SALES & USE TAX
GUIDELINES FOR
PENNSYLVANIA,
NEW JERSEY AND
NEW YORK
P R O V I D E DP R O V I D E D
P R O V I D E DP R O V I D E D
P R O V I D E D
A S A M E M B E RA S A M E M B E R
A S A M E M B E RA S A M E M B E R
A S A M E M B E R
S E R V I C E B YS E R V I C E B Y
S E R V I C E B YS E R V I C E B Y
S E R V I C E B Y
GRAPHIC ARGRAPHIC AR
GRAPHIC ARGRAPHIC AR
GRAPHIC AR
TSTS
TSTS
TS
ASSOCIAASSOCIA
ASSOCIAASSOCIA
ASSOCIA
TION OFTION OF
TION OFTION OF
TION OF
DELADELA
DELADELA
DELA
WW
WW
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ARE VALLEYARE VALLEY
ARE VALLEYARE VALLEY
ARE VALLEY
Philadelphia, PPhiladelphia, P
Philadelphia, PPhiladelphia, P
Philadelphia, P
AA
AA
A
A N DA N D
A N DA N D
A N D
PRINTING INDUSTRIESPRINTING INDUSTRIES
PRINTING INDUSTRIESPRINTING INDUSTRIES
PRINTING INDUSTRIES
ALLIANCEALLIANCE
ALLIANCEALLIANCE
ALLIANCE
Amherst, NY Amherst, NY
Amherst, NY Amherst, NY
Amherst, NY
andand
andand
and
WW
WW
W
estfield, NJestfield, NJ
estfield, NJestfield, NJ
estfield, NJ
R E S E A R C H B YR E S E A R C H B Y
R E S E A R C H B YR E S E A R C H B Y
R E S E A R C H B Y
MARGOLISBECKER LLCMARGOLISBECKER LLC
MARGOLISBECKER LLCMARGOLISBECKER LLC
MARGOLISBECKER LLC
WW
WW
W
ashington, DC ashington, DC
ashington, DC ashington, DC
ashington, DC
andand
andand
and
Philadelphia, PPhiladelphia, P
Philadelphia, PPhiladelphia, P
Philadelphia, P
AA
AA
A
Issued: January 14, 2009Issued: January 14, 2009
Issued: January 14, 2009Issued: January 14, 2009
Issued: January 14, 2009
www.PIAlliance.org
PRINTING INDUSTRIES ALLIANCE
Serving Graphic Communications Firms in New York State, Northern New Jersey and Northwestern Pennsylvania
636 North French Road, Suite 1, Amherst, NY 14228 • tel: 716-691-3211 • fax: 716-691-4249 • toll free: 800-777-4742
NY/NJ Metro Oce • 37 Elm Street, Suite 11-A, Westfield, NJ 07090 • tel: 908-233-4124 • fax: 908-233-4126
P R E F A C E
These Guidelines contain important information on the Sales & Use Tax regulations and
the effect of court decisions for the states of Pennsylvania, New Jersey, and New York.
Highlights of this Guidelines publication include:
o NEXUS criteria: Should you register to do business in other states?
o “What if” situations (including use of a mail house)
o Internet transactions
o Status of the Streamlined Sales and Use Tax Agreement
o Compilation of exemption forms and NEXUS Questionnaires
Respectfully Submitted,
Margaret Baumhauer, CAE Timothy Freeman, CAE
President President
Graphic Arts Association of Printing Industries Alliance
Delaware Valley, Inc. and (NY, NJ and Northwestern PA)
Subsidiaries Telephone: 1.716.691.3211
Telephone: 1.215.396.2300
TABLE OF CONTENTS
INTRODUCTION ............................................................................................................ 1
ABOUT THE AUTHOR................................................................................................... 2
NEXUS - In General
Should you register to do business in other states? ........................................... 3
SECTION I:
PENNSYLVANIA
Part A: Your Responsibilities as a Seller............................................................ 5
Part B: Your Responsibilities as a Buyer.......................................................... 14
Part C: SSUTA - Streamlined Sales & Use Tax Agreement............................ 17
SECTION II:
NEW JERSEY
Part A: Your Responsibilities as a Seller.......................................................... 19
Part B: Your Responsibilities as a Buyer.......................................................... 28
Part C: SSUTA - Streamlined Sales & Use Tax Agreement............................ 31
SECTION III:
NEW YORK
Part A: Your Responsibilities as a Seller.......................................................... 33
Part B: Your Responsibilities as a Buyer.......................................................... 42
Part C: SSUTA - Streamlined Sales & Use Tax Agreement............................ 47
SECTION IV:
EXAMPLES...WHAT IF SITUATIONS
................................................. 48
SECTION V:
SSUTA - Streamlined Sales & Use Tax Agreement
SSUTA: What Is the Streamlined Sales and Use Tax Project?........................ 58
Map of Participating States .............................................................................. 60
SECTION VI:
APPENDIX & RESOURCES
Sample Forms, PENNSYLVANIA
Sample Forms, NEW JERSEY
Sample Forms, NEW YORK
SECTION VII:
STATE NEXUS QUESTIONNAIRES
Pennsylvania
New Jersey
New York
1
INTRODUCTION
This document represents an effort to catalogue various sales and use tax regulations
impacting the printing and graphic communications industry in the states of
Pennsylvania, New Jersey and New York. Its purpose is to provide practical guidance
in day-to-day situations for the members of the Graphic Arts Association (representing
Pennsylvania, southern New Jersey, and Delaware) and the Printing Industries Alliance
(representing New York State, northern New Jersey, and northwestern Pennsylvania).
We believe the information contained herein reflects the current status of the
regulations, giving effect to actual court rulings and guidance provided by the Sales and
Use Tax Departments of Pennsylvania, New Jersey and New York.
Comments are supplied where there is sufficient information available to support an
interpretation. We did not speculate on issues which lack official guidance. To avoid
misinterpretation in these "gray" areas, we cited or paraphrased the actual "general"
regulations.
This document is not intended, and cannot be considered, to provide legal advice. In
specific cases, the actual facts and circumstances will control. Should you need legal
advice, please seek it from an attorney.
Periodically, the states will issue further rulings and regulations to clarify or amend the
contents of this manual. Association members should consult their state tax
departments to obtain guidance based on the latest available information.
Bart L. Krupnick, CPA, CVA
MargolisBecker LLC
Philadelphia, PA Office: Washington, DC Office:
161 Washington Street, Suite 430 10001 Derekwood Lane
Eight Tower Bridge Building Suite 210
Conshohocken, PA 19428 Lanham, MD 20706
610.667.4310; 888.577.1717 301.577.1313; 888.577.1717
2
ABOUT THE AUTHOR
Bart L. Krupnick
, CPA, CVA, a principal with MargolisBecker LLC, is uniquely qualified to help
growing companies make the transition from entrepreneurial firms to professionally managed
organizations and assist owners of closely-held businesses to achieve their personal and
business goals.
He provides “tax counsel” to PIA's Government Affairs division; is a contributing author for
various industry publications; serves as a speaker for trade and professional groups on various
topics; and is the author of “Sales & Use Tax Guidelines” for the Printing and Graphic
Association Mid-Atlantic (a PIA affiliate).
Krupnick provides a full range of services to businesses and individuals in the following areas:
•
Mergers and Acquisitions
•
Business Valuation
•
Business and Strategic Planning
•
Financial Planning
•
Accounting and Auditing
•
Personal Financial Planning
•
Sales Tax Consulting
•
Tax Return Preparation, Planning, and Advice
•
Management Information Systems
•
Employee Benefit Plan Consulting and Accounting
His professional memberships include:
•
Printing Industries of America (PIA), and regional affiliates.
•
National Association for Printing Leadership (NAPL)
•
American Institute of Certified Public Accountants (AICPA)
•
The ESOP Association (Employee Stock Ownership Plan)
•
National Association of Certified Valuation Analysts (NACVA)
•
Numerous State Certified Public Accountant associations
MargolisBecker, LLC is the nationally known business and management advisory specialist in the graphic
communications industry. We offer services including strategic planning, business valuations, mergers and
acquisitions, turnaround management, accounting, auditing and tax compliance; and are the preparers of the
PIA financial Ratios Studies.
www.margolisbecker.com
1.888.577.1717
3
NEXUS
Beware
if transacting business with out-of-state customers. State governments are
increasingly taking aggressive positions with unregistered out-of-state vendors in
pursuit of tax revenue. Their legal right to proceed against out-of-state companies for
uncollected sales taxes (or, for that matter, corporate income taxes) is not clear
in all
cases.
What is clear is that a nexus
(or connection) must be established before out-of-state
vendors must register as a dealer/vendor and collect sales tax from out-of-state
customers. To establish nexus, certain subjective
criteria must exist. For example:
Do you have a sales office, warehouse or other place of business in the
state?
Are there sales people soliciting within the state on a regular, active and
systematic basis?
Does your company truck regularly deliver to customers in the state?
Do you place advertisements in local publications within the state?
If the weight of evidence shows that you have a “presence” within the state, then Nexus
is established and you should register and collect sales tax in that state.
