New York ~ Sales and Use Tax: Telephone Directory Publisher Failed to Qualify for Exemption

A publishing company’s telephone directories did not qualify for the promotional materials exemption from New York sales and use tax under Tax Law §1115(n)(4) because the private delivery companies that shipped the directories were not common carriers or like delivery services.

Tax Law §1115(n)(4) provides an exemption from sales and use taxes for certain promotional materials shipped to customers without charge by means of a common carrier, the U.S. Postal Service (USPS), or like delivery service. The dispute here centered on the meaning of the terms “common carrier” and “like delivery service” and whether those terms applied to the private delivery companies hired by the taxpayer. Deliveries by the USPS were not at issue.

While not defined under the Tax Law, historically, a common carrier was one that, for a specified compensation, agreed to transport personal property from one place to another “for all persons that may see fit to employ [it],” and that holds itself “out to the public as a carrier, in such manner as to render [it] liable to an action if [it] should refuse to carry for any one who wished to employ [it].” By contrast, a private or contract carrier is one that carries for some particular person under some particular arrangement, but makes no public profession that it will carry for all who apply, nor is it required to.

Here, the taxpayer solicited bids for delivery services to be provided by the private delivery companies by issuing a request for quotation and then selected the winning proposal from those submitted based on cost, timeliness and quality. The private delivery companies utilized by the taxpayer were retained pursuant to a standard form contract with negotiated terms, including rates, delivery schedules and post-delivery verification and reporting requirements. There was no indication that those private delivery companies were required to provide delivery services. On the other hand, in making deliveries of the taxpayer’s directories, the USPS did not operate under a contract, was paid standard rates and made deliveries pursuant to standard delivery schedules. Thus, the private delivery companies used by the taxpayer were not common carriers.

Next, when construed in connection with the words “common carrier” and the USPS, the plain meaning of the term “like” with respect to “like delivery service” clearly meant delivery services that were the same or substantially similar to the services provided by either common carriers or the USPS. Here, the services provided by the USPS were similar to services provided by common carriers. As previously discussed, there were clear differences between how common carriers operated and how the private delivery companies retained by the taxpayer operated. Thus, the taxpayer failed to establish “like delivery services” under Tax Law §1115(n)(4).

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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