Current through Register Vol. 46, No. 12, March 20, 2024
(a) The term retail sale or
sale at retail means the sale of tangible personal property to
any person for any purpose, except as specifically excluded.
(b)
Special rule-sales specifically
included as retail sales.
(1) A sale of
any tangible personal property to a contractor, subcontractor or repairman for
use or consumption in erecting structures or buildings or adding to, altering,
improving, maintaining, servicing or repairing real property, property or land,
is deemed to be a retail sale, regardless of whether the tangible personal
property is to be resold as such before it is used or consumed. (See Part 541
of this Chapter.)
(2) A sale of
tangible personal property designed for use in some manner relating to domestic
animals or poultry, when sold to a licensed veterinarian, is deemed a retail
sale, notwithstanding a subsequent sale of such item of tangible personal
property by said veterinarian. (See Part 528 of this Subchapter.)
(3) A sale of tangible personal property to a
mortician, undertaker or funeral director for use in conducting funerals is
deemed a retail sale to him, notwithstanding a subsequent sale of such items.
(See Part 528 of this Subchapter.)
(4) A sale of automotive fuel by a
distributor is deemed a retail sale by him notwithstanding a subsequent sale of
such fuels. (See Part 560 of this Subchapter.)
(c)
Resale exclusion.
(1) Where a person, in the course of his
business operations, purchases tangible personal property or services which he
intends to sell, either in the form in which purchased, or as a component part
of other property or services, the property or services which he has purchased
will be considered as purchased for resale, and therefore not subject to tax
until he has transferred the property to his customer.
Cross-references:
Special applications of resale exclusions, see the
following sections of this Title: utility services, 527.2; storage, 527.6; food
and drink, 527.8; hotel occupancy, 527.9; cups, plates and beverage containers
used in or by restaurants, 528.20(d).
(2) A sale for resale will be recognized only
if the vendor receives a properly completed resale certificate. See section
532.4
of this Title.
(3) Receipts from
the sale of property purchased under a resale certificate are not subject to
tax at the time of purchase by the person who will resell the property. The
receipts are subject to tax at the time of the retail sale.
Example 1:
A store purchases shirts from a wholesaler to sell to its
customers. The store does not pay its wholesaler a tax on its purchase of the
shirts but collects the tax from its retail customers.
(4)
(i)
Tangible personal property which is purchased and given away without charge,
for promotion or advertising purposes is not purchased for resale. It is a
retail sale to the purchaser thereof, and is not a sale to the recipient of the
property.
(ii) Tangible personal
property which is purchased for promotional or advertising purposes and sold
for a minimal charge which does not reflect its true cost, or which is not
ordinarily sold by that person in the operation of his business, is a retail
sale to the purchaser thereof, and not a sale to the recipient of the
property.
(iii) A resale
certificate may not be used by the person making the purchases described in
subparagraphs (i) and (ii) of this paragraph for such purchases.
Example 2:
A bank has purchased premiums which will be given to
depositors upon the opening of an account in a new branch. As the bank is not
in the business of selling such items, and as it in fact does not sell such
items to its customers, the sale to the bank of such items of tangible personal
property is a retail sale which is taxable at the time of purchase. The bank
has not purchased these items for resale.
Example 3:
A vendor purchases catalogs and distributes them to his
potential customers for a minimal charge, which does not reflect the cost to
him. He is the retail purchaser of the catalog, and is required to pay the tax
thereon. He cannot charge his customer tax on the charge for the
catalog.
(5) The
purchase by a vendor of an item of tangible personal property which is sold by
him as a physical component part of tangible personal property to a customer is
a purchase for resale and therefore is not subject to tax. Items of tangible
personal property other than machinery or equipment, which are used in
manufacturing tangible personal property for sale, but do not become a physical
component part of the property manufactured are not purchased for resale, but
may be eligible for an exemption from state and local taxes. See Part 528 of
this Title.
Example 4:
A book publisher purchases leather for making book bindings
and then sells the books directly to the public. The leather has become a
physical component part of the books sold to the public and therefore has been
purchased for resale by the book publisher and is not subject to the
tax.
Example 5:
A company engaged in the printing of designs on unfinished
fabrics for garment manufacturers purchases processing paper and detergents to
be used in the manufacturing process. The fabric is rolled in processing paper
and put through a pressure steaming operation where dyes are developed and are
fixed into the fabrics. After the fixation process, the fabric is unrolled from
the processing paper and washed with detergents. The washing process (during
which a small portion of the detergent stays with the fabric) removes the dirt
from the previous handling of the fabric, washes out surplus dyes and changes
the texture of the fabric. As a portion of the detergent stays with the fabric,
the detergent qualifies as a component part of a product for sale and the
company may purchase the detergent exempt from the New York State and local
sales tax. The processing paper is considered a supply used in connection with
exempt machinery and may be purchased exempt from the New York State and local
sales tax, except the taxes imposed within New York City by section
1107 of the Tax Law.
