New York Implements Paper Carryout Bag Reduction Fee

Effective March 1, 2020, the state of New York authorizes counties and cities the option to impose a five-cent paper carryout bag reduction fee when sales tax vendors of tangible personal property provide paper carryout bags, other than exempt bags, to customers. The bag fee applies to each paper carryout bag provided to a customer, even if the vendor does not sell any tangible personal property or services to a customer, and regardless of whether the tangible personal property or service is tax exempt. Localities that will impose the paper bag fee beginning March 1, 2020, are:

• New York City
• Suffolk County
• Tompkins County

The paper carryout bag reduction fee is not included in any amount that is subject to sales tax and it must be collected in addition to any sales tax due on the transaction. Sellers should note that receipts must separately state the bag fee and include the number of bags provided. Sellers must report and remit the bag fee on Schedule E, Paper Carryout Bag Reduction Fee, which is filed as part of their sales tax return. Note that the bag fee is not included when calculating the vendor collection credit.

Any vendor who charges a customer for a paper carryout bag in a jurisdiction that does not impose a fee (or charges in excess of a locally imposed fee) is selling tangible personal property subject to tax.

Effective March 1, 2020. New York also bans businesses from providing plastic carryout bags to customers, unless such bags are exempt. Exempt bags are bags that are:

• used solely to contain or wrap uncooked, fish, or poultry;
• used by a customer solely to package bulk items such as fruits, vegetables, grains, or candy;
• used solely to contain food sliced or prepared to order;
• used solely to contain a newspaper for delivery to a subscriber;
• sold in bulk to a consumer at the point of sale;
• a trash bag;
• a food storage bag;
• a garment bag;
• prepackaged for sale to a customer;
• a plastic carryout bag provided by a restaurant, tavern, or similar food service establishment, as defined in the state sanitary code, to carry out or deliver food; or
• provided by a pharmacy to carry prescription drugs.

The paper carryout bag fee does not apply to:

• customers purchasing items using the Supplemental Nutrition Assistance Program (SNAP) (whether used as full or partial payment for items purchased);
• customers purchasing items using the Women, Infants, and Children (WIC) Program (whether used as full or partial payment for the items purchased);
• the State of New York and its agencies and instrumentalities;
• the United States of America and its agencies and instrumentalities; or
• the United Nations.

Other entities that may be exempt from sales tax, such as religious or charitable organizations, are subject to the paper carryout bag fee. For additional information and resources, visit New York’s Paper Carryout Bag Reduction Fee webpage. (Paper Carryout Bag Reduction Fee, New York Department of Taxation and Finance, February 2020; Publication 718-B, New York Department of Taxation and Finance, February 2020)