N.Y. Comp. Codes R. & Regs. tit. 20 § 528.20

Current through Register Vol. 46, No. 45, November 2, 2024

Section 528.20 - Cartons, containers, and wrapping and packaging materials and supplies

Tax Law, § 1115(a)(19)

(a)Exemption.

(1) The sale of cartons, containers, and wrapping and packaging materials and supplies, and components thereof for use and consumption by a vendor in packaging or packing tangible personal property for sale, and actually transferred by the vendor to the purchaser, is exempt from sales and use tax.

Example 1:

A manufacturer sells goods in bulk and ships them in corrugated cardboard cartons to a retailer. The retailer after using the cartons as temporary storage and containers removes the goods and discards the cartons. The cartons are not subject to tax.

Example 2:

Wax tissue paper is sold to a bakery which uses it to pick cookies from a tray. The cookies and paper are then placed in bags or boxes. The wax paper is taxable; but the bags and boxes are exempt from tax.

(2) Cartons, containers, and other packaging materials actually transferred to a customer in conjunction with the performance of a service subject to tax under paragraphs (1), (2), (3) and (5) of subdivision (c) of section 1105 of the Tax Law are excluded from sales tax as purchased for resale. (See section 526.6[c] of this Title.)

Example 3:

A watch repairman packs a watch in a box, with cushioning material to return it to his customer. The box and packing material is not taxable.

(b)Definitions.

(1)Packaging material includes, but is not limited to: bags, barrels, baskets, binding, bottles, boxes, cans, carboys, cartons, cellophane, coating and preservative materials, cores, crates, cylinders, drums, excelsior, glue, gummed labels, gummed tape, kegs, lumber used for blocking, pails, pallets, reels, sacks, spools, staples, strapping, string, tape, twine, wax paper and wrapping paper actually transferred with the product to the purchaser.

(2) The term vendor in this section refers to any person who sells tangible personal property whether manufacturer, wholesaler, retailer, processor or assembler.

(3) The term purchaser in this section refers to any person purchasing tangible personal property from a vendor, whether or not he is the ultimate consumer.

(4)Actually transferred means that the packaging material is physically transferred to the purchaser, for whatever disposition the purchaser wishes.

Example 1:

A returnable soda bottle may be returned for a refund of deposit or disposed of otherwise. Such a bottle is actually transferred to the purchaser and may be purchased without payment of tax.

Example 2:

A keg of beer is required to be returned to the vendor after its contents is used. This keg is not actually transferred to the purchaser of the beer, and may not be purchased by the vendor without payment of tax.

(c)Taxable cartons, containers, and wrapping and packaging materials and supplies.

(1) Returnable containers, such as drums, barrels, or acid carboys, when purchased at retail by a person who does not transfer ownership of the container, are subject to tax. Title to the container remains in the seller when possession of the container is transferred to one who purchases commodities contained therein and then returns the container to the seller for refilling.

Example 1:

A chemical firm produces acid for use in various processes. The acid is placed in carboys which are purchased by the firm for moving the acid between plants. The carboys are taxable.

(2) Cartons or other packaging materials purchased by a vendor for his own use or consumption are subject to tax.

(3) Racks, trays or similar devices used to facilitate delivery of the vendor's product if such devices are not transferred with the product to the purchaser are subject to tax.

Example 2:

A baking company delivers bread to a grocer in wire trays. After unloading, the delivery man takes the trays with him. The trays are taxable to the baking company.

(4) Packaging materials used in connection with rendition of exempt services are subject to tax.

Example 3:

A dry cleaner purchases rolls of plastic bags to package clean garments. Such purchases are subject to tax.

Example 44:

Protective coverings used by carriers or movers are subject to tax.

(d)Cups, plates and other containers, purchased by restaurants and other eating establishments for resale as containers.

(1) Cups, plates and containers for hot and cold drinks purchased for resale as a container of food or drink of any nature taxed under section 1105(d) of the Tax Law, and actually transferred to the purchaser of such food or drink, are purchased for resale and thus not subject to sales or use taxes.

(i) The following is a list, which is not intended to be all-inclusive, of packaging materials which may be purchased under the resale exclusion of the Tax Law:

(a) sandwich wrappers;

(b) cups and lids;

(c) food sleeves;

(d) disposable plates; and

(e) paper bags.

(2) Napkins, straws, stirrers, plastic knives, forks, spoons and other similar items are not purchased for resale as such, nor are they packaging materials or supplies or components thereof. Purchases of these items by restaurants and similar establishments are not purchases for resale nor exempted from tax by paragraph (19) of section 1115(a) of the Tax Law, and are subject to tax.

Example 1:

A restaurant purchases napkins, straws and stirrers which are made available to its customers. The purchase of these supply items is subject to tax whether purchased for on- or off-premises consumption.

Example 2:

A food vending machine operator purchases stirrers and napkins. Since these supplies do not become part of the products sold nor are they used to package the product, they are subject to tax.

(e)Exemption certificates.

(1) A purchaser of packaging material which qualifies for exemption or for the resale exclusion may purchase the material without payment of tax by issuing an exempt use certificate (ST-121) or a resale certificate to the vendor.

(2) A person who produces tangible personal property for sale by farming may purchase packaging material without payment of tax by issuing a farmer's exemption certificate (ST-125) to the vendor.

(3) An exemption certificate shall be given only by the original purchaser of cartons or other packaging material.

Example:

A manufacturer purchases cartons and other packaging materials from a supplier. The manufacturer's products are sold to a distributor who resells them to a retailer. When the manufacturer purchases the cartons and other packaging materials, which are transferred to the distributor with the product, an exempt use certificate should be issued to the supplier for the packaging materials. Subsequent sale and transfer of such packaging materials to the distributor and retailer do not require any certificate with respect to the packaging.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 528.20