If you are transacting business out-of-state, the safest
course of action is to register as
a dealer/vendor in that jurisdiction and collect sales taxes as appropriate; otherwise,
you could be held liable for the uncollected taxes.
[See Appendix, Section VII, for state NEXUS Questionnaires].
SECTION I: PENNSYLVANIA
5
SECTION I: PENNSYLVANIA
PART A: YOUR RESPONSIBILITY AS A SELLER
PENNSYLVANIA
I. YOUR RESPONSIBILITIY AS A
SELLER
, IF YOU ARE LOCATED IN
PENNSYLVANIA
NOTE: A sales tax obligation exists when and where title passes. Title
passes at destination: where goods are dropped-off, picked-up, or the
mailing address of the recipient.
(If mailed, the location of the post office is
irrelevant).
A. Charging of Tax:
Sales tax is to be charged on every job, unless
a valid, properly executed
Pennsylvania Exemption Certificate (REV-1220) or evidence of a Direct
Pay Permit is provided by the customer.
1
.
Sales Tax Exemption
– possible reasons:
a. Resale,
such as by a publisher or ad agency
b. Charitable or Not-for-Profit Organization
Applies to charitable organizations, non-profit educational institutions,
religious organizations, volunteer firemen’s organizations, and
hospitals registered with the Department of Revenue, as purely public
charities.
The exemption extends only to purchases billed directly to and paid by
the charity. It does not include purchases for an unrelated trade or
business.
The organization must present a
REV-1220 Exemption Certificate
containing the organization’s exemption number beginning with the
two digits “75.”
c. Government Agencies:
United States Government or the
Commonwealth of Pennsylvania or its political subdivisions.
Pennsylvania / Seller
(continued)
6
1
.
Sales Tax Exemption
– possible reasons (continued):
d. Direct mail advertising literature
or materials
distributed
through the US mail
, including mail order catalogues or electoral
literature and materials. Related services for mailing,
personalization and providing variable data are also exempt, as are
costs of mailing envelopes, address labels, mailing lists, delivery
costs and postage.
Direct mail advertising literature is defined as: “Tangible personal
property which is intended to promote business interest, create
goodwill, or engage the attention or interest of the prospective
purchaser to whom it is distributed through the US mail. Such
property includes but is not limited to printed matter, brochures,
price lists, matchbooks, playing cards, calendars, pens, and similar
materials, including the envelopes and address labels used in
sending the literature and materials through the mail.”
Printed matter is defined as: “Books, booklets, letterheads,
billheads, printed envelopes, folders, printed packages and
packaging materials, advertising, circulars, programs, newspapers,
magazines, periodicals, and similar items.”
Editor’s Note Beware
: To take advantage of this exemption,
the customer must not furnish their own material (e.g., paper or
cardboard) for printing (see examples below).
Examples of printed matter not
qualifying as direct mail
advertising literature
: (as denoted by Pennsylvania Department of
Revenue):
Pennsylvania / Seller
(continued)
7
1
.
Sales Tax Exemption
– possible reasons /
Part d.
Direct Mail
Advertising Literature
(continued):
EXAMPLE 1:
Printer “A” imprints stamped envelopes and brochures not qualifying
as direct mail advertising literature or material for his customer “B”.
“A” furnishes stamped envelopes and paper for the brochures. The
contract requires “A” to return the completed envelopes and
brochures to “B” who in turn will mail them to his customers. “A” is
required to collect sales tax upon his services for the envelopes,
paper, printing charges and cost of delivering the envelopes and
brochures to “B”. “A” may separately state the costs of the postage
stamps which are not subject to tax.
EXAMPLE 2:
Printer “A” imprints stamped envelopes and brochures not qualifying
as direct mail advertising materials or literature for customer “B”. “A”
furnishes the stamped envelopes and paper for the brochures. The
contract requires “A” to mail the envelopes and brochures to “B’s”
customers. “A” is required to collect sales tax upon charges for the
envelopes, paper, printing charges and stamps. The value of the
stamps represents the delivery charges in conjunction with the sale.
EXAMPLE 3:
Printer “A” imprints paper for customer “X”. “X” supplies the paper.
The letters are advertisements which will be mailed directly to “X’s”
customers. This printing service does not
qualify for the direct mail
advertising exemption. Accordingly, “A” is required to collect sales
tax on the total purchase price of the printing service.
The exemption relating to the purchase of direct mail advertising
literature or materials and mail order catalogs is confined to
transactions in which the printer provides both the printing service
and
the material to be imprinted. If the printer performs printing
services upon paper, cardboard or other material furnished by the
purchaser of the services or a third party, the charges are
subject
to tax
even though the finished product qualifies as direct mail
advertising literature or material or a mail order catalog.
Pennsylvania / Seller
(continued)
8
1
.
Sales Tax Exemption
– possible reasons (continued):
e. Periodicals
, if published at regular intervals not exceeding three
months (at least 4 times per year) and which are circulated among the
general public, containing matters of general interest and reports of
current events published for the purpose of disseminating information
of a public character or devoted to literature, the sciences, art or some
special industry.
2.
Printer - Mail House Transactions:
Selected Scenarios
Reminder:
Direct Mail printing is non-taxable
. (Refer to Section I:
Pennsylvania, part I.A.1.d above).
Mail House Selection
Mailer’s
Location Taxable Status
Printer is mailer or printer
selects mailer
In State Only pieces ultimately mailed to
Pennsylvania addresses are taxable in
Pennsylvania.
Printer is mailer or printer
selects mailer
Out of State Only pieces ultimately mailed to
Pennsylvania addresses are taxable in
Pennsylvania.
Customer selects mailer In State Only pieces ultimately mailed to
Pennsylvania addresses are taxable in
Pennsylvania.
Customer selects mailer Out of State Non-taxable to printer. Customer, if
registered in PA, may be obligated for
use taxes on pieces ultimately mailed to
PA addresses.
[See “What If” Situations in Section IV].
Pennsylvania / Seller
(continued)
9
3.
Taxability of Other Services
The following services are stipulated as taxable or non-taxable in
Pennsylvania
even if separately stated on the invoice:
Separately Invoiced
Services Taxable? Notes
Mailing of printed materials Yes Mailing is defined as a stand-alone
service only if no printing is performed.
Non-taxable if related to direct mail
advertising.
Addressing and stamping Yes Non-taxable if related to direct mail
advertising.
Personalization and providing
of variable data for direct mail
advertising
No
Mail list maintenance No Non-taxable if no tangible personal
property is delivered to the purchaser.
Website development,
design, or hosting
No Non-taxable if no tangible personal
property is delivered to the purchaser.
Graphic design or banner
advertising
No Non-taxable if no tangible personal
property is delivered to the purchaser.
Fulfillment of orders Yes
Delivery and postage Yes Non-taxable if related to direct mail
advertising or other non-taxable sale
(see below).
4.
Delivery Costs
If the transaction is taxable, delivery costs are
taxable,
even if the
following items are separately stated on the invoice:
•
Shipping and handling
•
Freight costs
•
Postage
Editor’s Note
These charges are non-taxable, if the customer pays
directly to, or is charged separately by, a third party.
Postage:
If the customer pays for their own postage on a taxable sale,
there is no tax on the postage (such as an indicia arrangement).
Pennsylvania / Seller
(continued)
10
B. Computation of Tax:
1.
Sales Tax Rate
in Pennsylvania is
6.0%.
An
additional 1% tax
applies
on goods shipped into the
City/County of Philadelphia or Allegheny
County.
2.
The selling price upon which tax shall be computed
is based upon the
inclusion or exclusion of the following:
Items Included in Taxable Portion
of Purchase Price:
Items Excluded from Taxable
Portion of Purchase Price:
Property or service Deposit charges for Returnable Containers.
Delivery Costs, including shipping and
handling, freight and postage
Discounts or rebates.
Restocking charges for returned merchandise
Amounts representing reimbursed costs
(manufacturer’s excise tax, gross receipts
tax, fuel adjustment charges, mercantile tax,
insurance, meals, lodging, mileage or similar)
Pennsylvania / Seller
(continued)
11
B. Computation of Tax
(continued):
3.
If a sale is cancelled or the customer receives a credit or refund
, the
following regulations apply:
If: Action:
Tax has not been remitted to Dept. and tax
has been returned to purchaser or credited to
purchaser’s account
Seller
shall deduct from the amount of gross
and taxable sales for a reporting period, as
sale or allowance, where in the same
reporting period one of the following
occurred: 1) Cancellation of contract of sale;
2) Property return; 3) Allowance for defective
merchandise; 4) Exemption certificate is
presented by the purchaser to the seller.
Tax has been remitted to the Dept. but tax
has not
been returned to the purchaser or
credited to customer’s account
Purchaser
may file a claim for credit or
refund with the Dept. for the tax within 2
years.
