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State Splits Hairs on Sales Tax
In an Advisory Opinion, the Office of Counsel in the New York State Department of Taxation and Finance set limits on what constitutes a New York business for sales tax purposes.
The opinion referred to an unnamed petitioner whose business is headquartered in California and who has no offices, employees, real or personal property located in New York. As described in the opinion, the petitioner offers a service that lets consumers purchase goods and services online, from catalogs, or from direct response companies, and to pay for those items at a local retail store using cash. The service also lets users pay bills at local retail stores using cash.
The business is aimed at those who don't use banks or who simply prefer to make all their purchases in cash—something it's difficult to do in an online world.
The question is whether the petitioner is running a New York business and is thus subject to state sales and use tax. The answer, says the opinion, is "no." This also applies to the merchants who allow customers to pay in cash through the service, because they are not "vendors" according to the legal definition.
More on sales tax issues is available in a recent E-zine article.