Is furniture manufactured in New York and delivered directly to an out-of-state buyer in Nevada subject to New York sales or use tax?

Plain-English summary

Gerard Altieri asked about a straightforward interstate transaction: a foreign corporation headquartered in Las Vegas, Nevada, but with an office in New York City, orders furniture manufactured in New York in finished form, and the manufacturer ships the completed furniture directly to the buyer's headquarters in Las Vegas. The question was whether the New York manufacturer owes New York sales or use tax on that sale.

New York's sales tax is what the Department calls a "destination tax" -- the point where the property is actually delivered, or where possession transfers from the seller to the buyer, controls whether (and where) the sale is taxed, not where the item was made or where the buyer's headquarters or New York office happens to be. Since the furniture in this case is delivered directly to Las Vegas and used outside New York, the transfer of possession happens outside New York State, so the New York manufacturer isn't required to collect or remit New York sales or use tax on the sale.

The Department made clear this outcome flips if the facts change. If the Nevada company instead had the furniture delivered to its New York office, or sent its own truck or an employee into New York to pick it up, the sale would be taxable in New York at that point -- even if the buyer immediately shipped the furniture on to Las Vegas afterward. What matters is where the actual physical handoff between seller and buyer takes place, not the item's ultimate destination or use.

What this means for you

New York manufacturers and sellers shipping to out-of-state buyers

A sale you ship directly to an out-of-state address isn't subject to New York sales tax, regardless of where your buyer's home office is or whether the buyer has any other New York presence. Keep clear delivery records (shipping documents, bills of lading) showing the out-of-state delivery point in case the exemption is ever questioned.

Out-of-state buyers purchasing custom or manufactured goods from New York vendors

If you want to avoid New York sales tax on a purchase, make sure the item is actually delivered to you (or your designee) outside New York -- picking the item up yourself in New York, or having it delivered to any New York location first, triggers New York tax even if you immediately move the item out of state afterward.

Accountants and tax professionals

This is a straightforward application of the destination-tax rule in 20 NYCRR §§ 525.2(a)(3) and 526.7(e), consistent with the Department's long-standing position in Bruce MacCorkindale, CPA, TSB-A-86(48)S: the taxable event is fixed by the location of the transfer of possession, not the buyer's residence, headquarters, or ultimate use location.

Common questions

Q: Is a New York manufacturer's sale to an out-of-state buyer taxable if the item is shipped directly out of state?
A: No, as long as delivery and the transfer of possession actually occur outside New York State.

Q: Does having a New York office make an out-of-state company's purchases taxable in New York?
A: Not by itself. What matters is where the specific item is delivered or where possession transfers, not whether the buyer has any New York presence.

Q: What would make this same sale taxable in New York?
A: If the buyer (or the buyer's truck or employee) picked up the furniture in New York, or if it was first delivered to a New York location, the transfer of possession would occur in New York and the sale would be taxable there, even if the furniture were later shipped elsewhere.

Q: Does this ruling apply to my interstate sale?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. The taxable outcome always depends on the actual point of delivery in your own transaction.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(13)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S971229D

On December 29, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Gerard Altieri, 35 High Ridge Road, Hartsdale,
New York, 10530.
The issue raised by Petitioner, Gerard Altieri, is whether the sale of
furniture manufactured in New York and delivered to Las Vegas, Nevada is subject
to sales or compensating use tax.
Petitioner submits the following facts as the basis for this Advisory
Opinion.
A foreign corporation places an order for the manufacture of furniture to
be delivered to Las Vegas, Nevada. The foreign corporation maintains an office
in New York City. The furniture is manufactured in New York in finished product
form and delivered to Las Vegas, Nevada.
The foreign corporation’s main
headquarters are located in Las Vegas, Nevada.
Applicable Law and Regulations
Section 1105(a) of the Tax Law imposes a tax on the receipts of every
retail sale of tangible personal property, except as otherwise provided.
Section 525.2 (a) of the Sales and Use Tax Regulations, provides, in part:
(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. The
time or method of payment is immaterial, since the tax becomes due
at the time of transfer of property or rendition of service.
*

*

*

(3) The sales tax is a “destination tax,” that is, the point of
delivery or point at which possession is transferred by the vendor
to the purchaser or designee controls both the tax incident and the
tax rate.

-2­
TSB-A-98(13)S
Sales Tax

Section 526.7(e) of the Sales and Use Tax Regulations, provides, in part:

Transfer of possession. (1) Except as otherwise provided in
paragraph (3) of this subdivision, a sale is taxable at the place
where the tangible personal property or service is delivered, or the
point at which possession is transferred by the vendor to the
purchaser or designee.
*

*

*

Example 2: A person, not a resident of New York State,
purchases tangible personal property in New York State and has it
delivered to his home out of state. The receipt from the sale is
not taxable in New York State as delivery was made outside of New
York.
*

*

*

(2)
Except as otherwise provided in paragraph (3) of this
subdivision, a sale of tangible personal property, in which the
title to the property passes in New York State, but in which
delivery occurs outside New York State, is not subject to tax.
Opinion
Since the point of delivery and the transfer of possession of the furniture
occurs outside New York State and the furniture is used outside New York State,
the New York firm is not required to collect or remit sales or compensating use
tax on the sale. If the foreign corporation purchases the furniture and has it
delivered to the company’s New York location, or the foreign corporation sends
its trucks or employees into New York to pick up the furniture, the purchase
would be subject to sales tax under Section 1105(a) of the Tax Law, even if the
furniture is subsequently shipped to Las Vegas. In those cases, the transfer of
possession would have taken place within New York State.
(See Bruce
MacCorkindale, CPA, Adv Op, Comm T & F, August 5, 1986, TSB-A-86(48)S).

DATED: February 25, 1998

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

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