Tax has been remitted to the Dept. and tax
has
been returned to the purchaser or
credited to customer’s account
Purchaser
may assign rights to the Seller for
the tax remitted to the Dept. and the
Seller
may file for a refund or credit for the tax within
2 years. The
Seller
may deduct from the
amount of gross and taxable sales for a
reporting period, as sale or allowance, where
in the same reporting period one of the
following occurred: 1) Cancellation of contract
of sale; 2) Property return; 3) Allowance for
defective merchandise; 4) Exemption
certificate is presented by the purchaser to
the seller.
4.
Bad Debts
are not eligible for sales tax credits. Such tax remains due
upon the original purchase price of the property sold.
C. Collection of Out-of-State Taxes
(The Nexus Issue):
Nexus is established when a business has a physical presence within
Pennsylvania
, either through a physical building within the Commonwealth,
property stored in
Pennsylvania
, or sales personnel soliciting sales in
Pennsylvania
.
1.
You are considered to have a "location"
or to be "actively engaged in
business" in
Pennsylvania
, and thus liable for collecting
Pennsylvania
sales taxes, based on the following:
Pennsylvania / Seller
(continued)
12
C. Collection of Out-of-State Taxes
, part 1 (The Nexus Issue) (continued):
a. Maintaining a place of business in Pennsylvania
, including having,
maintaining or using either directly or indirectly or through a subsidiary,
representative or agent, an office, distribution house, sales house,
warehouse, service enterprise or other place of business; or any agent
of general or restricted authority or representative in
Pennsylvania
,
regardless of whether the place of business, representative or agent is
permanently or temporarily in
Pennsylvania
, or whether the person or
subsidiary maintaining the place of business, representative or agent
is authorized to do business in
Pennsylvania
.
b. Regularly or substantially soliciting orders in Pennsylvania
,
regardless of whether orders are accepted within or outside
Pennsylvania
.
c. Delivery of printed materials into Pennsylvania
constitutes nexus
and requires the out of state printer to register as a dealer in
Pennsylvania
and collect tax on goods shipped to
Pennsylvania
customers.
Editor’s Note Pennsylvania
has no frequency of occurrence
threshold to define “engaging in business”: however, this provision is
generally not enforced for “diminimus” activity (minor or infrequent
occurrences).
The mere delivery of goods in another jurisdiction without any service
being performed does not
constitute engaging in business. To take this
position, a company must not
have a location in, or salespeople going
into, that jurisdiction.
SAFE HARBOR
: If there's even the slightest possibility that your
activities might be interpreted as "engaged in business" or "maintaining a
place of business" in a jurisdiction, the safest course of action is to
register and collect tax. Given the continual possibility of governmental
claims, this suggestion is a "safe position," not a consensus opinion in all
cases.
Pennsylvania / Seller
(continued)
13
D. Internet Transactions:
1.
Access to the Internet:
Computer services, including Internet access, are
exempt
from sales tax.
2.
Sale of goods purchased over the Internet
are treated the same as
sales of tangible personal property and are subject to the rules of nexus
and
Pennsylvania
’s sales/use tax laws. Services are taxable if provided
along with printed material, regardless of whether they are separately
stated on the invoice.
3
. Sale of data, information or software downloaded from the Internet:
The sale of all “canned” software, including updates, enhancements and
upgrades, whether transmitted electronically or in a physical medium, is
taxable
as the sale of tangible personal property.
E
.
Statute of Limitations/Records Retention
:
Pennsylvania
has up to four (4) years (3 full calendar years plus the current
year) to initiate proceedings for collection of unpaid sales and use taxes. If
returns were not filed, or returns were willfully filed falsely or fraudulently, then
assessments can be determined at any time.
Sales and use tax records must be maintained for four (4) years in
Pennsylvania
(3 years after the end of the calendar year to which the
transactions relate).
14
SECTION I: PENNSYLVANIA
PART B: YOUR RESPONSIBILITY AS A BUYER
PENNSYLVANIA
I. YOUR RESPONSIBILITY AS A
BUYER
, IF YOU ARE LOCATED IN
PENNSYLVANIA
A. Non-Taxable Items - Definitions
:
Generally,
materials purchased by a printer/manufacturer which are
predominantly and directly
used in the production process and/or
incorporated as components
into printed matter, are
non-taxable
.
Predominantly and directly
is defined as being
used greater than 50% of the
time
in the manufacturing process
.
Printing is defined as “the performance of an integrated series of operations,
engaged in as a business which is predominantly and directly related to the
production of multiple copies of substantially similar printed matter.”
“Property is predominantly used in printing when, over a 12 month period,
multiple copies are produced for 50% or more of the time or the total copies
of printed matter, divided by the number of orders for substantially similar
items, exceeds 50 or more copies.”
The printer/manufacturer tax exemptions also apply to those businesses
(whether extinct or not) related to the printing industry including: “trade
binding, engraving, silk screening, typography including advertising
typographers, plate making, color separating, stereotyping, electrotyping,
gravure cylinder making, photographic processing, and the business of
manufacturing page mechanicals, camera ready copy, image carriers, or
related or component items for sale to printers for use in their printing
operations.”
Pennsylvania / Buyer
(continued)
15
A. Non-Taxable Items – Definitions
(continued)
:
Examples of specific purchases that are
Non-taxable according to
Pennsylvania:
Non-Taxable Items in PA Notes
Mixed Use Items, such as utilities and
equipment
Non-taxable if its predominant use in manufacturing
is greater than 50% of the time.
High Speed Copy Machines used for
commercial use
Non-taxable if predominantly used to make 50 or
more copies of an item.
Printing equipment, parts and supplies Also includes computers, accessories, parts and
supplies if used greater than 50% of the time in the
manufacturing process
Repairs and maintenance For manufacturing equipment only
Wiping towels Non-taxable if used to prepare plates for the
production process; but
taxable as maintenance
supplies
if used to maintain the plates prior to or after
the printing operation.
Protective equipment for employee use Face masks, gloves, coveralls, goggles, etc.
Direct lighting fixtures Non-taxable if attached to, or necessary to run,
exempt machinery and equipment
Editor’s Note Proofing materials and related equipment:
As of the
writing of this document, there is uncertainty and ambiguity regarding their
taxability, which we believe are
predominantly and directly
used in the
manufacturing process, as well as integral in the testing and inspection of
printed products throughout the production cycle.
For all
non-taxable purchases
, a printer must provide its vendors with a valid,
properly executed
REV-1220 Exemption Certificate
.
Pennsylvania / Buyer
(continued)
16
B. Taxable Items:
Examples of specific purchases that are
Taxable according to Pennsylvania
:
Taxable Items in PA Notes
Mixed-use items, such as utilities and
equipment
Taxable if predominant use is 50% or less in
manufacturing.
Safety programs Equipment and supplies used for safety and accident
prevention programs.
Items used for warehousing and
storage of printed products
Purchase of property used to store
printed/manufactured products, including materials
handling equipment.
Wiping towels
Taxable as maintenance supplies if used to maintain the
plates prior to or after the printing operation;
Non-taxable
if used to prepare plates for the production process.
C. Use Tax:
In the event that you purchase taxable items and are not charged sales tax
,
you are still obligated for paying use tax
. This may occur when purchases are
made from out-of-state vendors.
The use tax
should be determined and
paid with the filing of your next sales and use tax return.
Editor’s Note
No reporting of use tax is an audit red flag
.
D. Statute of Limitations/Records Retention:
Pennsylvania
has up to four (4) years (3 full calendar years plus the current
year) to initiate proceedings for collection of unpaid sales and use taxes. If
returns were not filed, or returns were willfully filed falsely or fraudulently, then
assessments can be determined at any time.
Sales and use tax records must be maintained for four (4) years in
Pennsylvania
(3 years after the end of the calendar year to which the
transactions relate).
17
SECTION I: PENNSYLVANIA
PART C: SSUTA – Multistate STREAMLINED SALES AND USE TAX
AGREEMENT
Pennsylvania
is currently
NOT
a member, although it continues to monitor the project.
[See “What Is the Streamlined Sales and Use Tax Project?” and the map of
participating states in Section V, SSUTA, Streamlined Sales & Use Tax Agreement].
SECTION II: NEW JERSEY
19
SECTION II: NEW JERSEY
PART A: YOUR RESPONSIBILITY AS A SELLER
NEW JERSEY
II. YOUR RESPONSIBILITIY AS A
SELLER
, IF YOU ARE LOCATED IN
NEW
JERSEY
NOTE: A sales tax obligation exists when and where title passes. Title
passes at destination: where goods are dropped-off, picked-up, or the
mailing address of the recipient.
(If mailed, the location of the post office is
irrelevant).
A. Charging of Tax
:
Sales tax is to be charged on every job, unless
a valid, properly executed
New Jersey exemption certificate or Direct Pay Permit is provided by the
customer. The Streamlined Sales and Use Tax Certificate of Exemption
(Form ST-SST) may also be provided by the customer for use in
multijurisdictional transactions.
1.
Sales Tax Exemption
– possible reasons
:
a. Resale
, such as by a publisher or ad agency
Resale Certificate Form ST-3
or
Streamlined Sales and Use Tax
Certificate of Exemption (Form ST-SST)
is
required to be provided
by the customer
.
New Jersey / Seller
(continued)
20
1.
