Are Private Cooking Lessons Subject to Sales Tax?

 

The NYSDTF received a petition for  an Advisory Opinion whether teaching private cooking, baking, and decorating lessons in people’s homes are subject to sales tax.

The petitioner (a private cooking instructor) inquired if there was a difference for sales tax purposes if: (1) the client provided ingredients to be used during the private cooking lesson, or (2) if the cooking instructor provided the ingredients.  

NYSDTF Analysis: 

Tax Law § 1105(c) imposes sales tax on the receipts from every sale, except for resale, of certain enumerated services. Cooking and baking lessons are not among the services subject to tax. See Tax Law § 1105(c); TSB-A-02(34)S. When Petitioner provides the relevant ingredients, Petitioner is using those ingredients in the provision of a non-taxable service and is not reselling those ingredients to the customer. Therefore, Petitioner should pay any applicable sales tax on the purchase of the ingredients. See 20 NYCRR 526.6(c)(7); TSB-A-01(12)S. Because the ingredients and recipes provided in tangible form are incidental to the service, it does not change the non-taxability of the service. See TSB-A-01(12)S. Therefore, the lump sum charge for providing these lessons is not subject to tax. 

Sales Tax Guidance for Businesses with No Physical Presence in NY

I received an email from New York State Department of Taxation and Finance. The department has issued new guidance on changes affecting sales tax registration requirements for businesses having no physical presence in New York.

TSB-M-19(4)S requires businesses with no physical presence in New York to register as a vendor and collect and timely remit sales tax if in the preceding four quarters:

• Business made more than $500,000 in sales of tangible personal property delivered to New York. AND --->

• Business conducted more than 100 sales of tangible personal property delivered to New York.  

New York Sales Tax does not follow a calendar year the quarters are:  

• March 1 through May 31,
• June 1 through August 31,
• September 1 through November 30, and
• December 1 through February 28/29.

If you are an out of state business required to register see How to Register for New York State Sales Tax. If you need further assistance contact me.

No More Buying Items on Ebay Sales Tax Free

Do you remember NAPSTER? It was a peer-to-peer file sharing service. I was in college at Boston University during the golden age of Napster. I remember connecting speakers to my computer and investing a substantial amount of time building a music library. It was great! However, what was great for me was not great for the music industry that took legal action that would eventually shut down Napster.

As of June 1, 2019, EBAY is now required to collect sales tax on purchases shipped to New York. The benefit of shopping on ebay was the regular ability to find items cheaper online than brick and mortar stores. On top of that, sales tax was rarely collected because the seller did not have a physical presence or nexus with New York.

So what happened?

In a post Wayfair world states may now charge sales tax on purchases made from out-of-state sellers even if the seller does not have a physical presence (nexus) in the taxing state. It did not take long for New York State to enact sales tax legislation mandating "marketplace providers" to collect and remit sales tax on sales of tangible personal property that they facilitate for marketplace sellers. This sales tax legislation went into effect on June 1, 2019.

A marketplace provider is a person who, pursuant to an agreement, facilitates sales of tangible personal property by a marketplace seller or sellers.  A person "facilitates a sale of tangible personal property" when:

• the person provides the forum in which, or by means of which, the sale takes place or the offer of sale is accepted, including an internet web site, catalog, shop, store, booth or similar forum; and 
• the person, or an affiliate, collects the receipts paid by a customer to a marketplace seller for a sale of tangible personal property, or contracts with a third party to collect the receipts.  Persons are affiliated if one person has an ownership interest of more than five percent, whether direct or indirect, in another, or where an ownership interest of more than five percent, whether direct or indirect, is held in each of such persons by another person or by a group of other persons that are affiliated persons with respect to each other. 

To be considered a marketplace provider under the new law, a person or entity must meet both criteria listed above: (1) creating a marketplace connecting buyers & sellers; (2) collecting the proceeds of the sale from the buyer.  

Ebay is a marketplace seller as defined by the new legislation and has already started collecting sales tax on purchases being delivered to addresses in New York.  I believe this is an end of an error - no more buying items on ebay sales tax-free. 

For additional information and guidance see TSB-M-19(2)S