Are an auto club's member Triptiks, maps, tourbooks, and membership kits exempt from sales tax as promotional materials?

Plain-English summary

The Automobile Club of New York, a AAA affiliate, provides its members with a range of free travel materials: personalized "Triptik" routing booklets (with maps for the member's specific trip, printed partly in-house and partly from a preprinted cover bought from a vendor), a "Your Membership Benefits Kit," AAA road maps, AAA Tourbooks, a New York City area map book, and membership applications for prospects. Everything carries the AAA logo, and most items also carry some advertising for AAA services or outside merchants. The club asked two things: whether the equipment and supplies used to produce the Triptik qualify for the promotional-materials exemption, and whether the other listed items (kits, maps, tourbooks, applications, and their delivery envelopes) do too.

On the Triptik, the answer splits by component. The Triptik itself is a "promotional material," so buying the finished item (or its preprinted cover) from an outside vendor is exempt to the extent it's mailed free to recipients, whether in New York or out of state. But the paper, ink, and binding materials the club buys to print the Triptik's personalized contents in-house are ordinary taxable purchases -- they're raw materials for production, not finished promotional materials -- though the club can get a refund or credit for the portion used in Triptiks mailed to out-of-state members. The printers, computers, software, and binding machine used to produce the Triptik are also taxable; they don't qualify for the manufacturing exemption because they aren't producing tangible personal property for sale (the Triptik is given away, not sold).

On the other items, the Membership Benefits Kit, AAA maps, Tourbooks, the NYC-area map book, and membership applications all qualify as promotional materials. As of March 1, 1997, printed promotional materials mailed or shipped free of charge -- to recipients inside New York as well as outside -- are exempt under Tax Law § 1115(n)(4). Delivery envelopes used exclusively to send these items are themselves treated as promotional materials and share the same exemption. The catch: any of these materials that a member simply picks up at a club office, rather than having mailed or shipped, don't qualify, since they were never actually distributed by mail or common carrier. The club can buy its promotional materials tax-free by giving suppliers a completed Certificate of Exemption for Purchases of Promotional Materials (Form ST-121.2) stating the percentage of its purchases that are exempt, with true-up owed (or a refund available) if that percentage estimate turns out to be off.

What this means for you

Membership organizations and travel/loyalty clubs distributing free member materials

Finished promotional items you buy from an outside printer or vendor and then mail free to members or prospects can be exempt -- but if you produce those materials in-house, the raw supplies (paper, ink, binding materials) and the production equipment itself (printers, computers, binding machines) remain ordinary taxable purchases, separate from the exemption on the finished product.

Organizations distributing materials through both mail and in-person pickup

Track how each item is actually delivered. The same brochure or map can be exempt when mailed to a member and taxable when picked up in person at an office -- the exemption in Tax Law § 1115(n) turns specifically on distribution by mail, common carrier, or similar delivery service.

Accountants and tax professionals

This ruling is a useful worked example of the layered promotional-materials exemption regime: the finished-item exemption under § 1115(n)(4) (post-1997 expansion via TSB-M-97(6)S) for materials mailed free of charge, contrasted with the ordinary taxability of raw production supplies and equipment, plus the § 1119(a)(4) refund mechanism for materials incorporated into promotional items later delivered out of state.

Common questions

Q: Is everything an organization gives away for free automatically exempt as promotional material?
A: No. The item itself must fit the statutory definition of promotional materials, and it must actually be mailed, shipped, or delivered by common carrier free of charge -- items picked up in person don't qualify, and the raw materials/equipment used to produce items in-house are separately taxable regardless.

Q: Does printing a promotional item in-house change its tax treatment?
A: Yes, for the inputs. The finished promotional item can still be exempt when mailed free, but the paper, ink, and other supplies consumed to produce it in-house are ordinary taxable purchases (with a possible refund for the portion used in items later sent out of state).