Sales Tax Exemption
– possible reasons /
Part a. Resale
(continued)
:
Printing and publishing services
purchased by customers for use
out of state are not subject to
New Jersey
sales or use tax if the
finished product is delivered out of state by the seller. If the finished
product is picked up in
New Jersey
, the sale is subject to
New Jersey
sales tax.
Exempt Use Certificate Form ST-4
or
Streamlined Sales
and Use Tax Certificate of Exemption (Form ST-SST)
is required to
be provided by the customer. (See item “d” below for rules on “direct
mail” printing).
Resale Certificate for Non-New Jersey Vendors, Form ST-3NR
or
Streamlined Sales and Use Tax Certificate of Exemption (Form
ST-SST)
is required to be provided by
qualified
out-of-state
customers if goods are picked up in
New Jersey
by the customer, in
customer’s vehicle or by customer’s messenger.
Form ST-3NR
requires the person picking up the merchandise to provide acceptable
identification (i.e., driver’s license of any state in the US, major credit
card including photo, or any identification card which includes a
number, photo and address).
b. Charitable or Not-for-Profit Organization
Applies to entities that have obtained tax immunity authorization from
the Division of Taxation by the filing of
Form ST-5B.
Sales tax
exemption may be claimed for any purchases made by the
organization that are paid for with organizational funds.
Exempt Organization Certificate Form ST-5
is required to be
provided by the customer.
c. Government Agencies
Applies to Federal, State of
New Jersey
and their instrumentalities, or
local government entities, and the United Nations or any international
organization of which the United States is a member.
New Jersey / Seller
(continued)
21
1.
Sales Tax Exemption
– possible reasons /
Part c. Government
Agencies
(continued):
Acceptable proof for exemption is a copy of a government purchase
order or official contract on official government letterhead, and
payment by government check or USA SmartPay Visa or Mastercard,
not a card charged to an employee who gets reimbursed by the
Federal government.
For government cash purchases of $150 or less,
Exempt Use
Certificate
Form ST-4
is required to be provided and signed by a
qualified government official.
Exemption also applies to certain purchases by foreign diplomatic and
consular personnel residing in the US. Sales tax exemption cards are
issued by the US Department of State, Office of Foreign Missions, and
are for the sole benefit of the mission or individual identified on the
card.
d. Direct mail advertising materials
Applies to direct mail material and related processing services
delivered to out-of-state addresses.
“Direct mail” is defined as printed material delivered or distributed by
US mail or other delivery service to a mass audience or to addressees
on a mailing list provided by the purchaser or at the direction of the
purchaser when the cost of the items is not billed directly to the
recipients. “Direct mail” includes tangible personal property supplied
directly or indirectly by the purchaser to the direct mail seller for
inclusion in the package containing the printed material. For example,
if product samples are included with the printed material, it still is
treated as direct mail. “Direct mail” does not include multiple items of
printed material delivered to a single address (for example, a shipment
of flyers in bulk to the purchaser).
“Processing services” are described as mailing, addressing and
stamping, separating, folding, inserting, sorting, personalization, mail
list maintenance, fulfillment, packaging and transporting to the point of
shipment.
New Jersey / Seller
(continued)
22
1.
Sales Tax Exemption
– possible reasons /
Part d. Direct mail
advertising materials
(continued)
:
The customer should provide a direct mail form OR information to
show the states in which the direct mail is to be delivered to recipients.
Acceptable direct mail forms are the
New Jersey Exempt Use
Certificate Form ST-4
or the
Streamlined Sales and Use Tax
Certificate of Exemption (Form ST-SST).
If the purchaser provides a direct mail form, the seller shall be relieved
of all obligations to collect, pay or remit the applicable tax and the
purchaser shall be obligated to pay or remit the applicable tax on a
direct pay basis. A direct mail form shall remain in effect for all future
sales of direct mail by the seller to the purchaser until it is revoked in
writing.
If the purchaser provides information showing the states to which the
direct mail is to be delivered to recipients, the seller shall collect the
tax according to the delivery information provided by the purchaser. In
the absence of bad faith, the seller shall be relieved of any further
obligation to collect tax on any transaction for which the seller has
collected tax pursuant to the delivery information provided by the
purchaser. The purchaser may use
Form ST-4
or
Streamlined Sales
and Use Tax Certificate of Exemption (Form ST-SST)
in order to
document the allocation for out-of-state delivery.
If the purchaser of direct mail does not have a direct pay permit and
does not provide the seller with either a direct mail form or delivery
information, the seller is required to collect sales tax on the entire
amount.
The exemption for shipments out-of-state still applies even if first
shipped into
New Jersey
and stored for subsequent delivery.
Editor’s Note
The prorated cost of printed materials and related
processing services which are mailed to
New Jersey
addresses (in
state locations)
are subject to New Jersey sales tax
.
New Jersey / Seller
(continued)
23
1.
Sales Tax Exemption
– possible reasons (continued):
e. Newspapers, Magazines and Periodicals
Applies to newspapers and magazines sold by subscription, and
membership periodicals distributed by nonprofit organizations,
whether or not accessed electronically.
Resale Certificate Form ST-
3
or
Streamlined Sales and Use Tax Certificate of Exemption
(Form ST-SST)
is required to be provided by the customer.
Advertising to be published in a newspaper is also exempt.
Exempt
Use Certificate Form ST-4
or
Streamlined Sales and Use Tax
Certificate of Exemption (Form ST-SST)
is required to be provided
by the customer.
2.
Printer - Mail House Transactions:
Selected Scenarios
Mail House Selection
Mailer’s
Location
Taxable Status
Printer is mailer or printer
selects mailer
In State Only pieces ultimately mailed to NJ
addresses are taxable in NJ.
Printer is mailer or printer
selects mailer
Out of State Only pieces ultimately mailed to NJ
addresses are taxable in NJ.
Customer selects mailer In State Only pieces ultimately mailed to NJ
addresses are taxable in NJ.
Customer selects mailer Out of State Non-taxable to printer. Customer, if
registered in NJ, may be obligated for
use tax on pieces ultimately mailed to NJ
addresses.
[See “What If” Situations in Section IV].
New Jersey / Seller
(continued)
24
3.
Taxability of Other Services
:
The following services are stipulated as taxable or non-taxable in
New
Jersey even if separately stated on the invoice:
Separately Invoiced
Services Taxable? Notes
Mailing of printed materials no
Addressing and stamping no
Personalization and providing
of variable data for direct mail
advertising
no
Sale of mailing lists yes Whether delivered in hard copy, as
labels, or electronically; Non-taxable if
related to exempt direct mail.
Mail list maintenance no
Web site development,
design, or hosting
no
Graphic design or banner
advertising
no ,
Fulfillment of orders yes Non-taxable if exempt direct mail.
Delivery costs and postage yes Non-taxable if sale is non-taxable (see
below).
4.
Delivery Costs:
Delivery costs are
taxable
. The following charges are associated with
the
taxable portion
of sales of printed materials, in accordance with
the Multistate Streamlined Sales and Use Tax rules, even if these
items are separately stated on the invoice:
•
All costs of transportation
•
Shipping, handling
•
Postage
Editor’s Note
These charges are non-taxable, if the customer
pays directly to, or is charged separately by, a third party.
Postage:
If the customer pays for their own postage on a taxable sale,
there is no tax on the postage (such as an indicia arrangement).
New Jersey / Seller
(continued)
25
B. Computation of Tax
(what portion of your invoice is taxable):
1.
Sales Tax rate in New Jersey is 7%.
2.
The selling price upon which tax shall be computed
is based upon the
following items included or excluded from the taxable portion:
Items Included in Taxable Portion
of Purchase Price:
Items Excluded from Taxable
Portion:
Cost of property or service Taxes imposed by the State.
All costs of transportation:
Delivery Costs
Shipping and Handling
Postage
Discounts.
Labor and installation charges Tangible personal property traded-in or
exchanged.
Storage charges and fulfillment services Finance charges to the purchaser.
3.
If a sale is cancelled or the customer receives a credit or refund
, the
following regulations apply:
If: Action:
Tax has Not been remitted to the State
and tax has been returned to purchaser
or
credited to purchaser’s account
Seller
may deduct as a credit on next filed
reporting Form ST-50 or 51, or apply for a
refund on Form A-3730.
Tax has been remitted to the State but tax
has not
been returned to the purchaser
or
credited to his account
Seller
may deduct as a credit on next filed
reporting Form ST-50 or 51, or apply for a
refund on Form A-3730.
Tax has been remitted to the State and tax
has
been returned to the purchaser
or
credited to his account
Seller
may deduct as a credit on next filed
reporting Form ST-50 or 51, or seller or
purchaser may apply for a refund on Form
A-3730.
4.
Bad Debts
: A deduction is allowable from taxable sales and reported on
the return when the debt is determined to be uncollectible. If the bad debt
amount exceeds the taxable sales, a refund claim may be filed within four
(4) years from the due date of the return on which the bad debt could first
be claimed.
New Jersey / Seller
(continued)
26
C. Collection of Out-of-State Taxes
(The Nexus Issue):
Nexus is established when a business has a physical presence within
New
Jersey
.
