Is a contractor's lease of fuel-distribution equipment from the Port Authority — used to fuel and defuel commercial aircraft it doesn't own — exempt from New York sales tax?

Plain-English summary

Corporation X has an exclusive agreement with the Port Authority of New York and New Jersey to provide fuel receipt, fuel storage, and fueling/defueling services to commercial airlines at certain New York airports, plus separate maintenance contracts (including fueling/defueling) directly with the airlines. X doesn't own the fuel or any of the equipment it uses — under its Port Authority contract, X is required to lease all necessary equipment (hydrant carts, fuel tender trucks, and similar gear) exclusively from the Port Authority and can't procure its own.

New York exempts commercial aircraft, equipment installed on such aircraft, and property used for maintenance and repairs of commercial aircraft from sales and use tax — and separately exempts the services of maintaining, servicing, or repairing commercial aircraft. The Department leaned on an earlier Tax Appeals Tribunal decision holding that this exemption reaches equipment used to maintain and repair commercial aircraft even when the person leasing or purchasing the equipment isn't the aircraft's owner. Fueling and defueling qualify as "maintaining, servicing, or repairing" activities — they keep the aircraft in a condition of fitness, efficiency, readiness, and safety — so X's fueling/defueling services for the airlines are themselves exempt, and X's lease of the equipment used to perform those exempt services (from the Port Authority) is exempt too, even though X neither owns the aircraft nor sells the fuel.

Because the equipment lease is exempt on this ground regardless of who the lessor is, the second question Deloitte & Touche raised — whether the lease would separately be exempt because the Port Authority itself is a tax-exempt government entity — never needs to be answered; it's moot once the first exemption applies. X should give the Port Authority a properly completed Exempt Use Certificate (Form ST-121) so the Port Authority isn't obligated to collect tax on the lease.

What this means for you

Airport ground-service and fueling contractors

You don't need to own the aircraft you service, or sell the fuel itself, to claim the commercial-aircraft exemption on equipment you lease to perform maintenance-type services (like fueling/defueling) — the exemption travels with the exempt service, not with aircraft ownership.

Businesses leasing specialized equipment exclusively from a government authority (like a Port Authority)

If your equipment lease is already exempt because of what the equipment is used for (here, aircraft maintenance), you generally don't need to separately establish that your government lessor also qualifies for its own exemption — one valid exemption basis is enough.

Accountants and tax professionals

This is a clean citation for the "non-owner lessee" rule in the aircraft-maintenance-equipment exemption context — useful any time a service contractor (rather than the aircraft's owner or operator) is the one leasing or purchasing exempt maintenance equipment.

Common questions

Q: Do I need to own the aircraft to claim the commercial aircraft equipment exemption?
A: No — the exemption for machinery/equipment used to maintain or repair commercial aircraft applies to whoever leases or purchases that equipment, even a service contractor who isn't the aircraft's owner.

Q: Does fueling and defueling count as "maintenance" for this exemption?
A: Yes — the Department treats fueling and defueling as activities that keep aircraft in a condition of fitness, efficiency, readiness, or safety, which is the regulatory definition of maintaining/servicing.

Q: Does it matter that the equipment was leased from a government authority?
A: Not here — because the lease was already exempt under the commercial-aircraft equipment exemption, the separate question of the Port Authority's own government-entity exempt status didn't need to be resolved.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(5) (sale, selling or purchase definition); § 1101(b)(17) (commercial aircraft definition)
• Tax Law § 1105(c)(3)(v) (aircraft maintenance/repair services exemption)
• Tax Law § 1115(a)(21) (commercial aircraft equipment exemption)
• Tax Law § 1116(a)(1) (government entity exemption)
• 20 NYCRR § 526.7(a) (sale/selling/purchase definition); § 527.5(a)(3) (maintaining/servicing/repairing); § 528.10(b)(1) (airline definition)
• TSB-M-80(4)S (May 15, 1980, exemptions for commercial aircraft)

Prior rulings and cases referenced:

• Matter of Aero Instruments & Avionics, Inc., TSB-D-95(43)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2002.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a02_28s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-02(28)S
Sales Tax
July 12, 2002

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S010510A

On May 10, 2001, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Deloitte & Touche, LLP, Two World Financial Center, 8th Floor, New York,
New York, 10281.
The issues raised by Petitioner, Deloitte & Touche, LLP, are:
1) Whether receipts from the lease of equipment used to distribute fuel to commercial aircraft
are exempt under Section 1115(a)(21) of the Tax Law.
2) Whether receipts from the lease of such equipment from the Port Authority of New York
and New Jersey (Port Authority) are exempt as a result of the Port Authority's exempt status under
Section 1116(a)(1) of the Tax Law.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner’s client, Corporation X (X), is a for profit corporation doing business in New
York. X has an exclusive agreement with the Port Authority allowing X to provide fuel receipt
services, fuel storage services and fueling and defueling services to commercial airlines at certain
New York airports. Additionally, X contracts with commercial airlines to perform certain
maintenance services, including fueling and defueling services, related to the commercial aircraft
of the airlines. X owns neither the fuel nor the property used to perform the above-mentioned
services.
As part of the exclusive operating contract with the Port Authority, X must lease the
necessary equipment from the Port Authority. The equipment includes hydrant carts, fuel tender
trucks, etc. As additional equipment is needed, X requisitions the equipment from the Port
Authority. X is not allowed to procure equipment on its own to perform the relevant services. Any
equipment necessary must be leased from the Port Authority.
Applicable Law and Regulations
Section 1101(b) of the Tax Law provides, in part:
When used in this article for the purposes of the taxes imposed by
subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section
eleven hundred ten, the following terms shall mean:

