Current through Register Vol. 46, No. 12, March 20, 2024
(a)
General.
A direct payment permit is a notice to a vendor that the
holder thereof is authorized to pay directly to the Department of Taxation and
Finance any tax due on purchases made. The vendor's responsibility for the
collection of tax from the permit holder is waived upon receipt of such
permit.
(b)
Eligibility for a direct payment permit.
In order to be eligible for a direct payment permit, a
purchaser must meet the following conditions:
(1) at the time tangible personal property or
services are acquired by a purchaser, it is impossible to determine the manner
in which the property or services will be used;
(2) the purchaser must be registered as a
vendor with the Processing Division, Sales Tax Section, and maintain a place of
business in New York State; and
(3)
the purchaser must have timely filed all required returns and timely paid all
taxes due for the four quarterly periods immediately prior to the submission of
an application for a direct payment permit. This condition may be modified in
the case of a new vendor who has not filed returns.
(c)
Applying for a direct payment
permit.
(1) A person seeking a direct
payment permit must file a properly completed application directly with the
District Office Audit Bureau of the Division of Taxation, W.A. Harriman Campus,
Albany, NY 12227. Applications may be obtained from the District Office Audit
Bureau.
(2) The applicant must
submit the following information:
(i) the
business name and address;
(ii) the
vendor identification number;
(iii)
a description of the business conducted; and
(iv) a statement clearly indicating the
applicant's need for the permit and the types of transactions for which the
permit will be used.
(d)
Authorization of permit.
(1) The department, upon review of the
application filed and the statement submitted, has the sole discretion to issue
a direct payment permit.
(2) If the
District Office Audit Bureau of the Audit Division approves the application, it
will authorize the use of a direct payment permit by the applicant by issuing a
numbered direct payment permit.
(3)
Should the District Office Audit Bureau disapprove or reject the application,
it will notify the applicant by mail of such action.
(4) Upon the termination or suspension of the
direct payment permit holder's business, or upon a change in the name or legal
form of the business which requires a new registration, the permit shall be
surrendered to the District Office Audit Bureau.
(e)
Use of direct payment
permits.
(1) A direct payment permit
may only be used by the holder who makes purchases of tangible personal
property or services, the use of which is unknown to him at the time of
purchase.
Example 1:
A manufacturer-contractor purchases ingredients for use in
the production of concrete septic tanks. Some of the septic tanks will be sold
without installation, while others are to be sold installed. Since the
manufacturer-contractor does not know the number of tanks that will be sold
installed, he may use a direct payment permit when purchasing the
ingredients.
(2) A direct
payment permit may not be used:
(i) as a
device to defer payment of the sales tax on purchases;
(ii) as a substitute for a resale certificate
or other exemption certificates; or
(iii) as a device to transfer the permit
holder's privileges to another person.
Example 2:
The holder of a direct payment permit purchasing display
cases for use in his showroom gives his supplier a copy of his direct payment
permit to defer the payment of tax on his purchase which is taxable. This is a
use of the permit which is prohibited.
Example 3:
A holder of a direct payment permit engages a contractor to
erect a warehouse and gives the contractor a copy of his direct payment permit.
The contractor may not use the direct payment permit to defer his payment of
tax on purchases which are for use by him in the erection of the warehouse. The
contractor's liability for the tax on his purchases is not relieved by his
customer's direct payment permit. This is a use of the permit which is
prohibited.
(3)
Direct payment permit holders are required to notify vendors, from whom they
make purchases, of their status by submitting a copy of the direct payment
permit with the first purchase order. Each vendor accepting a direct payment
permit must, for verification purposes, maintain a method of associating a sale
for which the permit was used, with the permit on file.
(4) A direct payment permit holder, who by
reason of misusing such permit, fails to pay any tax due when required, shall
be liable for penalty and interest in addition to the tax due and revocation of
his permit. See Part 536 of this Title for penalties and interest.
(f)
Reporting and payment of
tax by a permit holder.
(1) When a
direct payment permit holder uses property or services purchased under a direct
payment permit, he is required to determine the taxable status of such use, and
report it on the return covering the period in which the use
occurred.
(2) The records of a
holder of a direct payment permit must show all purchases, the use made
thereof, the location of use, and the tax due thereon was reported and paid.
These records must be available to the Department of Taxation and Finance for
examination at any time upon demand.
(3) Each year, at the time physical
inventories are taken for federal income tax purposes, a reconciliation of
purchases made under the direct payment permit shall be prepared and retained
as part of the permit holder's files. Any inventory difference not accounted
for shall be included as additional purchases subject to use tax on the sales
and use tax return for the reporting period in which the fiscal or calendar
year ended.
(4) Any change in
federal income (either voluntary or by final federal adjustment), which results
in a change in opening inventory, purchases, or closing inventory, shall be
reported to the Division of Taxation within 90 days, together with an amended
return for the applicable reporting period in which the inventory was
reconciled. The amended return shall be filed with the Division of Taxation,
District Office Audit Bureau, W.A. Harriman Campus, Albany, NY 12227. Any
purchases or inventory which are unaccounted for shall be reported as
additional purchases subject to use tax on an amended return filed for the
reporting period in which the fiscal or calendar year ended.
(5) If any change in inventory is a result of
a final federal adjustment, a copy of the federal adjustment shall be attached
to the return required to be filed under paragraph (3) or (4) of this
subdivision. If the change was voluntary, substantiation for the change shall
be maintained.
(6) A direct payment
permit holder is required to comply with the reporting requirements for
transactions in which the permit was furnished.
