an on-line transmission from either the
financial institution's or the data processing company's computers to Petitioner's computers. In a few
cases, a financial institution furnishes the information to Petitioner by tangible magnetic media.
Petitioner is also retained by various businesses to create invoices to be sent to each business'
customers. Each invoice contains the name and address of the customer of the business, a brief
description of the product sold or service rendered, an amount reflecting the price charged for the
good or service, and the applicable sales tax due. Petitioner prints the invoices on paper, inserts the
invoices into envelopes which are later sealed, and then mails, or arranges for a third party to mail,
the invoices to each business' customers both inside and outside New York. No invoice is printed
for the business to keep.
In order to prepare the invoices, Petitioner receives information from the business which
consists of the names, addresses, account numbers, products or services sold, purchase price, and
applicable sales tax. The information is furnished to Petitioner either through an on-line

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Sales Tax
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transmission from the business' computers to Petitioner's computers or by tangible magnetic media.
The information is received in a compressed form and consists of either raw data or data in a print
image form. Petitioner's computers store this information, decompress the information, rearrange
the information for purposes of printing, and eventually instruct Petitioner's laser printers to print
out the information in English in a form recognizable as an invoice. The information in Petitioner's
computers is not returned to the business, but is archived for an agreed time frame, then deleted.
In some cases, Petitioner does not mail or arrange for the mailing of the statements,
confirmations or invoices, but delivers the printed material to the client for mailing.
Section 1105 of the Tax Law imposes sales tax 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) 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 such services are
performed.
Section ll15(d) of the Tax Law provides:
Services otherwise taxable under paragraph (1), (2), (3), (7) or (8) of subdivision (c)
of section eleven hundred five shall be exempt from tax under this article if the
tangible property upon which the services were performed is delivered to the
purchaser outside this state for use outside this state.
Section 525.2(a)(3) of the Sales and Use Tax Regulations provides that "[t]he sales tax is a
'destination tax', that is, the point of delivery or the point at which possession is transferred by the
vendor to the purchaser or designee controls both the tax incident and the tax rate."
Section 527.4(e) of the Sales and Use Tax Regulations provides, in part:
Printing and imprinting. (1) The services of printing and imprinting tangible
personal property furnished by or on behalf of a customer of the printer are taxable
under section 1105(c)(2) of the Tax Law; the service of printing or imprinting
tangible personal property which is sold by the person performing the service in
conjunction with the sale is taxable as part of the sale under section l105(a) of the
Tax Law.

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Example 1: A printer prints a form letter on letterhead stationery furnished by his
customer. The printer's services are taxable.
Example 2: A firm addresses envelopes furnished by its customer.
The addressing services are a taxable printing service.
Example 3: A printer prints business calling cards for his customer, supplying both
the card and the service of printing. This is the sale of tangible personal property, the
total amount being taxable as such (See section 526.6 of this Title.)
Section 528.23 of the Sales and Use Tax Regulations provides, in part:
Services on tangible personal property which is delivered out of state. [Tax Law, §
ll15(d)] (a) Exemption. The receipts from the sale of the following services shall be
exempt from the sales and compensating use tax when performed on tangible
personal property which is delivered to the purchaser outside of this State for use
outside of this State:
*
*
*
(2) the producing, fabricating, processing, printing or imprinting of tangible
personal property which is not for resale and which was furnished directly or
indirectly to the person performing the service by the purchaser. .
*
*
*
(b) Delivery. (1) Delivery outside of the State shall mean the tangible personal
property upon which the services have been performed has been delivered by the
person performing the services in his vehicle or by common or contract carrier.
(2) Delivery to a purchaser or his designee in the State for immediate
transportation outside of the State is not exempt.
Publication 831 (2/96), Collection and Reporting Instructions for Printers and Mailers
provides, in part, as follows:
A printer delivering printed matter to a mailer in New York State is required to
collect the sales tax on the entire charge unless the printer is furnished with proof of
the portion to be mailed to persons outside of New York State and the destinations
of all the material to be mailed to persons in New York State. If such proof is
furnished, the printer is required to collect tax only on the charge for that portion of
the printed matter that will be mailed to persons in New York State.
A mailer or printer-mailer is required to collect the statewide and appropriate local
sales taxes on the printing, addressing, and other taxable charges for printed matter
mailed to persons in New York State, whether mailed from within or outside the