(6) Tangible personal property purchased for
use in performing services which are taxable under section
1105(c)(1) (2)
(3) and (5) of the Tax Law is purchased for
resale and not subject to tax at the time of purchase, where the property so
sold (i) becomes a physical component part of the property upon which the
services are performed, or (ii) is later actually transferred to the purchaser
of the service in conjunction with the performance of the service subject to
tax.
Example 6:
A watch repairman purchases a new stem and places it in a
watch that he is repairing for a customer. The purchase of the stem by the
watch repairman is a purchase for resale not subject to tax at the time of its
purchase as it will become a physical component part of property upon which
services were performed.
Example 7:
A service station purchases grease to be used for
lubricating automobiles, without payment of tax as the grease will be
transferred to the customers in connection with the performance of a taxable
service.
Example 8:
The publisher of a stock market information service, which
is not personal and individual in nature, may purchase the paper on which the
service is printed for resale. The paper is actually transferred to his
customers in conjunction with the performance of a service subject to
tax.
Example 9:
A painter purchases plastic drop cloths and sandpaper and
after painting a customer's premises, leaves the used drop cloths and sandpaper
at the premises. The drop cloths and sandpaper, even though limited or no use
after the painting, have not been purchased for resale as they are items used
by the painter in performing a taxable service. The drop cloths and sandpaper
are not actually transferred to the purchaser of the service in conjunction
with the performance of the service.
(7) Tangible personal property purchased for
use in performing a service not subject to tax is not purchased for resale.
Example 10:
A shoe repairman purchases leather to be used for resoling
shoes. His purchase of the leather is not a purchase for resale, even though
the leather will be transferred to the customer in connection with the
performance of the service because the service he is performing is not
taxable.
Example 11:
A dentist purchases gold to be used as fillings and crowns.
The purchase by the dentist is not for resale, even though the gold is
transferred to his patient, in the performance of his service.
(8) The resale exclusion also applies to a
sale of service.
Example 12:
A jeweler sends a customer's watch to a repairman for
servicing. The charge by the jeweler to the customer is taxable. The charge to
the jeweler by the repairman is not taxable because the service was purchased
for resale by the jeweler.
(d)
Exclusions relating to corporate
and partnership transactions.
(1) The
following transfers of property are not retail sales:
(i) The transfer of property to a
corporation, solely in consideration for the issuance of its stock, pursuant to
a merger or consolidation effected under the law of New York or any other
jurisdiction.
(ii) The distribution
of property by a corporation to its stockholders as a liquidating
dividend.
(iii) The distribution of
property by a partnership to its partners in whole or partial
liquidation.
(iv) The transfer of
property to a corporation upon its organization in consideration for the
issuance of its stock.
(v) The
contribution of property to a partnership in consideration for a partnership
interest therein.
The transfers described in this paragraph between partners
and partnerships, and between corporations and stockholders, are excluded from
the definition of "retail sale" because while the form of ownership of the
property is changed, there is a continuity of interest in the property
transferred.
Cross-reference:
See Part 537 of this Title.
(2) Contributions to partnerships.
(i) A partnership is an association of two or
more persons to carry on as co-owners of a business for profit. Limited
partnerships and joint ventures are included as partnerships.
(ii) A partner's contribution is the property
valued in money or the monetary amount he contributes to the firm for
commencing or carrying on the business whether at the commencement of business
or later. Contributions of property are not subject to sales or use tax.
Example 1:
A, B and C agree to deal in raw wool as partners. Each
transfers $20,000 worth of tangible personal property to the partnership. These
transfers are contributions which are not retail sales. Later C transfers other
tangible personal property to the firm for cash. This is a taxable sale and not
a contribution in consideration for a partnership interest.
Example 2:
D owns a pleasure boat. He sells E a one-half interest in
the boat. The sale is a retail sale. Co-ownership without the carrying on of a
business is not a partnership.
(3) Partnership liquidations. The liquidation
of a partnership is the return, complete or partial, of partnership capital to
the partners. In a liquidation a partner's interest is diminished by the value
of the property distributed to him. The distribution of tangible personal
property pursuant to a liquidation is not a taxable sale.
Example 3:
F, G and H are partners operating two stores. The
partnership owns five station wagons. The partnership closes one store, and
distributes one station wagon to each partner. The distribution of these
station wagons constitutes a partial liquidation.
(4) Other partnership transactions.
(i) The purchase or surrender of a
partnership interest for cash, or the substitution of one partner for another,
is the sale of intangible personal property and is not subject to sales
tax.
(ii) The purchase by a partner
of tangible personal property from the firm is a retail sale.
(5) Transfers of property to a
corporation upon its organization.
(i) The
transfer of property to a corporation upon its organization, in consideration
for issuance of its stock, is not a retail sale.
(ii) Corporate existence is deemed to begin
upon the filing of the certificate of incorporation with the Secretary of
State. Only transfers made at the time of the commencement of the corporate
business, or within a reasonable time thereafter, while the corporation is
still in the process of organizing its business, are eligible for the
exclusion.
