When a photographer consigns student photos to a nonprofit PTA to sell to parents, who owes and collects the sales tax?

Plain-English summary

Irvin Simon Photographers, Inc. (New York City) provides student photographs to parent-teacher associations (PTAs) on a consignment basis, for resale to parents. Unsold photos are returned, and the PTA pays for the balance at 20% below the selling price. The photographer asked whether these transactions are subject to sales tax.

The Department ruled the photographer's sales to parents are taxable, and the PTA must collect the tax as the photographer's agent.

• Consignment is not a sale — it's an agency. When goods are placed on consignment, the consignee (the PTA) becomes the agent of the consignor (the photographer) for making sales, and must account for the proceeds. That is distinct from a sale, where title passes absolutely and an obligation to pay the price arises (Tax Law § 1101(b)(5); Estate of Friedman, 91 Misc. 2d 201 (1977)).
• So the taxable sale is the photographer's sale to the parents. Those are retail sales whose receipts are taxable under § 1105(a), and the PTAs — acting as the photographer's agent — must collect the tax at the time of sale.
• The nonprofit "purchaser" rule didn't apply. The photographer relied on a Sales Tax Newsletter passage describing a nonprofit that is the actual purchaser of the pictures. Because this arrangement is a consignment (agency), the newsletter's agency paragraph controls — not the paragraph about a nonprofit that buys the pictures outright.

What this means for you

Labeling a deal a "sale" doesn't make it one — the terms control. If unsold goods come back to you and the other party only accounts for what it sells (often at a set markup or discount), you have a consignment, which creates an agency. The taxable retail sale is your sale to the ultimate customer, made through your agent.

Your nonprofit consignee still has to collect the tax. Even a tax-exempt PTA or similar organization, when it sells your consigned goods as your agent, must collect sales tax on the full selling price from the customer. Its own exempt status doesn't exempt the retail sales it makes for you.

A nonprofit that truly buys your goods is a different case. If a nonprofit actually purchases all the pictures and is the payer of record (not a consignee), different rules govern its later sales. The consignment-versus-purchase distinction decides which rule applies.

Common questions

Q: We consign student photos to the PTA — is that a tax-free sale to a nonprofit?
A: No. Consignment creates an agency, not a sale to the PTA. Your sales to the parents are taxable retail sales, and the PTA must collect the tax from parents as your agent.

Q: Why does the PTA have to collect tax if it's a nonprofit?
A: Because it's acting as your selling agent, not as a buyer. A nonprofit acting as an agent for the photographer must collect sales tax on the full selling price of the pictures.

Q: When would the nonprofit's own status matter?
A: If the nonprofit is the actual purchaser of all the pictures and the payer of record — not a consignee — then the rules on a nonprofit's own resales apply. That wasn't the case here.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(a) — imposes sales tax on receipts from every retail sale of tangible personal property
• Tax Law § 1101(b)(5) — defines "sale" to include any transfer of title or possession, or both, for consideration
• Estate of Friedman, 91 Misc. 2d 201 (1977) — a consignment for sale is distinct from a sale; a consignee who must act in a fiduciary capacity and account for proceeds is an agent (see also Matter of Friedman, 64 A.D.2d 70 (1978))

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h81_27s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-H-81(27)S
Sales Tax
February 27,1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S80l030A

On October 30, 1980 a Petition for Advisory Opinion was received from Irvin
Simon Photographers, Inc., c/o George Shimmerlik, 29 West 34th Street, New York,
New York 10001.
The issue raised by Petitioner is whether its sale of photographs to
non-profit organizations under the circumstances described below constitutes a
transaction subject to the sales tax.
Petitioner states that it "sells" photographs of students to parent-teacher
associations on a consignment basis, for resale to the parents of the students.
Unsold photographs are returned to Petitioner and the balance paid for by the
organization at a rate of 20% below selling price.
Section 1105(a) of the Tax Law imposes a tax on the receipts from every
retail sale of tangible personal property. Section 1l0l(b)(5) of the Tax Law
defines the term "sale" to include any "...transfer of title or possession or
both...for a consideration...."
Where goods are placed on consignment such transaction constitutes not a
sale but the creation of an agency relationship wherein the consignee becomes the
agent of the consignor for the purpose of making sales of the consignor's
property, and is obligated to account to the consignor for the proceeds. See, in
this regard, Estate of Friedman, 91 Misc. 2d 201 (1977), wherein the court stated
that "It is axiomatic that a consignment for sale is quite distinct, in
principle, from a sale. On the one hand, if the provisions of a contract are such
that title to the subject matter passes absolutely from one party to the other
and a correlative obligation to pay the purchase price is imposed, the contract
should be construed to be a contract of sale .... On the other hand, even though
a contract contains a recitation denoting passage of title and payment of
purchase price, if it appears from all the terms of the contract that the buyer
is required to act in a fiduciary capacity and as such account to the other party
for the proceeds of a sale, the contract is one of consignment for sale .... "
Cf., Matter of Friedman, 64 AD 2d 70 (1978); In Re Majority of Directors of James
Chambers, 17 App, Div, 340 (1897).
Petitioner's stated reliance on the Sales Tax Newsletter, Vol. 4, No. 1,
was misplaced. It was stated therein that " Photographers are required to collect
the applicable sales tax from the purchasers of student pictures. An
organization, even a non-profit organization which has established its exempt
status with the Sales Tax Bureau, acting as an agent for a photographer (i.e.
distributing the pictures and collecting receipts) must collect sales tax on the
total selling price of the pictures and remit it to the photographer.
"In the unusual case where an exempt organization is not acting as an agent
for the photographer but is the actual purchaser of all the pictures and the
payer of record, the taxable status of its subsequent sales of student pictures
is as follows:
1)

Sales of student pictures by a public school are subject to sales
tax because a governmental entity must collect sales tax whenever it
sells tangible personal property or services of a kind ordinarily
sold by private persons.

JAMES H. TULLY, JR., COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

2
TSB-H-81(27)S
Sales Tax
February 27,1981

2)

Sales of student pictures by other qualifying non-profit
organizations, which have received Exempt Organization Certificates
from the Sales Tax Bureau, such as a PTA, church, or nonpublic
school, are not required to collect sales tax unless the sale is
made through a shop or store."

Where there is a consignment for sale, as Petitioner states the case to be
in the present instance, an agency is created and it is the first paragraph of
the quoted material that is applicable. That is, Petitioner's sales of school
photographs to the parents of students constitute retail sales the receipts from
which are subject to the tax imposed under Section 1105(a) of the Tax Law, and
the parent-teacher associations through which Petitioner sells the photographs
are required to collect that tax at the time of sale.

DATED: January 29, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau