Starting March 1st, 2020, the New York State Bag Waste Reduction Act authorizes counties and cities to impose a 5 cent paper carryout bag reduction fee on paper carryout bags that certain sales tax vendors provide to customers. This act also imposes a ban on providing plastic bags for carryout.
Who is responsible for collecting the 5 cent paper carryout ban reduction fee?
New York has imposed this fee on certain counties and localities. With that being said, only sales tax vendors that sell tangible personal property (“TPP”) in a locality where the fee is imposed must collect the fee when they provide a paper carryout bag to a customer regardless of whether the TPP being sold is exempt from sales tax.
Localities that impose paper bag fee (Publication 718-B):
- Suffolk County: $0.05
- Tompkins County: $0.05
- New York City: $0.05
The fee will apply to each paper carryout bag that is provided to a customer by a sales tax vendor of TPP. Certain bags and customers are exempt from the fee.
Exempt Bag Means
- 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
- Customers purchasing items using the Supplemental Nutrition Assistance Program (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;
- The United Nations.
Collecting, Reporting, and Remitting the Fee
There are two things to know about the bag reduction fee:
- Is not included in any amount that is subject to sales tax; and
- Must be collected in addition to any sales tax due on the transaction
It is important that the receipt separately states the bag fee and includes the number of bags provided.
- Sales Tax Vendors must report and remit the fee on Schedule E, Paper Carryout Bag Reduction Fee, which is filed as part of their periodic sales tax return.
- Also, the paper carryout bag reduction fee is not included when calculating the vendor collection credit.
Please note that 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 sales tax.
New York Paper Bag Tax
Although many are calling this fee a paper bag tax, technically, it’s only a fixed fee per bag. However, as explained above, the collected fees will be remitted with a sales tax vendor’s monthly, quarterly, or annual sales tax remittance.
- DEC’s Bag Waste Reduction Law: Information for Manufacturers and Retailers
- DEC’s Proposed Part 351, Plastic Bag Reduction, Reuse, and Recycling
- Publication 718-B