(iii) Transfers made to
a dormant corporation, which is being activated, are not eligible for the
exclusion.
Example 4:
A corporation filed a certificate of incorporation with the
Secretary of State on February 1, 1974. On March 10, 1976 it is decided that
the corporation is to be activated, and on March 15, 1976 a stockholder
transfers tangible personal property - a truck - to the corporation, in
consideration of the issuance of shares of stock. The transfer is not excluded
from the definition of retail sale, as it was not made upon the organization of
the corporation.
(iv) Where
a transfer of property is made to a corporation upon its organization in
consideration of the issuance of stock, and other property, the transfer is a
sale to the extent of the other consideration.
Example 5:
A contribution of tangible personal property is made to a
corporation upon its organization in consideration of the issuance of $3,000 in
shares of stock and $7,000 in notes. The transfer is a retail sale to the
extent of $7,000.
(v) Where
a transfer of property is made to a corporation upon its organization in
consideration of the issuance of stock, and the assumption of debts and
liabilities representing security interests in the property transferred, the
transfer is eligible for exclusion from the definition of retail
sale.
(6) Mergers and
consolidations.
(i) A merger under the law of
New York is the procedure whereby two or more corporations merge into a single
corporation which is one of the participating corporations.
(ii) A consolidation under the law of New
York is the procedure whereby two or more corporations consolidate into a
single corporation which is a newly organized corporation.
(iii) A merger or consolidation under the law
of any other jurisdiction is one that qualifies under section 368(a)(1)(A) of
the Internal Revenue Code or which meets the requirements of the law of the
Sate, District of Columbia or territory pursuant to which it was effected.
Example 6:
Corporation A is merged into Corporation B.
Example 7:
Corporation A and B are consolidated into Corporation
C.
Example 8:
Corporation A owns all the stock of Corporation B.
Corporation B is merged into Corporation A pursuant to the Business Corporation
Law. Included among the property transferred is machinery, office equipment and
supplies. The transfer of the tangible personal property to Corporation A,
pursuant to the merger, is not subject to sales tax.
(iv) Where a corporation purchases another
corporation's assets in consideration of issuance of stock of the purchasing
corporation, or the parent of the purchasing corporation, such as under section
368(a)(1)(C) of the Internal Revenue Code, the transaction does not qualify as
a merger or consolidation, even if the selling corporation is subsequently
liquidated.
Example 9:
Corporation A will transfer its assets to Corporation B in
consideration for B's issuance of shares of its stock. Corporation A will
continue to exist for discharging its expenses, and then will be dissolved. The
transfer of tangible personal property will be subject to tax, as it is carried
out under a plan of reorganization but is not a statutory merger or
consolidation.
(v) Where a
transaction is taxable the tax base is computed by applying the percentage that
the value of tangible personal property in New York bears to the value of all
the assets transferred to the total consideration, including value of stock and
liabilities assumed.
(7)
Issuance of stock by a corporation acquiring property.
(i) The stock issued in consideration for the
transfer of tangible personal property to a corporation pursuant to a merger or
consolidation, or upon its organization, must be the stock of the corporation
receiving the property. A transaction in which the stock issued is that of a
parent corporation does not qualify for exclusion.
Example 10:
Corporation A organizes Corporation B as a subsidiary. Upon
the organization of Corporation B, Corporation C transfers certain tangible
personal property to Corporation B in exchange for stock of Corporation A. This
transfer is not excluded from the definition of retail sale, as the stock
issued upon the organization of B was that of Corporation A, its
parent.
(ii) To the extent
that securities other than its stock are issued by a corporation for transfer
of tangible personal property to it pursuant to a merger or consolidation, or
upon its organization, the transaction does not qualify for
exclusion.
(8) Other
inter-corporate transactions.
(i) The sale of
property by one related corporation to another related corporation is a retail
sale, and taxable to the extent of the consideration paid, or the fair market
value, if the consideration paid is not an adequate indication of the true
value of the property transferred.
Example 11:
On February 1, 1976, Corporation A transfers to its
subsidiary, Corporation B, ten 1975 trucks, for a total of $40,000. The fair
market value of the trucks is $100,000. Corporation A has made a taxable retail
sale to Corporation B in the amount of $100,000.
(ii) The transfer of property to a
corporation, as a contribution to capital, at a time other than its
organization, without the issuance of stock or other consideration, is not a
retail sale.
(9)
Corporate liquidations.
(i) The distribution
of tangible personal property by a corporation to its stockholders as a
liquidating dividend is not a retail sale.
(ii) The liquidating dividend may be as a
result of a partial or complete liquidation.
(iii) The liquidating dividend must be
declared in accordance with the law of the state of incorporation, to qualify
for exclusion from the definition of retail sale.
Cross-reference:
Bulk sale provisions: See Part 537 of this
Subchapter.