Q: Does this ruling apply to my organization's member-materials program?
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. It shows how the Department reasons, but your facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(12) (definition of promotional materials)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1115(a)(12) (production machinery and equipment exemption)
• Tax Law § 1115(n)(1), (3), (4) (promotional materials exemption)
• Tax Law § 1119(a)(4) (refund/credit for materials in property delivered out of state)
• Tax Law § 1132(c)(1) (exemption certificate requirement)
• TSB-M-97(6)S, dated August 20, 1997 (expanded promotional materials exemption)

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_28s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(28)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S971210D

On December 10, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from the Automobile Club of New York, Inc., 1415
Kellum Place, Garden City, New York 11530.
The issues raised by Petitioner, Automobile Club of New York, Inc., are as
follows:
1.
Whether the cost of equipment and supplies used for producing an AAA
Triptik, including ink, paper, equipment and machinery, or a portion of the cost
thereof, is exempt from sales and use tax under Section 1115(n) of the Tax Law.
2.
Whether the purchase of any of the following materials is exempt from
sales and use tax as promotional materials:
a.
b.
c.
d.
e.
f.

AAA “Your Membership Benefits Kit”
AAA maps
AAA Tourbooks
Maps for AAA members
Membership applications
Envelopes used to mail these items

Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner is an affiliate of a national not-for-profit organization known
as the American Automobile Association (AAA). Petitioner is an automobile club
membership organization which receives dues from its members and provides a
number of services and savings opportunities to them.
A fee is paid by
Petitioner to the national organization on a per member basis. An AAA card is
issued to each member entitling the member to service at any AAA office in the
The services and
U.S. and Canada as well as other services and benefits.
benefits are mostly related to automobile and other travel.
The following detailed explanations relate to the issues for which the
Advisory Opinion is requested.

1. A Triptik is a personalized routing booklet with the AAA logo which
   contains detailed maps outlining a preplanned driving route and other relevant
   travel and member information. The Triptik also contains some advertising for
   other AAA services and may have advertising from unrelated merchants. It is
   provided to members free of charge.
   The Triptik is normally delivered to members via common carrier or the
   U.S. Postal Service. It is also available to be picked up at an AAA location if
   necessary, but is generally delivered to the member. An accurate count can be
   made of those Triptiks mailed versus those picked up at an AAA location.

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The front and back cover of the Triptik is preprinted and purchased from
an outside vendor. The internal contents are printed in-house, cut, folded to
size, and bound to form the Triptik. The internal contents are printed from
computer programs which contain all of the maps and other information included
in the Triptik which a member requests. The Triptik is ‘personalized’ for the
member in that only the maps for the specific route and destination are included.
The programs or software which contain all of the map information and other
information are acquired from an outside vendor.
The paper and ink used to print the maps, plastic binders, and logo
imprinted envelopes are purchased from outside vendors. The printers, computers
and software are leased from outside vendors. The binding machine used to put
the Triptik together was purchased.
2.
The AAA “Your Membership Benefits Kit” (‘Membership Kit’), is a small
brochure packet with inside pockets to hold other information for members of the
club.
It too has the AAA logo on the cover. Included in the packet is a
Membership Benefits Handbook, and an envelope with the AAA logo on it which
contains Members-Only coupons and benefit information. The Membership Kit is
provided free of charge to all club members.
The Membership Benefits Handbook is a comprehensive guide to services and
savings for club members. The “Members-Only Coupons and Benefit Information”
packet contains coupons and information for services and special offers from AAA
services and other outside merchants. These include emergency road service
reference guides, auto trip delay contracts, auto repairs, hotel discounts,
traveler’s checks and car rental information and discounts. It also contains an
AAA emblem which can be affixed to an automobile.
The Membership Kit and the related inserts are purchased from outside
vendors. Some of these items are co-op type advertising where the merchant will
split the costs, or Petitioner may receive a commission from the merchant when
the services promoted are used by a member. The Membership Kits are delivered
to members via common carrier or the U.S. Postal Service, in an envelope which
has the AAA logo.

3. The AAA Maps are standard folded road maps of specific geographic
   regions which have the AAA logo on the cover. These maps are available free of
   charge to members and are sent to members via common carrier or the U.S. Postal
   Service, in a logo envelope. They are often sent with the Triptik, but they may
   be ordered by a member and sent separately. They may be available to be picked
   up at an AAA location, but are normally sent to the member. An accurate count
   can be made of those AAA maps mailed versus those picked up at an AAA location.
   The maps are purchased from the affiliated national organization. The maps
   may be ordered in conjunction with a specific trip, and may accompany a Triptik.
   The map in this case may be imprinted with arrows which indicate an overall
   automobile route. These arrows are drawn by hand on the maps in-house and are
   done on approximately 90% of the maps sent to members.

