'Verizon' Case Takes Narrow View on Sales Tax Exemption [telecom]

Many people are familiar with the "resale exception" under which, for example, a sale by a clothing manufacturer of shirts to a clothing store is exempt from sales tax because the sales of the shirts by the store are taxable, see N.Y. Tax Law Sections 1101(b)(4)(i), 1105(a).

By Joseph Lipari and Aaron S. Gaynor

Many people are familiar with the "resale exception" under which, for example, a sale by a clothing manufacturer of shirts to a clothing store is exempt from sales tax because the sales of the shirts by the store are taxable, see N.Y. Tax Law Sections 1101(b)(4)(i),

1105(a). The sales tax contains corollary exemptions for property purchased to produce goods and services for sale to consumers. Thus, for example, the clothing manufacturer does not pay sales tax when it purchases sewing machines used to produce the shirts, see N.Y. Tax Law Section 1115(a)(12).