What's happening
This bill exempts foreign corporations using third-party fulfillment services in New York from being considered as "doing business" for tax purposes, under certain conditions.
Why it matters
Clarifies the tax status of foreign businesses using third-party fulfillment centers in New York. , potentially making it easier for out-of-state and international sellers to use New York-based logistics services without triggering state corporate tax obligations—provided their annual receipts remain under a set threshold.
Distinguishes between affiliated and non-affiliated fulfillment providers. , meaning only those foreign corporations using truly independent (non-affiliated) third-party logistics services get the exemption; this prevents large companies from exploiting the rule by using their own subsidiaries.
May encourage more e-commerce and warehouse businesses to operate or contract in New York. , since out-of-state sellers can store inventory and use local third-party fulfillment services without being taxed as if they’re actively “doing business” in the state—potentially boosting jobs and economic activity in the logistics sector.
Establishes clear definitions around fulfillment services and ownership thresholds. , aiming for legal certainty for businesses and tax authorities, reducing disputes over who owes state business taxes and under what circumstances.
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Who cares
Headline styles
Redefine Fulfillment Services Rules
Plain English, a few words. Used as the page title.
Sponsors
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History
- Referred to budget and revenue
- Referred to budget and revenue
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4301
2019-2020 Regular Sessions
IN SENATE
March 7, 2019
Introduced by Sen. RANZENHOFER -- read twice and ordered printed, and when printed to be committed to the Committee on Budget and Revenue
AN ACT to amend the tax law, in relation to the use of fulfillment services of certain persons
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 208 of the tax law is amended by adding a new subdivision 13 to read as follows:
13. The term "fulfillment services" shall mean any of the following services performed by an entity on its premises on behalf of a purchaser:
(a) the acceptance of orders electronically or by mail, telephone, telefax or internet;
(b) responses to consumer correspondence or inquires electronically or by mail, telephone, telefax or internet;
(c) billing and collection activities; or
(d) the shipment of orders from an inventory of products offered for sale by the purchaser.
§ 2. Subdivision 2 of section 209 of the tax law, as amended by section 5 of part A of chapter 59 of the laws of 2014, is amended to read as follows:
2. A foreign corporation shall not be deemed to be doing business, employing capital, owning or leasing property, or maintaining an office in this state, or deriving receipts from activity in this state, for the purposes of this article, by reason of (a) the maintenance of cash balances with banks or trust companies in this state, or (b) the ownership of shares of stock or securities kept in this state, if kept in a safe deposit box, safe, vault or other receptacle rented for the purpose, or if pledged as collateral security, or if deposited with one or more banks or trust companies, or brokers who are members of a recognized security exchange, in safekeeping or custody accounts, or (c) the
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD01733-01-9
S. 4301 2
taking of any action by any such bank or trust company or broker, which is incidental to the rendering of safekeeping or custodian service to such corporation, or (d) the maintenance of an office in this state by one or more officers or directors of the corporation who are not employees of the corporation if the corporation otherwise is not doing business in this state, and does not employ capital or own or lease property in this state, or (e) the keeping of books or records of a corporation in this state if such books or records are not kept by employees of such corporation and such corporation does not otherwise do business, employ capital, own or lease property or maintain an office in this state, or (f) the use of fulfillment services, provided receipts, including receipts pursuant to such services, do not exceed the threshold set by paragraph (b) of subdivision one of this section, of a person other than an affiliated person and the ownership of property stored on the premises of such person in conjunction with such services, or (g) any combination of the foregoing activities. For purposes of this subdivision, persons are affiliated persons with respect to each other where one of such persons has an ownership interest of more than five percent, whether direct or indirect, in the other, or where an ownership interest of more than five percent, whether direct or indirect, in the other, 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 which are affiliated persons with respect to each other. The term "person" in the preceding sentence and in paragraph (f) of this subdivision shall have the meaning ascribed thereto by subdivision (a) of section eleven hundred one of this chapter.
§ 3. This act shall take effect January 1, 2020 and shall apply to taxable years commencing on or after such date.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the tax law, in relation to the use of fulfillment services of certain persons
PURPOSE::
To provide that a foreign corporation does not subject itself to New York State taxation simply by virtue of the use of fulfillment services other than an affiliated person
SUMMARY OF PROVISIONS::
Section 1 amends section 208 of the Tax Law to add a new paragraph 13 to define fulfillment services.
Section 2 amends subdivision 2 of section 209 of the Tax Law to add to the list of activities that will not deem a foreign corporation to be doing business, employing capital, owning or leasing property, or main- taining an office in the state, or deriving receipts from activity in this state, for the purposes of Article 9 of the Tax Law paragraph (f) the use of fulfillment services of a person other than an affiliated person and the ownership of property stored on the property of such person in conjunction with such services.
Section 2 contains the effective date.
JUSTIFICATION::
Prior to January 1, 2015, the Tax Law contained language similar to that contained in this bill. By virtue of legislation in 2014, this language was removed from the Tax Law. Unfortunately, fulfillment services are very cost sensitive and extremely mobile. They can usually store goods in warehouses in any of the states surrounding New York just as easily as in New York, and if using New York warehouses subject these foreign companies to expensive New York taxes, there is in most cases simply no reason for them to locate or remain in New York, and ample reason to leave.
The upshot of this is that with the changes in law passed in 2014, which took effect in 2015, fulfillment operations in New York are closing. The workers who were employed at these facilities are losing their jobs. The owners of the warehouses are losing their tenants. With warehouse buildings becoming vacant, localities potentially face reductions in their assessment rolls. New York faces diminishing tax benefits as the fulfillment industry leaves the state.
LEGISLATIVE HISTORY::
2016 - S.8170-A - RULES 2017/18 - S.4624-A - INVESTIGATIONS/INVESTIGATIONS
FISCAL IMPLICATIONS::
To be determined.
EFFECTIVE DATE::
This act shall take effect January 1, 2020 and shall apply to taxable years commencing after such date.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.