Adjunct Law Prof Blog

Editor: Mitchell H. Rubinstein
New York Law School

Sunday, February 21, 2010

Free Books Given To Professors Are Subject To New York State Use Tax

One of the benefits professors enjoy is free books. We get books all the time to examine for use in class and we get to keep them. They are often unsolicited. The NYS Department of the Taxation and Finance recently issued an advisory opinion, OPINION NO. S090923A (Feb. 8, 2010) about whether such books are taxable. I am no tax expert, but this opinion suggests that free copies of books given out are subject to a use tax. Professors are considered readers and not prospective customers who are covered by an exemption. It does not appear that such books would be subject to income tax. However, this opinion may result in less books being distributed. The Opinion states in part:

Section 1105(a) of the Tax Law imposes sales tax on the sale of tangible personal property in New York. Tax Law section 1110 imposes use tax on the use in the State of tangible personal property purchased outside the State. Use includes the distribution of tangible personal property as promotional material in the State. Tax Law section 1101(b)(7). Tax Law section 1115(n)(4) provides an exemption from sales and use tax on printed promotional materials mailed or shipped by a common carrier or a like delivery service to customers or prospective customers of the purchaser of the promotional materials. The Tax Law section 1115(n)(4) exemption is inapplicable to the books distributed by Petitioner in New York because the recipients are not Petitioner’s customers or prospective customers. The
professors, book critics, and other recipients are not prospective customers of a book after they receive a free copy of the book. Petitioner’s prospective customers as to the books it distributes free to professors, book critics, and other recipients are students and readers of book reviews, respectively. That is, neither a professor’s assignment of a book as course material nor a critic’s public recommendation that a book be purchased makes the professor or critic a prospective customer of the book. See Promex Medical, Inc., Adv Op Comm T&F, April 8, 1999, TSB-A-99(23)S. Use tax is due on the books distributed in New
York because the books are used in New York. Tax Law section 1101(b)(7). (The exemption from use tax provided by Tax Law section 1118(2) is inapplicable to Petitioner’s use of books in New York because Petitioner is conducting business in the State.) The basis of the tax is the amount Petitioner paid for the books. Tax Law section 1110(b).

Hat Tip: New York Public Personnel Law

Mitchell H. Rubinstein

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