Does a Canadian mail-order company have to collect New York sales tax when it uses a New York mailing address for orders and drives its own trucks across the border to mail products to New York customers?

Plain-English summary

Lady Calston is a Canadian corporation with all its facilities in Canada. It sells tangible personal property by mail, advertising in over 20 nationally distributed magazines. The ads carry an "800" number answered in Toronto and a New York street address for mail orders and checks -- that New York address actually belongs to an independent mail-forwarding service that gathers customer mail and forwards it to Canada weekly, mainly so U.S. customers can use U.S. postage. Calston keeps no stock, offices, or employees in New York or anywhere else in the U.S. -- everything is warehoused in Canada. But its own trucks pick up the goods at the Canadian warehouse, cross the border into New York, and drop the shipments off at a U.S. Post Office in New York for final delivery to customers.

Calston asked whether it had to collect New York sales tax. New York law makes a company a "vendor" required to collect tax if it distributes catalogs or advertising into the state and has some additional connection with New York satisfying constitutional nexus -- and the Department's own regulation lists a non-exhaustive set of qualifying connections, including "the maintenance of a post office box in the State for receiving responses to such person's solicitations." The Department found Calston cleared that bar twice over: first, using a New York mailing address for orders and payments is itself a sufficient additional connection with the state (the mailing service functions as a conduit between Calston and New York); and second, Calston's own trucks physically entering New York to deliver goods to the Post Office independently supports nexus. Because Calston solicits sales via catalogs/ads reaching New York and has this additional connection, it's a vendor that must register with the Department and collect sales and use tax on its New York sales.

What this means for you

Out-of-state and foreign mail-order or catalog sellers

Having zero physical stores, warehouses or employees in New York doesn't mean you're off the hook. Something as simple as directing customer mail and payments to a New York address -- even one run by an independent third-party mail-forwarding service purely for postal convenience -- can be enough "additional connection" to create a tax-collection obligation, on top of ordinary catalog/advertising solicitation reaching the state.

Businesses using their own trucks to deliver into New York

Using your own vehicles (rather than a common carrier or the U.S. mail) to bring goods into New York, even just to hand them to the Post Office for final delivery, is treated as a further nexus-supporting fact, separate from the mailing-address issue.

Accountants and tax professionals

Review both halves of the two-part vendor test in Tax Law § 1101(b)(8)(i)(C): (1) catalog/advertising solicitation reaching New York customers, and (2) some additional in-state connection satisfying constitutional nexus. The regulation's non-exhaustive list of qualifying connections (20 NYCRR § 526.10(a)(4)(ii)) is broader than physical presence -- a mailing address or in-state trucking activity can each independently satisfy it.

Common questions

Q: Does the taxpayer need a warehouse or office in New York to have nexus?
A: No. Here, the company had neither -- its New York mailing address and its own trucks crossing into the state for delivery were each independently enough.

Q: Would using a common carrier (not the company's own trucks) change the analysis?
A: The ruling specifically notes Calston used its own trucks rather than a common carrier or the U.S. mail for the cross-border leg; that fact independently supported nexus, though the mailing-address connection alone was already found sufficient.

Q: Can another mail-order company rely on this ruling?
A: No. This advisory opinion binds the Department only as to Lady Calston and the specific facts about its mailing and delivery arrangements.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(8)(i) (definition of vendor)
• 20 NYCRR § 526.10(a)(4) (vendor; catalog/advertising nexus)
• Tax Law §§ 1132, 1133 (vendor liability to collect tax)
• Tax Law § 1134 (vendor registration requirement)

Prior rulings referenced:

• Clark Color Laboratories Division of District Photo, Inc., Dec St Tx Comm, March 28, 1980, TSB-H-80(88)S
• Karl Brussel D/B/A Kalbrus, Det Tax App Trib, June 25, 1992, TSB-D-92(50)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_19s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(19)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S960226A

On February 26, 1996, a Petition for Advisory Opinion was received from
Lady Calston, 72 St. Regis Crescent North, North York, Ontario M3J123 Canada.
Petitioner, Lady Calston, submitted additional information pertaining to the
Petition on February 14, 1997.
The issue raised by Petitioner is whether it is liable for collecting sales
and use tax within New York State.
Petitioner submits the following facts as the basis for this Advisory
Opinion. Petitioner is a Canadian corporation whose only facilities, owned or
rented, are in Canada.
Petitioner sells tangible personal property via the
mails, with its customers being in the United States (U.S.), Canada and abroad.
Petitioner places advertisements in over twenty (20) nationally distributed
magazines.
The advertisements carry an "800" number, which is answered in
Toronto, as well as a New York State street address for mail orders and checks.
Interested parties can obtain a catalog of Petitioner's products via the "800"
number or by clipping a coupon from the magazine advertisement and sending it to
the address shown. The New York street address is that of an independent mail
forwarding service, FSI, who receives Petitioner's mail and weekly forwards it
to Canada. FSI's purpose is for the mailing convenience of U.S. customers to
affix U.S. postage, rather than being concerned with the correct Canadian
postage.
Petitioner maintains no stock in New York or any other state. All products
are warehoused exclusively in, and distributed from, Canada. In the matter at
hand, Calston's driver picks up the goods at the Canadian warehouse and drives
the trucks across the Canadian border into New York State and delivers the goods
and consigns all shipments to the United States Postal Service. The goods are
then delivered to New York customers. There are no direct deliveries to New York
customers by Petitioner's truck drivers but Petitioner does use its own trucks
to deliver the goods into New York for mailing. Other than the trucks carrying
goods in international commerce, Petitioner has no assets owned or rented that
are used in New York State.
Nor does Petitioner have any employees or
representatives soliciting sales on its behalf in New York.
Section 1101(b)(8)(i) of the Tax Law defines "vendor," in part, as follows:
(A) A person making sales of tangible personal property or services,
the receipts from which are taxed by this article;
*