1.
You are considered to have a "location"
or to be "actively engaged in
business"
in New Jersey
, and thus liable for collecting
New Jersey
sales
taxes, based on the following:
a. Maintaining a place of business in New Jersey
(such as retaining
employees, owning inventory or owning or leasing real property) and
making sales to persons within
New Jersey
of taxable tangible
property, digital property, or services.
b. Regularly or substantially soliciting orders in New Jersey
,
regardless of whether orders are accepted within or outside
New
Jersey.
Persons who solicit business are defined as employees,
independent contractors, agents or other representatives.
c. Distribution of catalogues or other advertising matter within New
Jersey
, especially when a vendor uses its own trucks to make
deliveries into
New Jersey
.
2.
New Jersey/New York Combined State Sales & Use Taxes:
File
Form DTF-24, Application for New Jersey/New York State
Simplified Sales and Use Tax Reporting,
to become a registered
vendor in either state.
Form ST-20/21
will then be sent to you for
remitting sales and use taxes on interstate transactions.
Editor’s Note
New Jersey
has no frequency of occurrence threshold
to define “engaging in business”: however, this provision is generally not
enforced for “diminimus” activity (minor or infrequent occurrences).
The mere delivery of goods in another jurisdiction without any service
being performed does not
constitute engaging in business. To take this
position, a company must not
have a location in, or salespeople going
into, that jurisdiction.
New Jersey / Seller
(continued)
27
C. Collection of Out-of-State Taxes
(The Nexus Issue, continued):
SAFE HARBOR
: If there's even the slightest possibility that your activities
might be interpreted as "engaged in business" or "maintaining a place of
business" in a jurisdiction, the safest course of action is to register and collect
tax. Given the continual possibility of governmental claims, this suggestion is a
"safe position," not a consensus opinion in all cases.
D. Internet Transactions:
1.
Access to the Internet:
Computer services, including Internet access, are
exempt
from state
sales tax.
2.
Sale of goods purchased over the Internet
are treated the same as
sales of tangible personal property through more traditional channels and,
therefore, subject to the rules of nexus and
New Jersey’s
sales/use tax
laws.
3.
Sale of digital property, information or software downloaded from
the Internet
is
taxable
and defined as electronically delivered medium
such as books, mailing lists, and audio and video works and similar
products, where the customer is granted a right or license to use, retain,
or make a copy of such item. The sale of “canned” software, though, is
exempt
.
E. Statute of Limitations/Records Retention:
To proceed against a vendor for assessment of additional tax, the state has up
to four (4) years in
New Jersey
. If a false or fraudulent return is filed with
intent to evade tax, or if no return was filed, a tax assessment may be made at
any time.
Sales and use tax records must be maintained for four (4) years in
New
Jersey
.
28
SECTION II: NEW JERSEY
PART B: YOUR RESPONSIBILITYAS A BUYER
II. YOUR RESPONSIBILITY AS A
BUYER
, IF YOU ARE LOCATED IN
NEW
JERSEY
A. Non-Taxable Items
:
Generally,
materials purchased by a printer/manufacturer for use or
consumption
directly and primarily
in the production process, are
non-
taxable
.
(The manufacturing exemption is claimed by issuing
Exempt Use Certificate
Form ST-4
and noting “8.29” as the statutory basis for exemption).
Specific purchases that are
Non-taxable according to New Jersey:
Non-Taxable Items
in NJ Notes
Mixed Use Items
Machinery must be used
more than 50%
of the time to be
considered
directly and primarily
used in production.
Component parts of the end
product
Printing equipment and
related supplies
Also Includes high speed copiers used directly and primarily in
production.
Protective equipment worn
on the body
Necessary for work only, not suitable for general use, including
safety shoes, uniforms, ear and hearing protectors, safety glasses,
goggles, and belts.
“Printing and publishing
production machinery,
apparatus, or equipment
used directly and primarily
in publishing newspapers,
and by a commercial printer
in the production of tangible
property for sale”.
Editor’s
Note This would include
computers.
“Commercial printers include those businesses engaged in
periodical, book, manifold business form, greeting card, or
miscellaneous publishing and typesetting; photoengraving;
electrotyping and stereotyping; and lithographic platemaking,
including engraving, enlarging and development equipment,
internal process cameras and news and other similar transmission
equipment, composing and pressroom apparatus and equipment,
binding apparatus and equipment, type fonts, lead, mats, ink,
plates, conveyors, stackers, sorting, bundling, stuffing, labeling,
and wrapping equipment and supplies for any of the foregoing”.
Canned software
downloaded from the
Internet
New Jersey / Buyer
(continued)
29
A. Non-Taxable Items
/ Specific Purchases (continued)
:
Specific examples of
exempt supplies
include:
Acids
Alcohol used a fountain solution
Blanket wash
Boxes
Carbon tissue
Cartons
Color filters
Color separations
Custom dies and die cutting materials
Dampener sleeves
Dampening solution
Developer chemicals
Engravings
Film used to photograph printing copy
Ink
Labels
Latex gum
Lettering
Masking paper
Offset plates
Opaqueing ink
Paper
Plates
Press blankets
Press chemicals (etch)
Press chemicals (press wash)
Printing plates (all types)
Proof paper
Proofs and proof processing (all types)
Protective gloves
Reducers
Roller covering
Screen tints
Shrink wrap
Thermopowder
Tissue overlays
Toners
Transparencies
Varnishes
Veloxes
Wood mounts
Wrapping paper
Wrapping tape
New Jersey / Buyer
(continued)
30
B. Taxable Items:
Examples of specific purchases that are
Taxable according to New Jersey
:
Taxable Items in NJ Notes
Items used for warehousing and
storage of printed products
Shelving, racks, etc.
Repairs and maintenance service,
installation or maintenance contracts
On manufacturing and non-manufacturing equipment.
Specific examples of taxable
purchases include:
Stripping knives used to trim negatives or masking
paper, filing envelopes used to file negatives, and tape
dispensers for wrapping tape.
C. Use Tax:
In the event that you purchase taxable items and are not charged sales tax
,
you are still obligated for paying use tax
. This may occur when supplies are
purchased in another state, or via the internet, and then brought into
New
Jersey
. If the tax paid on an out-of-state purchase was less than
New
Jersey’s
7% sales tax and the other state has sales tax reciprocity with
New
Jersey
, the difference must be remitted as use tax.
The use tax
should be
determined and paid with the filing of your next sales and use tax return.
Editor’s Note
No reporting of use tax is an audit red flag
.
File
Form DTF-24, Application for New Jersey/New York State Simplified
Sales and Use Tax Reporting,
to become a registered vendor in either state.
Form ST-20/21
will then be sent to you for remitting sales and use taxes on
interstate transactions.
D. Statute of Limitations/Records Retention:
The state of
New Jersey
has up to four (4) years to initiate proceedings for
collection of unpaid use taxes; but, if a false or fraudulent return is filed with
intent to evade tax, or if no return was filed, a tax assessment may be made at
any time.
Sales and use tax records must be maintained for four (4) years in
New
Jersey.
31
SECTION II: NEW JERSEY
PART C: SSUTA – Multistate STREAMLINED SALES AND USE TAX
AGREEMENT
New Jersey
IS
a member
, effective October 1, 2005.
[See “What Is the Streamlined Sales and Use Tax Project?” and the map of
participating states in Section V, SSUTA, Streamlined Sales & Use Tax Agreement].
SECTION III: NEW YORK
33
SECTION III: NEW YORK
PART A: YOUR RESPONSIBILITY AS A SELLER
NEW YORK
III. YOUR RESPONSIBILITIY AS A
SELLER
, IF YOU ARE LOCATED IN
NEW
YORK
NOTE: A sales tax obligation exists when and where title passes. Title
passes at destination: where goods are dropped-off, picked-up, or the
mailing address of the recipient.
(If mailed, the location of the post office is
irrelevant).
A. Charging of Tax:
Sales tax is to be charged on every job, unless
a valid, properly executed
New York Resale Certificate (Form ST-120) or Direct Payment Permit is
provided by the customer.
1.
Sales Tax Exemption
– possible reasons:
a. Resale
, such as by a publisher of newspapers and periodicals.
(Periodicals are defined as being published at least four (4) times per
year, among other general criteria).
Resale Certificate Form ST-120
is required to be provided by the
customer.
b. Charitable or Not-for-Profit Organization
Applies to organizations that have received
exempt
status (under
section 1116) and are the direct purchaser and payer of record.
Exempt Organization Exempt Purchase Certificate (Form ST-
119.1)
is required to be provided by the customer.
New York / Seller
(continued)
34
1.
Sales Tax Exemption
– possible reasons (continued):
c. Government Agencies:
Applies to
Federal Government entities
and
New York State and
local entities
when the governmental entity is the purchaser, user or
consumer. A governmental purchase order is required to be provided.
Also applies to:
•
The United Nations or any international organization of which the
United States is a member
•
An armed forces post or organization organized in
New York State
•
Diplomatic missions and personnel
•
Certain Indian nations or tribes residing in
New York State
d. Out-of-State Deliveries
Applies to all printed materials delivered outside of
New York State
for use outside
New York State
.