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December 13, 1996
state. The mailer or printer-mailer must maintain records showing the destinations
of all material sent to persons in New York State and the portion of the material
mailed to persons outside New York State.
The statewide tax and local sales taxes, at the rate in effect where delivery is made,
must be collected on the entire charge if printed matter is delivered to the customer
in New York State, even if the customer will subsequently send some or all of the
printed matter to persons outside New York State.
In this case, Petitioner is retained by various financial institutions and businesses to print
monthly statements, confirmations and invoices. Each monthly statement, confirmation and invoice
printed by Petitioner includes the name, address and account number along with information
pertaining to transactions relevant to the document being printed. Petitioner does not perform
calculations on the information furnished to it by the financial institutions and businesses. The
financial institutions or data processing companies perform the necessary calculations. Petitioner
stores and rearranges the information it receives for the purpose of printing. After printing the
monthly statements, confirmations and invoices on paper, Petitioner inserts the monthly statements,
confirmations and invoices into envelopes and mails or arranges for a third party to mail them to the
institutions' customers both inside and outside New York. In some cases, a copy of the monthly
statement or confirmation is mailed to the representative or broker of the institutions' customer who
may be inside or outside of New York. Also, in some cases, Petitioner delivers the printed material
to the client for mailing.
With respect to issues "1", "2" and "3", if Petitioner's client furnishes the paper, Petitioner's
printing of the monthly statements, confirmations and invoices constitutes the service of printing or
imprinting tangible personal property under Section 1105(c)(2) of the Tax Law and Section 527.4(e)
of the Sales and Use Tax Regulations. Therefore, the receipts from the sale of these services are
subject to sales and use taxes. Also, in accordance with Section 1105(c)(2) of the Tax Law and
Section 527.4(e) of the Sales and Use Tax Regulations, if the customer furnishes the outside
envelopes, the printing or application of address labels is either a printing or processing service
subject to such sales and use taxes. Receipts from the services of printing, imprinting and processing
tangible personal property otherwise taxable under Section 1105(c)(2) of the Tax Law are not subject
to sales and use taxes if the tangible personal property on which the services are performed are
delivered outside of New York State for use outside the state. (See Section ll15(d) of the Tax Law,
Section 528.23 of the Sales and Use Tax Regulations and Publication 831.)
Alternatively, if Petitioner provides the paper and envelopes for printing and addressing, then
Petitioner's sales of the printed statements, confirmations and invoices and envelopes are sales of
tangible personal property subject to tax under Section l105(a) of the Tax Law.

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Where Petitioner is both the printer and mailer of the printed matter, Petitioner is required
to collect tax only on the charge for that portion of the statements, confirmations and invoices mailed
to persons in New York State. Where Petitioner delivers statements, confirmations or invoices to
a mailer in New York State, Petitioner is required to collect the sales tax on the entire charge unless
Petitioner is furnished with proof of the portion to be mailed to persons outside of New York State
and the destinations of all the material to be mailed to persons in New York State. If such proof is
furnished, Petitioner is required to collect tax only on the charge for that portion of the printed matter
that will be mailed to persons in New York State. If the statements, confirmations or invoices are
delivered by Petitioner to its client in New York State, the statewide tax and local sales taxes, at the
rate in effect where delivery is made, must be collected on the entire charge, even if the client will
subsequently send some or all of the printed matter to persons outside New York State.
It is noted that, where Petitioner provides the paper and envelopes for printing and mailing
the statements, confirmations or invoices, Petitioner's purchase of this paper and envelopes may be
made exempt from sales tax as purchases for resale. In addition, if the machinery, equipment, tools
and supplies purchased by Petitioner are used or consumed by Petitioner directly and predominantly
(that is, over 50 percent of their use is directly in the production phase) to produce tangible personal
property (i.e., the printed matter) for sale, this machinery, equipment, tools and supplies would
qualify for exemption from State and local sales and compensating use taxes pursuant to Sections
l105-B and 1115(a)(12) of the Tax Law. Effective September 1, 1996, tools and supplies are also
exempt from the four percent local tax imposed within New York City under Section 1107 of the
Tax Law.

DATED: December 13, 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.