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On occasion, the maps sent to a member are purchased from outside vendors
and do not have the AAA logo on the map, but are mailed in a logo envelope and
are provided free of charge to members.

4. The AAA Tourbook is an illustrated book with the AAA logo which covers
   a specific geographic region of the U.S., Canada or Mexico. The book highlights
   points of interest along a member’s travel route, as well as AAA approved
   accommodations and restaurants in the particular geographic region.
   The Tourbook is provided free of charge to members. It is normally sent
   to members via common carrier or the U.S. Postal Service, in a logo envelope.
   It may be picked up at a AAA location, but is normally sent to a member along
   with a Triptik and AAA map. The Tourbook can also be ordered separately.
   An
   accurate count can be made of those Tourbooks mailed versus those picked up at
   an AAA location.
   The Tourbook is purchased from the affiliated national organization. It
   also contains advertising for other AAA services and other merchants such as
   hotels and restaurants.
5. The Maps for AAA members is a map book with the AAA logo on the cover,
   as opposed to a traditional folding map.
   It is a map of New York City and
   vicinity and is sent to members free of charge as a gift, and may accompany a
   Membership Kit.
   These maps are purchased from outside vendors and are mailed to members via
   common carrier or the U.S. Postal Service. They contain detailed road maps,
   related information, information about other AAA services and some advertising
   for merchants such as car rentals and traveler’s checks.
6. The Membership Application is an application to become a member of the
   club. It consists of a letter which highlights the AAA services and savings
   opportunities and offers a AAA Visa or MasterCard.
   The actual membership
   application is a detachable portion of the letter indicating the cost of
   membership and preferred method of payment. The Membership application is sent
   to prospective members free of charge in a logo envelope via common carrier or
   the U.S. Postal Service.
   Members may pay their dues by either check or credit card. There is also
   an option to have each year’s renewal charged automatically to the credit card.
   In all other situations, annual renewal notices are sent under separate cover to
   members.
   Petitioner provided samples of all the above described items.
   Applicable Law
   Section 1101(b)(12) of the Tax Law defines promotional materials as:

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Any advertising literature, other related tangible personal
property (whether or not personalized by the recipient’s name or
other information uniquely related to such person) and envelopes
used exclusively to deliver the same. Such other related tangible
personal property includes, but is not limited to, free gifts,
complimentary maps or other items given to travel club members,
applications, order forms, and return envelopes with respect to such
advertising literature, annual reports, promotional displays and
Cheshire labels but does not include invoices, statements and the
like.
Section 1105(a) of the Tax Law imposes sales tax on the receipts of every
retail sale of tangible personal property, except as otherwise provided.
Section 1115(a) of the Tax law, provides, in part:
Receipts from the following shall be exempt from the tax on
retail sales imposed under subdivision (a) of section eleven hundred
five and the compensating use tax imposed under section eleven
hundred ten:
*

*

*

(12) Machinery or equipment for use or consumption directly
and predominantly in the production of tangible personal property,
gas, electricity, refrigeration or steam for sale ....
Section 1115(n) of the Tax Law provides, in part:
(1) Except as otherwise provided in this subdivision,
promotional materials mailed, shipped, or otherwise distributed from
a point within the state, by or on behalf of vendors or other
persons to their customers or prospective customers located outside
this state for use outside this state shall be exempt from the tax
on retail sales imposed under subdivision (a) of section eleven
hundred five and the compensating use tax imposed under section
eleven hundred ten of this article.
*

*

*

(3) Receipts from the retail sale of promotional materials,
receipts from every sale, except for resale, of services described
in paragraph one or two of subdivision (c) of section eleven hundred
five to such promotional materials and consideration given or
contracted to be given for either such materials or such services to
such materials shall be exempt from tax under this article to the
extent of the vendor’s separately stated charge to the purchaser of
such materials or services for the vendor’s cost to ship or deliver