This provision specifically exempts “promotional materials” delivered in
or outside
New York State
, services related to mailing lists for
promotional materials, and storage of promotional materials (see
III.A.1.e).
e. Printed Promotional Materials
Applies to materials ultimately mailed or shipped by common
carrier or delivery service to end users of the customers, or their
potential customers, for use in or outside New York State
.
New York / Seller
(continued)
35
1.
Sales Tax Exemption
– possible reasons: /
Part e.
Printed Promotional
Materials
(continued):
Definition of Printed Promotional Materials:
Promotional materials include any advertising literature such as
catalogs and brochures, and related tangible personal property (for
example, annual reports, prospectuses. complimentary maps, other
free gifts, applications, and order forms), and the envelopes used
exclusively to deliver the promotional materials (including direct
materials and outside costs necessary to produce exempt promotional
materials). Account statements, invoices, or the envelopes used to
deliver them are not promotional materials.
Sales Tax Exemption
also applies to:
•
Mailing list services related to the distribution of promotional
materials, such as addressing, labeling, inserting, mailing and
related materials such as envelopes, labels and mailing lists.
•
Charges for storage of printed promotional materials
The exemption does not apply and the following promotional materials
are
taxable
:
.
•
Printed promotional materials delivered in
New York State
by a
means other than common carrier or delivery service.
•
Free gifts, product samples, and other non-printed promotional
materials delivered in
New York State
.
Editor’s Note
Deliveries to a customer location or retail store for
customer’s use or give away are
taxable
. The printer’s customer must
not charge the ultimate recipient for the printed materials or for the
related mailing or shipping costs.
If delivery is by company vehicle, or if picked up by the customer, then
the transaction is
taxable.
If the materials are ultimately delivered out of state by common carrier
or delivery service, and the customer provides the printer with
appropriate documentation, then the transaction is
exempt.
New York / Seller
(continued)
36
1.
Sales Tax Exemption
– possible reasons: /
Part e.
Printed Promotional
Materials
(continued):
Exemption Certificate for Purchases of Promotional Materials
(Form ST-121.2)
is required to be provided by the customer.
2.
Printer-Mail House Transactions:
Selected Scenarios
Mail House Selection
Mailer’s
Location Taxable Status **
Printer is mailer or printer
selects mailer
In State Only pieces ultimately mailed to New
York addresses are taxable in NY.
Printer is mailer or printer
selects mailer
Out of State Only pieces ultimately mailed to New
York addresses are taxable in NY.
Customer selects mailer In State Fully taxable in NY.
Customer selects mailer Out of State Non-taxable to printer. Customer, if
registered in NY, may be obligated for
use tax on pieces ultimately mailed to
NY addresses.
[See “What If” Situations in Section IV].
**These transactions may be
exempt
if they qualify as printed
promotional materials, as defined as follows:
“Any
printed
promotional materials delivered by a common carrier, the
US Postal Service, or a similar delivery service to a mailing address
within
New York State
, are exempt from
New York State
sales and
use taxes when a purchaser (directly or through a printer-mailer)
delivers these materials to a customer or prospective customer
at no
charge to the customer”
.
Alternative Model
:
If mailing records are not adequate to show all mailing addresses in
New York State
, a sampling technique may be used, provided 10% of
the list, or 5000, whichever is less, is sampled.
[See Appendix: Publication 831 for more information and examples].
New York / Seller
(continued)
37
3.
Taxability of Other Services
:
The following services are stipulated as taxable or non-taxable in
New
York
even if the items are separately stated on the invoice:
Separately Stated
Services Taxable? Notes
Mailing of printed materials no
Addressing and stamping no
Personalization and providing
of variable data for direct mail
advertising
yes Unless qualifies as promotional
materials.
Sale of mailing lists yes Unless qualifies as promotional
materials.
Mail list maintenance yes Unless qualifies as promotional
materials.
Web site development,
design, or hosting
no
Graphic design or banner
advertising
no Taxable if delivered in tangible form
(such as a CD).
Fulfillment of orders yes
Printing of political campaign
literature
yes Taxable (by case law) since the end
users are not considered purchasers or
potential purchasers of the customer’s
products or services.
Transportation, delivery costs,
postage
yes Taxable only if sale is taxable (see
below).
4.
Delivery Costs:
Even if items are separately stated on the invoice, the following
charges are
taxable
, as long as the transaction is taxable:
•
Shipping and handling:
•
Freight costs
•
Postage
Editor’s Note
These charges are
non-taxable
if customer pays
directly to, or is charged separately by, a third-party.
Postage:
If the customer pays for their own postage on a taxable sale,
there is no tax on the postage
(
such as an indicia arrangement).
New York / Seller
(continued)
38
B. Computation of Tax
(what portion of your invoice is taxable):
1.
Sales Tax rate in New York State is 4%.
The
New York City rate is 4%
plus a .375% transportation tax
. Therefore the
combined rate in
New
York City is 8.375%.
Other counties and local jurisdictions impose separate sales tax rates.
[See Appendix for
New York State Sales and Use Tax Rates by
Jurisdiction, Publication 718].
2.
The selling price upon which tax shall be computed
is based upon the
following items included or excluded from the taxable portion:
Items Included in Taxable Portion
of Purchase Price:
Items Excluded from Taxable
Portion:
Property or service. Items delivered out-of-state for use out-of-
state.
Labor and installation services. Discounts.
Restocking charges (for returned
merchandise.
Tangible personal property traded-in or
exchanged.
Shipping, delivery and transportation charges
including postage.
Shipping, delivery and transportation
charges, including postage, are non-taxable,
if for mailing or delivery of printed promotional
materials (by USPS or delivery service, not
company vehicle).
Storage charges, unless for printed
promotional materials.
Finance charges to the purchaser.
New York / Seller
(continued)
39
B. Computation of Tax
(continued):
3.
If a sale is cancelled or the customer receives a credit or refund
, the
following regulations apply:
If: Action:
Tax has not been remitted to Dept. and tax
has been returned to purchaser or credited to
purchaser’s account.
Seller
shall take a credit on the next filed
sales tax return, if within three (3) years of
the date the tax was payable.
Tax has been remitted to the Dept. but tax
has not
been returned to the purchaser or
credited to their account.
Purchaser
may file a claim for credit or
refund within the later of three (3) years from
date of filing the return, or two (2) years from
the date of payment.
Tax has been remitted to the Dept. and tax
has
been returned to the purchaser or
credited to their account.
Seller
may file a claim for credit or refund
within the later of three (3) years from date of
filing the return, or two (2) years from the
date of payment.
4.
Bad Debts
: A refund or credit is allowed for tax paid on uncollectible
accounts.
C. Collection of Out-of-State Taxes
(The Nexus Issue):
Nexus is established when a business has a physical presence within
New
York
.
1.
You are considered to have a "location"
or to be "actively engaged in
business"
in New York
, and thus liable for collecting
New York
sales
taxes, based on the following:
a. Maintaining a place of business in New York
(store, salesroom,
sample room, showroom, distribution center, warehouse, service
center, factory, credit and collection office, administration office or
research facility).
b. Own or rent real or personal property in the state.
c. Regularly or systematically soliciting orders in New York
, through
salespeople, employees, independent contractors, or agents present
within the state.
New York / Seller
(continued)
40
C. Collection of Out-of-State Taxes
(The Nexus Issue) (continued):
d. Delivery of printed materials into New York
using a company
vehicle more than 12 times a year.
e. Regularly and systematically distributing
, by mail or otherwise,
advertising flyers or letters, including advertisements and
telecommunications when receipts from the sales delivered into the
state exceed $300,000 and the number of sales exceeds 100.
2.
New York/ New Jersey Combined State Sales and Use Taxes:
For New York vendors who have no business location in
New Jersey
, but
who make taxable sales that are delivered in
New Jersey.
File
Form DTF-24, Application for New York/New Jersey State
Simplified Sales and Use Tax Reporting,
to become a registered
vendor in either state.
Form ST-20/21
will then be sent to you for
remitting sales and use taxes on interstate transactions.
3.
New York/Connecticut
Combined State Sales and Use Taxes:
For
New York
vendors who have no business location in
Connecticut
,
but who make taxable sales that are delivered in
Connecticut.
[For registration information, obtain Connecticut publication 904.]
Editor’s Note
The mere delivery of goods in another jurisdiction without
any service being performed does not constitute engaging in business. To take
this position, a company must not
have a location in, or salespeople going into,
that jurisdiction.
SAFE HARBOR
: If there's even the slightest possibility that your activities
might be interpreted as "engaged in business" or "maintaining a place of
business" in a jurisdiction, the safest course of action is to register and collect
tax. Given the continual possibility of governmental claims, this suggestion is a
"safe position," not a consensus opinion in all cases.
New York / Seller
(continued)
41
D. Internet Transactions:
1.
Access to the Internet:
Computer services, including Internet access, are
exempt
from state
sales tax.
2.