(i) A permit holder making purchases and
taking delivery of tangible personal property or services in an area having a
tax rate which is higher than the tax rate in the area where the property or
services are used is liable for the payment of tax based on the higher rate.
Example 1:
A direct payment permit holder purchases and takes delivery
of a forklift in County X (6% tax rate) for use in his plant located in County
Y (5% tax rate). He does not know whether its use will be taxable or exempt as
production equipment. The purchaser issues a copy of his direct payment permit
to the supplier at the time of purchase. If the fork lift is not used for an
exempt purpose, the permit holder must report on his next sales tax return, the
amount of the transaction on the line for County X, under the heading
"Purchases Subject to Use Tax" and remit the 6% tax based upon the point of
delivery.
(ii) A permit
holder, making purchases and taking delivery of tangible personal property or
services in an area having a tax rate which is less than the tax rate in the
area where the property or services will be used, is liable for the payment of
tax based upon the higher rate.
Example 2:
A direct payment permit holder, located in County A (6% tax
rate), purchases a forklift with his permit from a supplier in County B (5% tax
rate). He does not know whether its use will be taxable or exempt as production
equipment. Delivery is taken within County B by the permit holder. On the next
sales tax return if the forklift is not used for an exempt purpose, the permit
holder must report the transaction as "Purchases Subject to Use Tax" on the
line for County B and remit 5% tax. The transaction is also subject to an
additional compensating use tax of 1% for use of the forklift in County A. This
additional use tax must be shown in the space provided on the return for
reporting transactions subject to local tax only.
(iii) A permit holder operating in areas
having differing tax rates, making purchases and taking delivery of tangible
personal property in bulk (as described in section 1119[a] of the Tax Law) is
liable for the payment of tax based on the rate in effect in the area of use.
Example 3:
A direct payment permit holder has his main office in
County L where only the statewide 4% tax rate is in effect and branch offices
in County M (5% tax rate) and County N (6% tax rate). He purchases in bulk
various office and merchandising supplies, such as invoice books, stationery,
and catalogs for use in all his offices from a printer located in County L at a
cost of $10,000. At the time of purchase, he does not know at which location
any part of the supplies will be used. The supplies are delivered to the permit
holder's main office and the printer is issued a copy of the direct payment
permit. The permit holder stores the supplies at his warehouse in County L and
periodically distributes these supplies to his branch offices as needed. During
a reporting period the permit holder withdraws these supplies for use as
follows:
| Main Office |
$2,000 |
| County M Branch |
$1,000 |
| County N Branch |
$1,000 |
On his sales tax return for the period, the permit holder
must report as "Purchases Subject to Use Tax" the cost of the supplies and the
tax due as follows:
| Purchases Subject to Use
Tax |
Sales and Use
Taxes |
| New York State 4% |
$2,000 |
$80 |
| County M 5% |
$1,000 |
$50 |
| County N 6% |
$1,000 |
$60 |
(7) Direct payment permit holders who make
sales which are subject to sales tax, must report these transactions and pay
the appropriate taxes on the return filed for the period in which the sales
were made.
(8) The holder of a
direct payment permit is required to pay the tax due on his purchases, not
acquired for resale or an exempt use, directly to the department with his sales
and use tax return for the period in which the use of the purchases becomes
known.
(g)
Revocation.
(1) A direct payment
permit may be revoked for:
(i) failure by the
holder thereof to timely file his sales and use tax returns and timely pay any
tax due;
(ii) any misuse of the
privileges granted by the permit or failure to comply with any requirement with
respect to the permit;
(iii) a
change in business operations, so that it is possible to determine the use of
purchases at the time made.
(2) A notice of revocation sent by the
District Office Audit Bureau of the Audit Division by ordinary mail to the
vendor's address, as given on the last return filed by him, shall be sufficient
notice to advise the holder of revocation and the effective date
thereof.
(3) The holder of a
revoked permit shall without delay surrender the permit to the District Office
Audit Bureau.
(4) Any person
willfully using a permit after revocation may be subject to the criminal
penalty provisions of section 1817 of the Tax Law and the Penal Law. (See Part
536 of this Title.)
(h)
Direct payment permits for omnibus carriers engaged in local transit
service.
(1) Direct payment permit for
the purchase or use of an omnibus.
(i) An
omnibus carrier engaged in local transit service may make application for a
direct payment permit with respect to his purchase or use of an omnibus. Such
permit will not be granted unless the carrier has filed a certificate of
registration with the Department of Taxation and Finance and the department has
issued a certificate of authority to the carrier.
(ii) A copy of the omnibus direct payment
permit must be furnished to the omnibus carrier's vendor in lieu of payment of
sales or compensating use tax on each such purchase.
(iii) The omnibus carrier must pay the tax
(after allowing for any credit taken by the applicant pursuant to subdivision
[b] of section 1119 of the Tax Law) on such purchase or use of an omnibus
directly to the department at the time of filing the return covering the period
in which the omnibus was purchased or used.
(2) Direct payment permit for all taxable
purchases. An omnibus carrier may apply for a direct payment permit with
respect to all of its purchases. Such permit may be granted by the District
Office Audit Bureau of the Audit Division if the carrier qualifies under the
provisions of subdivision (b) of this section.
(3) Omnibus carriers who receive direct
payment permits under paragraph (1) or (2) of this subdivision must comply with
the requirements of subdivisions (e) and (f) of this section, and are subject
to the provisions of subdivisions (d) and (g) of this section.
Cross-reference:
Refunds and credits for omnibus carriers engaged in local
transit service, see Part 534 of this Title.