*

(C) A person who solicits business either:

*

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Sales Tax

(I) by employees,
representatives; or

independent

contractors,

agents

or

other

(II) by distribution of catalogs or other advertising matter,
without regard to whether such distribution is the result of regular
or systematic solicitation, if such person has some additional
connection with the state which satisfies the nexus requirement of
the United States constitution; and by reason thereof makes sales to
persons within the state of
tangible personal property or services, the use of which is taxed by
this article;
(D) A person who makes sales of tangible personal property or
services, the use of which is taxed by this article, and who
regularly or systematically delivers such property or services in
this state by means other than the United States mail or common
carrier ....
Section 526.10(a)(4) of the Sales and Use Tax Regulations defines "vendor"
as follows:
(i) A person who solicits business by the distribution of catalogs
or other advertising matter, without regard to whether such
distribution is the result of regular or systematic solicitation, if
such person has some additional connection with the State which
satisfies the nexus requirement of the United States Constitution
and by reason thereof makes sales to persons within the State of
tangible personal property or services the use of which is subject
to tax, is a vendor.
(ii) For purposes of subparagraph (i) of this paragraph, the
additional connection with the State a person may have in order to
qualify as a vendor shall include, but not be limited to:
(a) the operation of retail stores in the State;
(b) the presence of traveling sales representatives in the State;
(c) the presence of employees, independent contractors or agents
in the State;
(d) the presence of service representatives in the State;
(e) the maintenance of a post office box in the State for receiving
responses to such person's solicitations; or
(f) the maintenance of an office in the State, even if such office
performs no activities related to the sales solicited by such
person. (emphasis added)

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Sales Tax

In this case, Petitioner through its advertising in magazines is selling
tangible personal property in New York State. Petitioner makes available to
customers a catalog which can be obtained by sending in a coupon to an address
in New York State, or by calling Petitioner's "800" telephone number. Petitioner
has the responding customer send the necessary orders and checks to a mailing
service in New York State. The mailing service gathers the orders and checks and
forwards them to Canada. The reason for the use of a mail forwarding service is
to guarantee that the orders are properly sent to Petitioner, taking into account
the difference in postal fees between the United States and Canada, thereby
insuring that the customer's order will be processed by Petitioner and the
merchandise delivered. Petitioner has its trucks pick up its product from a
warehouse in Canada, cross the border and deliver the product in its trucks to
a U.S. Post Office in New York State.
A person is a vendor under Section 1101(b)(8)(i)(C) of the Tax Law if it
distributes catalogs or other advertising matter, has some additional connection
with New York State which satisfies the nexus requirement of the United States
Constitution, and as a result of its solicitation makes sales to persons within
New York State of tangible personal property or services the use of which are
subject to tax. Petitioner does distribute catalogs in New York State, and as
a result makes sales to persons in the State of tangible personal property the
use of which is subject to tax. Accordingly, Petitioner will qualify as a vendor
under Section 1101(b)(8)(i)(C) if it has an additional connection with the State
which satisfies constitutional nexus requirements.

Petitioner has a constitutionally sufficient nexus with New York State to
be required to collect sales and use tax. Although Petitioner has no physical
presence in the State such as salespersons, offices or independent salespersons
(jobbers, wholesalers), the fact that customer orders are sent to a New York
mailing address is evidence that nexus with New York State exists. (See: Clark
Color Laboratories Division of District Photo, Inc., Dec St Tx Comm, March 28,
1980, TSB-H-80(88)S, Karl Brussel D/B/A/ Kalbrus, Det Tax App Trib, June 25,
1992, TSB-D-92(50)S, and Section 526.10(a)(4)(ii)(e) of the Sales and Use Tax
Regulations.)
Petitioner advertises a New York mailing address for the
convenience of its customers.
The New York based mailing service acts as a
conduit between Petitioner and this State. The use by Petitioner of a New York
mailing address is an additional connection with the State which satisfies the
nexus requirement of the United States Constitution, and makes Petitioner a
vendor under Section 1101(b)(8)(i)(C) of the Tax Law.
The delivery of
Petitioner's product into New York State in its own trucks further supports the
conclusion that Petitioner has a nexus with New York State.
Accordingly, Petitioner is considered a vendor because it distributes
catalogs in New York and sells tangible personal property that is subject to tax
under Article 28 of the Tax Law, and uses a New York mailing address to receive
its orders and payments. In addition, Petitioner uses its own trucks to bring
the tangible personal property into New York for delivery to its customers. As
a vendor, Petitioner is personally liable for and must collect the sales and use

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tax on its sales of tangible personal property into this State. (See Sections
1132 and 1133 of the Tax Law.) As a vendor, Petitioner must also register for
the collection of tax with New York State as required by Section 1134 of the Tax
Law.

DATED:

March 28, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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