Sale of goods purchased over the Internet
are treated the same as
sales of tangible personal property
3.
Sale of data, information or software downloaded from the Internet:
The sale of all “canned” software is taxable. Music, artwork and computer
graphics are
exempt
.
E. Statute of Limitations/Records Retention
:
To proceed against a vendor for assessment of additional tax, the state has up
to three (3) years in
New York
. If a willfully false or fraudulent return was filed
with intent to evade tax, or if no return was filed, a tax assessment may be
made at anytime.
Sales and use tax records must be maintained for a minimum of three (3)
years from the due date of the return to which they relate, or the date the
return is filed, if later.
42
SECTION III: NEW YORK
PART B: YOUR RESPONSIBILITYAS A BUYER
NEW YORK
III. YOUR RESPONSIBILITY AS A
BUYER
, IF YOU ARE LOCATED IN
NEW YORK
A. Non-Taxable Items - Definitions
:
Generally,
materials purchased by a printer/manufacturer which are used
directly and predominantly
in the production process and/or
incorporated
as components
of the final product, are
non-taxable
.
Directly and predominantly is defined as more than 50% of the time
.
The production process begins when raw materials are received, and ends
when the product is completed, packaged and ready for shipment or storage.
Costs to transport the completed product from production for shipment or
storage are
taxable
.
New York / Buyer
(continued)
43
A. Non-Taxable Items - Definitions
(continued):
Specific purchases
that are
Non-taxable according to New York:
Non-Taxable Items in NY Notes
Mixed-use items: Predominant
manufacturing use vs. admin use.
Predominant use is defined as
more than 50%
of the
time.
High speed Copy Machines used for
manufacturing.
Production equipment, parts, tools and
supplies.
Installation, maintenance and repair
services.
Non-taxable if performed on exempt production
equipment, parts, tools and supplies, though subject
to local sales and use taxes if incurred outside of
New York City. Non-taxable items include plumbing
and electrical components, industrial wipes.
Production equipment rigging, erecting,
connecting, dismantling, relocating .
Activities of receiving, unloading and
storage of raw materials.
Taxable, though, if raw materials are weighed,
inspected, measured, tested or inventoried
before
placed in storage. The mere verifying of shipping
counts does not make these activities taxable.
Utility costs.
Non-taxable if used
directly and exclusively
in the
production process .Printer to provide vendor with
exemption forms ST-121, FT-1012 or FT-1020.
If mixed use, an allocation must be made to
determine non-taxable portion. [See Appendix for
formula examples].
Items used in Research and
Development activities.
Equipment and utilities, etc.
Waste treatment equipment and filters.
Non-taxable if over 50% of waste (such as particulate
dust and gases) result from production processes.
Labels and tags. Non-taxable if used in packaging, shipping, mailing.
Taxable if not permanently attached to product and
not useful to customer/consumer after sale.
Pallitizer Systems.
Non-taxable if used
directly and predominantly
as
part of production line. Taxable if predominant use is
for storage then distribution of finished products.
Quality Control equipment and supplies.
Non-taxable if used
directly and predominantly
during
the production process. Taxable if predominant use
is to test the manufactured product after it is finished
and ready for sale, or to test raw materials before
they are stored.
New York / Buyer
(continued)
44
A. Non-Taxable Items - Definitions / Specific purchases
that are
Non-taxable
according to New York (
continued)
:
Safety apparel and supplies
Uniforms, safety shoes, gloves, eye shields, etc. that
are indispensible for production and furnished to
employees. If items are sold to employees, tax must
be collected from employees.
Cartons, containers, and other
packaging materials (see examples
below**)
**Examples of exempt cartons, containers, and other packaging materials:
Bags Glue
Barrels Gummed labels
Binding Gummed tape
Bottles (including deposit bottles) Kegs
Boxes Lumber used for blocking
Cans Pallets
Carboys Reels
Cartons Sacks
Cellophane Spools
Coatings and other preservative material Staples
Cores Strapping
Crates String
Cylinders Tape
Drums Twine
Excelsior Wrapping paper
These materials must be transferred with the product to the customer and
must become the property of customer to be
non-taxable
. Common
taxable
items are returnable cartons and pallets, and racking.
If these materials are not
transferred to the customer, then they are
taxable
regardless of the taxability of the items being packaged, or if ultimately shipped
outside of
New York
.
New York / Buyer
(continued)
45
A. Non-Taxable Items - Definitions / Specific purchases
that are
Non-taxable
according to New York (
continued)
:
For all non-taxable purchases,
a printer must provide its vendors with a
Resale Certificate Form ST-120
(for raw materials, etc),
Exempt Use
Certificate Form ST-121
(for equipment, consumable items, utilities,
packaging materials, safety equipment, etc) or
Exempt Pay Permit Form AU-
297
.
B. Taxable Items:
Examples of specific purchases that are
Taxable according to New York
:
Taxable Items in NY Notes
Utility costs not used directly and
exclusively in production.
To provide vendor an Exempt use Certificate Form ST-121,
FT-1012, FT-1020 or Form FT-500 if requesting refund or
credit. [See appendix for allocation formula examples]..
Items used in activities before and
after the production process.
Pertains to equipment, fuel, utilities. After production
activities include storage/warehousing, loading or delivery
of finished goods.
Items that are incidental or ancillary
to the production process.
Purchasing, transporting and testing raw materials; office
and collections; clerical work related to production, such as
production and time records; general maintenance and
janitorial services (to maintain production premises); hand
cleaner and aprons.
Motor fuel (gasoline and liquefied
petroleum gas) and diesel motor fuel.
If used
directly and exclusively
in the production process,
refund may be claimed from State and local sales tax by
filing Form FT-500 (Application for Refund of Sales Tax
Paid on Automotive Fuels).
Tools used in general maintenance
and repair of production equipment.
Non-taxable if used directly and predominantly in the
production process.
Racking, returnable cartons and
pallets.
Storage charges. Exempt if for non-taxable promotional materials.
[See Appendix for charts detailing
items exempt or taxable by a
manufacturer
in
New York State, Publication 852
].
New York / Buyer
(continued)
46
C. Use Tax:
In the event that you purchase taxable items and are not charged sales tax
,
you are still obligated for paying use tax
. This may occur when supplies are
purchased in another state, or via the internet, and then brought into
New
York
. Use tax is also due on the cost of materials used to manufacture your
own equipment not used directly and predominantly in the production process.
The use tax should be determined and paid with the filing of your next
sales and use tax return.
Editor’s Note
No reporting of use tax is an audit red flag
.
D. Statute of Limitations/Records Retention:
To proceed against a vendor for assessment of additional tax, the state has up
to three (3) years in
New York
. If a willfully false or fraudulent return was filed
with intent to evade tax, or if no return was filed, a tax assessment may be
made at anytime.
Sales and use tax records must be maintained for a minimum of three (3)
years from the due date of the return to which they relate, or the date the
return is filed, if later.
47
SECTION II: NEW YORK
PART C: SSUTA – Multistate STREAMLINED SALES AND USE TAX
AGREEMENT
New York State
is currently
NOT
a member.
[See “What Is the Streamlined Sales and Use Tax Project?” and the map of
participating states in Section V, SSUTA, Streamlined Sales & Use Tax Agreement].
SECTION IV
EXAMPLES...WHAT IF SITUATIONS
What If Situations
49
EXAMPLE 1
What if: SALE IS TAXABLE
PRINTER DELIVERY
(PRINTER REGISTERED IN SINGLE STATE
)
Printer in:
State A/Registered in State A (only)
Customer in:
State B
Mail house in:
N/A
Job:
Print 2,000 Brochures
Deliver to:
Customer in State B
Via:
Company truck
Price (*):
$10,000
Tax in:
State A
State B
Taxable
amt:
$0 N/A
(*) Taxable price will include delivery costs and postage (if charged) on materials delivered to PA,
NJ or NY and if the printer is registered in PA, NJ or NY.
NOTES:
•
Beware, if registered in multiple states, each state may have differing rules for taxability of
the same transaction.
•
Beware of possible obligation to register and collect tax in other states (see NEXUS
information).
What If Situations
(continued)
50
EXAMPLE 2
What if: SALE IS TAXABLE
CUSTOMER PICK-UP
(PRINTER REGISTERED IN SINGLE STATE)
Printer in:
State A/Registered in State A (only)
Customer in:
State B
Mail house in:
N/A
Job:
Print 2,000 Brochures
Deliver to:
Customer pick-up in State A
Via:
N/A
Price (*):
$10,000
Tax in:
State A
State B
Taxable amt:
$10,000 N/A
(*) Taxable price will include delivery costs and postage (if charged) on materials delivered to PA,
NJ or NY and if the printer is registered in PA, NJ or NY.
NOTES:
•
Beware, if registered in multiple states, each state may have differing rules for taxability of
the same transaction.
•
Beware of possible obligation to register and collect tax in other states (see NEXUS
information).
