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).


Wolters Kluwer Tax and Accounting

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