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such materials to the purchaser’s customers or prospective customers
by means of the United States postal service, paid by the vendor to
such postal service to ship or deliver such materials, but only
where the vendor separately states such charge to ship or deliver
(not exceeding the vendor’s United States postal service costs) in
a written contract with the purchaser or on a written bill rendered
to the purchaser.
*

*

*

(4) Notwithstanding any contrary provisions of paragraph one
of this subdivision, promotional materials which are printed
materials and promotional materials upon which services described in
paragraph two of subdivision (c) of section eleven hundred five have
been directly performed shall be exempt from tax under this article
where the purchaser of such materials mails or ships such
promotional materials, or causes such promotional materials to be
mailed or shipped to its customers or prospective customers, without
charge to such customers or prospective customers, by means of a
common carrier, United States postal service or like delivery
service.
Opinion
Issue 1
Petitioner’s AAA Triptik given free of charge to members constitutes a
promotional material under Section 1101(b)(12) of the Tax Law. If Petitioner
purchases the Triptik, or the preprinted front and back cover of the Triptik,
from the national affiliate or an outside vendor, the purchase would be exempt
from sales and use taxes to the extent that the Triptik is mailed without charge
to recipients outside the state or within the state in accordance with Section
1115(n)(4) of the Tax Law.
Purchases of tangible personal property used by Petitioner to print its
Triptik in-house, such as paper, ink, binding materials and mechanicals, are
subject to tax under Section 1105(a) or Section 1110 of the Tax Law. However,
if Petitioner delivers any of the Triptiks to customers outside the state for use
outside the state, Petitioner will be entitled to a refund or credit of sales or
use tax paid on the paper, ink and plastic binder used to make the Triptiks
delivered outside the state, provided that these materials are used only for
fabricating, processing, printing, or imprinting the property, in accordance with
Section 1119(a)(4) of the Tax Law. (See Technical Services Bureau Memorandum,
Expanded Sales and Compensating Use Tax Exemption for Promotional Materials,
August 20, 1997, TSB-M-97(6)S).
The printers, computers, software and binding machine purchased by
Petitioner are tangible personal property purchased at retail, and are subject
to sales and compensating use taxes. This equipment is not eligible for the
exemption from sales tax for manufacturing equipment under Section 1115(a)(12)
of the Tax Law, since they are not used to produce tangible personal property for
sale.

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The envelopes in which the Triptiks are mailed will qualify as promotional
materials under Section 1101(b)(12) and may be eligible for exemption from sales
and use tax, provided that such envelopes are used exclusively either to deliver
Triptiks alone or to deliver Triptiks with any other promotional materials, as
discussed below in “Issue 2".
Issue 2
The AAA “Your Membership Benefits Kits”, AAA Maps, AAA Tourbooks, Maps for
AAA Members and Membership Applications qualify as “promotional materials” as
defined in Section 1101(b)(12) of the Tax Law. These are printed promotional
materials under Section 1115(n)(4) of the Tax Law. Effective March 1, 1997,
printed promotional materials and promotional materials upon which Section
1105(c)(2) services have been performed which are mailed or shipped to customers
or prospective customers within New York State, as well as customers or
prospective customers outside New York State, by U.S. Postal Service or common
carrier, free of charge to the recipient, are exempt from sales and compensating
use tax pursuant to Section 1115(n)(4). Envelopes used exclusively to deliver
promotional materials are also promotional materials. If the envelope qualifies
as a promotional material, it is exempt if it is mailed outside New York, or if
it is mailed or shipped in New York, as described. However, to the extent that
any of such promotional materials are picked up by the customer at an AAA office
in New York State, Petitioner’s purchases of these materials will be subject to
tax, since they are not distributed, mailed or shipped in accordance with Section
1115(n)(1) or (4). Petitioner may make purchases of promotional materials tax
exempt by giving the supplier a properly completed Form ST-121.2, Certificate of
Exemption for Purchases of Promotional Materials, within 90 days of delivery of
the promotional materials. See Section 1132(c)(1) of the Tax Law. Petitioner
should indicate on the certificate the percentage of exempt sales. To the extent
that Petitioner indicates an exempt percentage on the certificate higher or lower
than is warranted, Petitioner would owe tax or be entitled to a credit or refund,
as the case may be.

DATED: April 14, 1998

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau
The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.