What If Situations
(continued)
51
EXAMPLE 3
What if: SALE IS TAXABLE
PRINTER DELIVERY
(PRINTER REGISTERED IN MULTIPLE STATES)
Printer in:
State A/Registered in States A, B AND C
Customer in:
State B
Mail house in:
N/A
Job:
Print 2,000 Brochures
Deliver to:
Customer
Via:
Company Truck
Price (*):
$10,000
Tax in:
State A
State B State C
Taxable amt:
N/A $10,000 N/A
(*) Taxable price will include delivery costs and postage (if charged) on materials delivered to PA,
NJ or NY and if the printer is registered in PA, NJ or NY.
NOTES:
•
Beware, if registered in multiple states, each state may have differing rules for taxability of
the same transaction.
•
Beware of possible obligation to register and collect tax in other states (see NEXUS
information).
What If Situations
(continued)
52
EXAMPLE 4
What if: SALE IS TAXABLE
PRINTER DELIVERS JOB TO MAIL HOUSE IN-STATE
(PRINTER REGISTERED IN SINGLE STATE)
Printer in:
State A/Registered in State A (only)
Customer in:
State B
Mail house in:
State A/Agent of Printer
1
Job:
Print 2,000 Brochures
per mailing list: 200 delivered to State A
Deliver to:
Mail House
Via:
N/A
Price (*):
$10,000
Tax in:
State A
Taxable amt:
200/2000 = 10% of $10,000 = $1,000
(*) Taxable price will include delivery costs and postage (if charged) on materials delivered to PA,
NJ or NY and if the printer is registered in PA, NJ or NY.
FACT CHANGE:
If in-state mailer is agent of customer, the final destination is mail-house and
100% of job is taxable in printer’s State A; unless customer provides printer with mailing
information, then taxable amount = $1,000 in State A.
NOTES:
•
Beware, if registered in multiple states, each state may have differing rules for taxability of
the same transaction.
•
Beware of possible obligation to register and collect tax in other states (see NEXUS)
1
Agent of printer (e.g., selected by printer, mailer bills printer).
Agent of customer (e.g., selected by customer, mailer bills customer).
What If Situations
(continued)
53
EXAMPLE 5
What if: SALE IS TAXABLE
PRINTER DELIVERS JOB TO MAIL HOUSE OUT-OF-STATE
(PRINTER REGISTERED IN SINGLE STATE
)
Printer in:
State A/Registered in State A (only)
Customer in:
State B
Mail house in:
Outside of State A/Agent of Printer
2
Job:
Print 2,000 Brochures
per mailing list: 200 delivered to State A
Deliver to:
Mail House
Via:
N/A
Price (*):
$10,000
Tax in:
State A
Taxable amt:
200/2000 = 10% of $10,000 = $1,000
(*) Taxable price will include delivery costs and postage (if charged) on materials delivered to PA,
NJ or NY and if the printer is registered in PA, NJ or NY.
FACT CHANGE:
If mailer is agent of customer, the final destination is mail house out-of-state;
therefore taxable amount = zero.
NOTES:
•
Mailer is agent of printer; therefore location of mail house is irrelevant. Final destination is
each addressee in State A (state of registration). If no mailing list is provided, then 100%
of job is taxable in Printer’s State A.
•
Beware, if registered in multiple states, each state may have differing rules for taxability of
the same transaction.
•
Beware of possible obligation to register and collect tax in other states (see NEXUS)
2
Agent of printer (e.g., selected by printer, mailer bills printer).
Agent of customer (e.g., selected by customer, mailer bills customer).
What If Situations
(continued)
54
EXAMPLE 6
What if: SALE IS TAXABLE
PRINTER DELIVERS JOB TO MAIL HOUSE IN ANY STATE
(PRINTER REGISTERED IN MULTIPLE STATES)
Printer in:
State A/Registered in State A, B and C
Customer in:
Any state
Mail house in:
Agent of Printer
3
Job:
Print 2,000 Brochures
per mailing list: 200 delivered to State A
200 delivered to State B
200 delivered to State C
1, 400 delivered to other states
Deliver to:
Mail House
Via:
N/A
Price (*):
$10,000
Tax in:
State A
State B State C
Taxable amt:
$1,000 $1,000 $1,000
200/2000 = 10% of $10,000 = $1,000
(*) Taxable price will include delivery costs and postage (if charged) on materials delivered to PA,
NJ or NY and if the printer is registered in PA, NJ or NY.
FACT CHANGE:
If mailer is agent of customer, final destination is state of mail-house. Therefore
taxable amount =100% (if mail house is in state A, B or C, taxed in the state of mail house.) If a
mailing list is provided, taxable amount is as per above example.
FACT CHANGE:
If mailer is agent of customer and mail house is outside of state A, B, or C, then
taxable amount = zero.
3
Agent of printer (e.g., selected by printer, mailer bills printer).
Agent of customer (e.g., selected by customer, mailer bills customer).
What If Situations
(continued)
55
EXAMPLE 6
(continued)
NOTES:
•
Mailer is agent of printer; therefore location of mail house is irrelevant. Final destination is
each addressee in State A, B and C (states of registration). If no mailing list is provided,
then 100% of job is taxable to Printer’s State A.
•
Beware, if registered in multiple states, each state may have differing rules for taxability of
the same transaction.
•
Beware of possible obligation to register and collect tax in other states (see NEXUS
information).
What If Situations
(continued)
56
EXAMPLE 7
What if: SALE IS TAXABLE
PRINTER IS MAILER
(PRINTER REGISTERED IN MULTIPLE STATES)
Printer in:
State A/Registered in State A, B and C
Customer in:
Any state
Mail house in:
N/A
Job:
Print 2, 000 Brochures
per mailing list: 200 delivered to State A
200 delivered to State B
200 delivered to State C
1, 400 delivered to other states
Deliver to:
Addressees
Via:
Mail
Price (*):
$10,000
Tax in:
State A
State B State C Other States
Taxable amt:
$1,000 $1,000 $1,000 N/A
200/2000 = 10% of $10,000 = $1,000
(*) Taxable price will include delivery costs and postage (if charged) on materials delivered to PA,
NJ or NY and if the printer is registered in PA, NJ or NY.
NOTES:
•
Beware, if registered in multiple states, each state may have differing rules for taxability of
the same transaction.
•
Beware of possible obligation to register and collect tax in other states (see NEXUS
information).
SECTION V
SSUTA – STREAMLINED SALES AND USE
TAX AGREEMENT
58
What Is the Streamlined Sales and Use Tax Agreement?
Organized in 2000, the
Streamlined Sales and Use Tax Project
objective is to
simplify and modernize sales and use tax collection and administration in the United
States. It arose in response to efforts by Congress to permanently prohibit states
from collecting sales taxes on online commerce. Because such a ban would have
serious financial consequences for the states, the project began as an effort to try to
minimize the many differences between the sales tax policies and practices of
states.
In a decision regarding mail order sales, the U.S. Supreme Court ruled in 1992 that
mail-order retailers were not compelled to collect use tax and remit the tax to states,
in part because of the complexities of doing so. With computers, however, the
difficulties of doing so are much smaller today, so the remaining stumbling block lies
in the variations among state sales taxes. Organizers of the project hope that by
ironing out differences among state taxation levels, they will remove a major
roadblock to the collection of taxes on online sales and convince Congress and the
courts to allow them to collect these taxes regularly.
As of July 2008, there are 22 participating states
. There are
19 full member
states
(Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota,
Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Oklahoma, Rhode
Island, South Dakota, Vermont, West Virginia, Washington, and Wyoming), which
are states in compliance with the Streamlined Sales and Use Tax Agreement
through its laws, rules, regulations and policies. There are
3 associate member
states
(Ohio, Tennessee, and Utah) which are states in compliance with
Streamlined Sales and Use Tax Agreement except that its laws, rules, regulations
and policies to bring the state into compliance are not in effect but are scheduled to
take effect on or before July 1, 2009; or are states that have achieved substantial
compliance with the terms of the Streamlined Sales and Use Tax Agreement as a
whole, but not necessarily each provision, and there is an expectation that the state
will achieve compliance by July 1, 2009. There are
5 states with no sales tax
(Alaska, Delaware, Montana, New Hampshire and Oregon).
The project’s organizers are setting up a system by which Internet e-commerce
companies can voluntarily pay state taxes to the states in which their customers
reside. The incentive being offered to companies is rather than try to work out how
much tax a company owes for each locality, they can instead use a CSP (Certified
Service Provider). In addition, “the states that are in compliance with SSUTA
(Member States) will offer advantages to those sellers who use a CSP. Four
companies have been designated Certified Service Providers for the project.
What is the Streamlines Sales and Use Tax Agreement
(continued)
59
One such advantage is that the states will offer amnesty “from assessment for
uncollected or unpaid sales or use taxes together with interest or penalty for sales
made during the period the seller was not registered in that state.”
The agreement goes into effect when 10 states comprising at least 20% of the
population (of states imposing a sales tax) have come into compliance.
This
threshold has not yet occurred.
In any case, collection by sellers of sales and use
taxes on remote (out-of-state) sales remains voluntary under the agreement until
either Congress or the Supreme Court acts to make this collection mandatory.
(
Excerpts from Wikipedia)
60
