Are the electricity, gas, and fuel purchases a residential condominium association or trailer park makes to heat and light shared areas -- hallways, parking lots, pools, community buildings, water/sewage pumps -- exempt from New York sales tax as residential energy use?

Plain-English summary

Residential condominium associations and trailer parks commonly maintain shared spaces for the exclusive benefit of their own unit owners or tenants -- things like building hallways, parking lots, community buildings or clubhouses, pool areas, and water and sewage pump houses, none of which are open to the general public. The question asked was whether the association's or park's own purchases of fuel oil, coal, propane, natural gas, electricity, and steam (and related services) to heat, light, or run these common areas qualify for New York's residential energy sales tax exemption, given that the purchaser here is the association or park itself rather than an individual homeowner.

New York exempts (reduces to zero the state rate on) energy sources and services used for "residential purposes," defined broadly as any use of a structure or part of a structure as a place of abode. The Department held that common areas exclusively serving residents -- closed to the general public -- count as being used for residential purposes even though the immediate purchaser is the condominium association or trailer park entity, not an individual resident. So energy purchased exclusively to heat or light these areas is exempt from state sales tax (and gets reduced rates or a full exemption locally, if the locality has opted in). Water pumps and sewer pumps serving residential units get the same treatment, since they're considered residential in nature.

Where a facility serves both residential and nonresidential purposes -- say, a mixed-use building with some commercial space -- the Department applies its standard allocation rules: if a single meter or lump-sum bill covers energy that's 75% or more residential use, the whole bill gets the reduced/exempt rate without any certification needed; below that threshold, only the actual residential percentage (calculated under the regulation's formula and rounded to the nearest 10%) gets the favorable rate, and a certification must be filed with the supplier. Notably, the Department expressly overruled two of its own prior opinions on this exact point -- Windsor Square Homes Association (1992) and The Tower At Montauk Condominium (1993) -- to the extent they suggest a contrary conclusion, meaning this 2000 opinion represents the Department's current, controlling position going forward.

What this means for you

Condominium associations, cooperative boards, and trailer park operators

Your own purchases of energy for shared spaces used only by residents -- hallways, parking areas, community rooms, pools, and residential water/sewage pumps -- can qualify for the residential energy exemption even though your association or entity, not an individual owner, is on the utility bill. If any of those spaces are also used for nonresidential purposes (a rented commercial unit, a business office), you'll need to allocate and possibly certify the residential percentage to your energy supplier.

Property managers billing multiple building types on shared meters

Where energy for a mixed residential/nonresidential structure is billed on one meter, use the 75%-threshold rule: 75% or more residential usage gets the whole bill the favorable rate with no certification; below that, only the calculated residential percentage (rounded to the nearest 10%) gets the favorable treatment, and you'll need to file a certification with your supplier to get it.

Accountants and tax professionals

Flag this ruling if you're relying on the Department's older Windsor Square Homes Association (1992) or Tower At Montauk Condominium (1993) opinions on this exact topic -- both are expressly identified here as no longer representing current policy to the extent they conflict with this 2000 conclusion.

Common questions

Q: Does the residential energy exemption apply if the condo association, not an individual homeowner, buys the energy?
A: Yes, as long as the energy is used exclusively for residential-purpose common areas closed to the general public -- the identity of the purchaser (association vs. individual resident) doesn't defeat the exemption.

Q: What if a building has both residential and commercial space on one energy meter?
A: The Department's allocation rules apply: 75% or more residential usage gets the reduced/exempt rate on the entire bill without certification; below 75%, only the calculated residential percentage is exempt, and a certification must be given to the energy supplier.

Q: Are water and sewer pumps serving residential units exempt too?
A: Yes, pumps attached to and serving residential units are treated as residential, so the energy used to run them qualifies for the same exemption (subject to allocation if the pumps also serve nonresidential areas).

Q: Did this ruling change the Department's prior position on this issue?
A: Yes. The Department explicitly stated that to the extent its earlier Windsor Square Homes Association (1992) and Tower At Montauk Condominium (1993) opinions suggest a contrary conclusion, they no longer represent current Department policy.

