Sales Tax State Activity Update - September 2004

New York Rules Sale of Postage Stamps Represents a Right To Service

A taxpayer who services the retail and wholesale markets has operations based on the concept of offering low prices on national brand products. This taxpayer plans on selling postage stamps in a unit consisting of 100 stamps, and in a separate transaction, sell 10 Priority Mail envelopes with the applicable postage affixed. The taxpayer will buy the first class and priority mail stamps from the U.S. Postal Service (U.S.P.S.). The envelopes are supplied free to the taxpayer and no agency agreement exists between the taxpayer and the U.S.P.S. The sales price for the first class delivery stamps and the priority mail envelopes with postage will be at face value or below that of the stamps. No additional charge will be made for the envelopes since they are provided free of charge to the taxpayer by U.S.P.S.

The Technical Services Division ruled the purchase of postage is evidence of the right to receive postal services, and is an intangible rather than the purchase of tangible personal property.

Also, since the taxpayer is transferring the priority mail envelopes free of charge, and the sale of such envelopes is for the face value of the priority stamps, it also is the sale of a right. Such sales constitute a sale of an intangible, which is not subject to sales tax.

Opinion is available at: http://www.tax.state.ny.us/pdf/Advisory_Opinions/Sales/A04_10s.pdf

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