Paper carryout bag reduction fee
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DEC will begin enforcement of the state’s ban on single-use plastic carryout bags on October 19, 2020.
As of October 19, 2020, any person required to collect tax must not distribute any plastic carryout bags to its customers unless such bags are exempt bags as provided for in the Bag Waste Reduction Law. Additional information is available at Bag Waste Reduction Law: Information for Manufacturers and Retailers. For assistance with compliance requirements email firstname.lastname@example.org.
Only sales tax vendors that sell tangible personal property in a locality where the fee is imposed must collect the fee when they provide a paper carryout bag to a customer. For a listing of the localities that enacted the fee, visit Publication 718-B, Paper Carryout Bag Reduction Fee.
The five-cent fee applies to each paper carryout bag provided to a customer by a sales tax vendor of tangible personal property, even if the vendor does not sell any tangible personal property or a service to the customer, and regardless of whether the tangible personal property or service sold is exempt from sales tax. Certain bags and certain customers are exempt from the fee (as discussed below).
- used solely to contain or wrap uncooked meat, 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.
For a complete and current list of exempt bags, see DEC’s Bag Waste Reduction Law: Information for Manufacturers and Retailers.
Publication 718-B, Paper Carryout Bag Reduction Fee, lists those localities that have enacted the five-cent paper carryout bag reduction fee.
The paper carryout 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.
The receipt must separately state the bag fee and include 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.
The paper carryout bag reduction fee is not included when calculating the vendor collection credit.
Important: 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.
The five-cent paper carryout bag reduction 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 (such as religious or charitable organizations) that may be exempt from the payment of sales tax are subject to the five-cent paper carryout bag reduction fee.
Only sales tax vendors who sell tangible personal property in a locality that has imposed the fee must collect the fee if they provide paper carryout bags to customers. This includes businesses such as:
- department stores,
- grocery stores,
- convenience stores,
- hardware stores,
- retail stores operated by an exempt organization (such as a charitable organization),
- stores or kiosks that sell cell phones or other electronics and accessories, and
- flea market or craft show vendors.
Businesses that do not sell any tangible personal property are not required to collect the fee. In addition, certain bags are exempt from the fee, including:
- bags used by customers to package bulk items such as produce and candy,
- garment bags provided by dry cleaners,
- bags used to contain newspapers, and
- bags provided by pharmacies to carry prescriptions.
Publication 718-B, Paper Carryout Bag Reduction Fee, lists those localities that have enacted the paper bag fee and will be updated as additional localities impose the bag fee.
If I sell tangible personal property in a locality that imposes the fee, does it matter if some of the items I sell aren’t subject to sales tax?
No. Any business selling tangible personal property in a locality that imposes the fee must charge the fee on the paper carryout bags that it provides to a customer, regardless of whether the items sold are subject to sales tax.
The paper bag fee must be listed as a separate line item, and you must include the number of bags provided. When identifying the fee on the receipt, you may use an abbreviation such as “PCBRF” or similar code that clearly indicates that it represents the paper bag fee.
My business is in an area with a locally administered bag fee that was in effect prior to March 1, 2020 (before the New York State Bag Waste Reduction Act took effect). Do I remit this fee with our sales tax return?
No, businesses cannot remit a locally administered fee to the Tax Department. Your business should continue to follow the local law requirements.
What if my business charges customers for paper bags in a locality that does not impose the paper bag fee?
The business is selling tangible personal property that is subject to tax. Sales tax is due on the amount charged for the paper bag. Report each sale of a paper bag that is subject to tax for the jurisdiction in which the sale was made. Do not report these sales on Schedule E, Paper Carryout Bag Reduction Fee.
What if my business charges more than five cents for a paper bag in a locality that imposes the paper bag fee?
If your business charges more than the five-cent paper bag fee, the additional amount charged in excess of five cents is considered a sale of a bag and is subject to sales tax. The five-cent fee must be a separate line item on the receipt or statement of price, and it must be remitted with your sales tax return on Schedule E, Paper Carryout Bag Reduction Fee. The excess amount is reported on your sales tax return in the jurisdiction where the sale is made.
If your business offers a discount that is not reimbursed by a third party on items sold to customers who use their own bags, the discount represents a reduction in the price of the items sold. You should subtract the amount of the discount from the sales price before calculating the amount of sales tax due on the sale.
Customers purchasing items using SNAP or WIC benefits (whether used as full or partial payment for the items purchased) are exempt from paying the fee. If a business chooses to charge SNAP or WIC customers a fee for paper bags in a locality that has not enacted a paper bag fee, sales tax is due on the amount charged for a bag.