Citations and references

Statutes and regulations:

• Tax Law § 1105(b)(1)(A) (tax on gas, electricity, refrigeration, and steam)
• Tax Law § 1105-A (residential energy source exemption/reduced rate)
• Tax Law § 1210(a)(3), (b)(3) (local reduced rate authority for residential energy)
• 20 NYCRR § 527.13 (residential energy source exemption; definitions and allocation rules)

Prior rulings referenced (superseded to the extent contrary):

• Windsor Square Homes Association, Adv Op Comm T&F, April 16, 1992, TSB-A-92(34)S
• The Tower At Montauk Condominium, Adv Op Comm T&F, Oct. 5, 1993, TSB-A-93(53)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2000.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a00_31s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(31)S
Sales Tax
August 22, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S970828A

On August 28, 1997, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Cynthia Havey, 2775 Main Street, Buffalo, New York 14214-1703.
The issue raised by Petitioner is whether purchases by residential condominium associations
and trailer parks of energy sources and services which are used for the public areas and facilities
described below are subject to New York State sales tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Residential condominium associations and trailer parks generally maintain areas and facilities
for the general benefit of residents, which are used exclusively by unit owners or tenants and are not
open to the general public. These areas and facilities include hallways in residential buildings,
parking lots, community buildings, pool areas, and water pumps and sewage pump houses.
Petitioner inquires whether purchases of fuel oil, coal, propane, gas, electricity, steam and gas,
electric and steam services, to heat, light or operate these areas and facilities are subject to sales tax.
Applicable Law and Regulations
Section 1105(b)(1)(A) of the Tax Law imposes sales tax on the receipts from every sale,
other than sales for resale, of "gas, electricity, refrigeration and steam, and gas, electric, refrigeration
and steam service of whatever nature.”
Section 1105-A of the Tax Law provides, in part:
(a) Notwithstanding any other provisions of this article, but not for purposes
of the taxes imposed by section eleven hundred seven or eleven hundred eight or
authorized pursuant to the authority of article twenty-nine of this chapter, the taxes
imposed by subdivision (a) or (b) of section eleven hundred five on the receipts from
the retail sale of fuel oil and coal used for residential purposes; the receipts from the
retail sale of wood used for residential heating purposes; and the receipts from every
sale, other than for resale, of propane (except when sold in containers of less than one
hundred pounds), natural gas, electricity, steam and gas, electric and steam services
used for residential purposes shall be paid at the rate of . . . zero percent on and after
October first, nineteen hundred eighty.
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Sales Tax
August 22, 2000

(d) Where a residence is a part of a multiple dwelling or other premises
consisting of residential and non-residential units, or where a portion of a residence
is used for non-dwelling purposes including the conduct of a trade or business, the
tax commission may establish such rules and regulations as may be necessary in
order to allocate to such residence the portion of the sale of energy sources or
services attributable to the residential portion.
Section 1210(a)(3), (b)(3) of the Tax Law authorizes localities to impose local sales and
compensating use tax at a reduced rate on energy sources used for residential purposes.
Section 527.13 of the Sales and Use Tax Regulations provides, in part:
(a) Reduction in rate. (1)
Section 1105-A of the Tax Law provides for
a reduction in the four-percent statewide sales tax rate imposed under sections
1105(a) and 1105(b) of the Tax Law and in the four-percent statewide compensating
use tax rate imposed under section 1110(a) of the Tax Law, as set forth in subdivision
(c) of this section, on the receipts from every sale, other than for resale, used for
residential purposes of:
(i) fuel oil (except diesel motor fuel);
(ii) coal;
(iii) wood (for heating purposes only);
(iv) propane (except when sold in containers of less than 100 pounds);
(v) natural gas;
(vi) electricity;
(vii) steam; and
(viii) gas, electric and steam services.
For purposes of this regulation, the term "energy sources" is used to describe
the abovementioned tangible personal property and services.
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Sales Tax
August 22, 2000

