19 March 2019 - Article
The New York State Department of Taxation and Finance issued a Tax Bulletin in August addressing whether a shipping company is considered a common carrier or a private or contract carrier. The bulletin, which is meant to provide clarity to New York's out-of-state delivery rules, has caused concern in the art community as it appears to narrowly define common carrier in a manner that suggests that the use of fine art shipping companies for out-of-state shipments may trigger New York sales tax.
When are art purchases in New York not subject to New York sales tax?
A sale of tangible personal property in which title to the property passes in New York State but delivery and transfer of possession occur outside of New York is not subject to New York sales tax. Examples in the New York regulations and the bulletin illustrate generally that if a customer instructs a store to ship a purchased item, then sales tax is determined by the location to which the item is delivered, not by the store location. Therefore, if a gallery ships art to a purchaser outside of New York State, the purchase should not be subject to New York Sales Tax. Additionally, if a common carrier is used to deliver a purchased item outside of New York State, then sales tax is due based on where the common carrier delivers the item, regardless of whether the common carrier has been hired by the seller or the purchaser.
Why is the bulletin causing concern in the art community?
The bulletin is meant to be an informational document designed to provide general guidance in simplified language on a topic of interest to taxpayers. However, the concern with the bulletin is that it is not merely simplifying the language of the law, but rather it is imposing additional restrictions. The bulletin states that a private or contract carrier hired by a purchaser is a designee of such purchaser, and therefore if such carrier takes possession in New York State, the purchase is subject to New York sales tax. The bulletin distinguishes a private or contract carrier from a common carrier as a carrier that operates under a private arrangement or contract with negotiated terms. The language in the bulletin may be interpreted as categorizing fine art shippers as private or contract carriers in a manner that New York law does not. We are currently advocating for the position that fine art shippers should be characterized as common carriers, but until this issue is resolved, if art is to be delivered to a purchaser out of New York State, the conservative approach is to have the seller arrange the shipment.
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