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July 12, 2002

(5) Sale, selling or purchase. Any transfer of title or possession or both,
exchange or barter, rental, lease or license to use or consume . . . conditional or
otherwise, in any manner or by any means whatsoever for a consideration, or any
agreement therefor, including the rendering of any service, taxable under this article,
for a consideration or any agreement therefor.
*

*

*

(17) Commercial aircraft. Aircraft used primarily (i) to transport persons or
property, for hire, (ii) by the purchaser of the aircraft primarily to transport such
person's tangible personal property in the conduct of such person's business, or (iii)
for both such purposes.
Section 1105 of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby
imposed and there shall be paid a tax of four percent upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
*

*

*

(3) Installing tangible personal property . . . or maintaining, servicing or
repairing tangible personal property . . . whether or not the services are performed
directly . . . or by any other means, and whether or not any tangible personal property
is transferred in conjunction therewith, except:
*

*

*

(v) such services rendered with respect to commercial aircraft,
machinery or equipment and property used by or purchased for the use of
such aircraft as such aircraft, machinery or equipment, and property are
specified in paragraph twenty-one of subdivision (a) of section eleven
hundred fifteen of this article . . . .
Section 1115(a)(21) of the Tax Law exempts from the sales and compensating use tax:

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Commercial aircraft primarily engaged in intrastate, interstate or foreign
commerce, machinery or equipment to be installed on such aircraft and property used
by or purchased for the use of such aircraft for maintenance and repairs and flight
simulators purchased by commercial airlines.
Section 1116(a) of the Tax Law provides, in part:
Except as otherwise provided in this section, any sale or amusement charge
by or to any of the following or any use or occupancy by any of the following shall
not be subject to the sales and compensating use taxes imposed under this article:
(1) The State of New York, or any of its agencies, instrumentalities, public
corporations (including a public corporation created pursuant to agreement or
compact with another state or Canada) or political subdivisions where it is the
purchaser, user or consumer, or where it is a vendor of services or property of a kind
not ordinarily sold by private persons . . . .
Section 526.7(a) of the Sales and Use Tax Regulations provides, in part:
Definition. (1) The words sale, selling or purchase mean any transaction in
which there is a transfer of title or possession, or both, of tangible personal property
for a consideration.
(2) Among the transactions included in the words sale, selling or purchase are
exchanges, barters, rentals, leases or licenses to use or consume tangible personal
property.
Section 527.5(a)(3) of the Sales and Use Tax Regulations provides, in part:
Maintaining, servicing and repairing are terms used to cover all activities that
relate to keeping tangible personal property in a condition of fitness, efficiency,
readiness or safety or restoring it to such condition.
Section 528.10(b)(1) of the Sales and Use Tax Regulations provides the following definition
of commercial airline:
(b) Airline defined. (1) An airline is:
(i) an air carrier of persons, property and mail operating under
a certificate of public convenience and necessity issued by the Civil

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Aeronautics Board, or a foreign air carrier holding an equivalent
certificate issued by the carrier's respective sovereign government;
(ii) an air carrier holding a certificate for all-cargo air service
issued by the Civil Aeronautics Board; or
(iii) an air taxi operator, who is classified by the Civil
Aeronautics Board as a commuter air carrier, or who (a) performs at
least five round trips per week between two or more points, and
publishes flight schedules which specify the times and days of the
week and places between which such flights are performed, or (b)
transports mail by air pursuant to contract with the United States
Postal Service. This exemption shall extend to the purchase of fuel
for use in such commuter flights.
Opinion
Petitioner asks whether receipts from the lease of equipment used to distribute fuel to
commercial aircraft are exempt under Section 1115(a)(21) of the Tax Law.
X contracts with commercial airlines to perform certain maintenance services, including
fueling and defueling services, related to the commercial aircraft of the airlines. X owns neither the
fuel nor the property used to perform the above-mentioned services nor is X in the business of
selling tangible personal property including fuel. In the Matter of Aero Instruments & Avionics,
Inc., Dec Tax App Trib, October 5, 1995, TSB-D-95(43)S, the Tax Tribunal determined that, except
for flight simulators, purchases and leases of machinery and equipment used to repair and maintain
commercial aircraft are exempt from sales tax pursuant to Section 1115(a)(21) of the Tax Law even
though the purchaser or lessee of such machinery or equipment is not the owner of the commercial
aircraft upon which the services are performed.
The services of fueling and defueling commercial aircraft are activities that relate to keeping
commercial aircraft in a condition of fitness, efficiency, readiness or safety and the charges for such
services are exempt from sales tax under Section 1105(c)(3)(v) of the Tax Law. See
Technical Service Bureau Memorandum, Exemptions for Commercial Aircraft, May 15, 1980,
TSB-M-80(4)S. Under the facts submitted by Petitioner which indicate that X does not sell fuel to
the airlines but provides fueling and defueling services, purchases or leases of the equipment used
to perform such services by X from the Port Authority are exempt from the sales and use
tax. See Section 1115(a)(21) of the Tax Law. X should provide the Port Authority with an
Exempt Use Certificate (Form ST-121), in order to relieve the Port Authority of any obligation to
collect the tax.

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With respect to Issue 2, it is noted that governmental entities are generally responsible for
the collection of tax on their sales of tangible personal property which is of a kind ordinarily sold
by private persons. However, since the rental of equipment by X for use in fueling and defueling
commercial aircraft is exempt pursuant to Section 1115(a)(21) of the Tax Law, Issue 2 is moot.

DATED: July 12, 2002

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

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