(d) Definitions.
(1) The term “residential purposes” means any use of a structure or part of
a structure as a place of abode, maintained by or for a person, whether or not owned
by such person, on other than a temporary or transient basis with the exclusion of
accommodations subject to tax under subdivision (e) of section 1105 of the Tax Law.
(2) The term “nonresidential purposes” means any use other than for
residential purposes, as defined in paragraph (1) of this subdivision, including any
use in the conduct of a trade, business or profession, whether such trade, business or
profession is carried on by the owner of the structure or some other person.
(3) The term “common area” means any area of the premises of a structure
used without distinction for both residential and nonresidential purposes.
(e) Certification and allocation. (1) Purchases of energy sources used
exclusively for residential purposes shall receive the reduced tax rate without the
necessity of certification.
(2) Where energy sources billed on a single meter or in a lump sum are used
for both residential and nonresidential purposes, and the residential purposes
constitute 75 percent or more of the usage, the entire amount billed shall be taxed at
the reduced sales tax rate without certification. See paragraph (5) of this subdivision
to determine the percentage of residential use.
(3) Where energy sources billed on a single meter or in a lump sum are used
for both residential and nonresidential and less than 75 percent of the usage is for
residential purposes, the purchaser is entitled to the reduced tax rate on only the
percentage of energy sources used for residential purposes. This percentage shall be
determined in accordance with paragraph (5) of this subdivision and shall be rounded
off to the nearest 10 percent. A certificate shall be filed in the form provided and
shall be given by the purchaser to the supplier of the energy sources. In the absence
of such a certificate, the supplier of energy sources shall collect the full tax on the
entire usage.
(4) Where a structure is exclusively used for nonresidential purposes, no
certification or statement is required, since no eligibility for a reduced sales tax rate
shall exist for purchases of energy sources and services.
(5) To determine the percentage of the area of a structure used for residential
purposes, the following formula shall be used by the purchaser of the energy sources

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August 22, 2000

and services: total area of space used for residential purposes, excluding common
areas, divided by the total area (residential and nonresidential), excluding common
areas, equals the percentage rounded off to the nearest 10 percent applicable to use
for residential purposes. Thus, if the percentage before rounding is 74.9 percent, the
percentage when rounded is 70 percent.
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(f)(4) Where a customer is eligible for the reduced tax rate, as a residential
customer described in paragraph (1) or (2) of subdivision (e) of this section, but the
supplier of energy sources has not classified him as a residential user, the customer
should furnish the supplier with a certification.
Opinion
Section 1105-A of the Tax Law exempts energy sources and services used for residential
purposes from New York State sales and use taxes. In the case of residential condominium
associations and trailer parks, under the circumstances described above by Petitioner where the
facilities are closed to the general public, parking lots, play areas, community buildings or club
houses, swimming pools, and hallways and stairways in residential buildings, are used for residential
purposes. Accordingly, energy sources and services purchased exclusively to heat or light the public
areas and facilities described above are exempt from State sales and use taxes, and will be subject
to reduced local rates or exempt from local taxes if the locality has elected to provide reduced rates
or such an exemption, as the case may be.
If a condominium association or trailer park contains areas used for residential purposes and
areas used for nonresidential purposes, e.g. areas used in the conduct of a trade or business, it may
be necessary to allocate the portion of energy sources and services attributable to residential
purposes. Pursuant to Section 527.13(e)(2) of the Sales and Use Tax Regulations, if the energy
sources and services purchased by the condominium association or trailer park are billed on a single
meter or in a lump sum and the energy used for residential purposes constitutes 75% or more of the
usage, calculated in accordance with Section 527.13(e)(5) of the Regulations, then the entire amount
billed will be exempt from State sales and use taxes, and will be subject to reduced local rates or
exempt from local taxes if the locality has elected to provide reduced rates or such an exemption,
as the case may be. On the other hand, pursuant to Section 527.13(e)(3) of the Regulations, if the
residential usage is less than 75%, calculated in accordance with Section 527.13 (e)(5) of the
Regulations, then Petitioner would be entitled to the exemption from State tax (and local tax, or at
a reduced local rate, if applicable) only on the percentage of residential energy usage as applied to
the entire amount billed.

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August 22, 2000

Water pumps and sewer pumps attached to residential units would be considered residential.
Accordingly, energy sources and services used to operate these pumps would be used for residential
purposes and would be exempt from State tax under Section 1105-A of the Tax Law and would be
taxed at a reduced local rate or exempt from local taxes, as the case may be. If water or sewer
pumps, or sewage pump houses, serve both residential and nonresidential areas, energy sources and
services used in their operation may be subject to State and local taxes based on the allocation rules
of Section 527.13(e) of the Sales and Use Tax Regulations described above.
These conclusions represent the current position of the Department. To the extent Windsor
Square Homes Association, Adv Op Comm T&F, April 16, 1992, TSB-A-92(34)S; The Tower At
Montauk Condominium, Adv Op Comm T&F, October 5, 1993, TSB-A-93(53)S, or any other
advice from the Department suggests a contrary conclusion, it does not represent current policy.

DATED: August 22, 2000

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Division

The opinions expressed in Advisory Opinions are limited to
the facts set forth therein.