Are welding gases, cylinders, regulators, hoses, and related supplies exempt from New York sales tax when sold to farmers who use them to repair and maintain farm production equipment?

Plain-English summary

Airgas East, Inc. manufactures and distributes medical and industrial gases (oxygen, acetylene, helium, nitrogen, argon) plus related supplies like welders, cylinders, hoses, regulators, welding screens, and fire blankets. Many of its agricultural-producer customers use these products for welding — repairing and maintaining farm equipment and machinery, or occasionally fences and other farm real property. Airgas posed five specific questions about how New York's farm-production sales tax exemption applies to each category of product it sells, assuming its customers otherwise qualify as exempt agricultural producers.

The Department worked through each in turn, all keyed to whether the item is used "predominantly" (more than 50%) to repair or maintain equipment essential to farm production:

1. Welding gases used to repair farm production equipment (like tractors) are exempt — gas sold in cylinders counts as tangible personal property (not a taxable utility "gas service"), and welding gas is closely enough tied to the production process to qualify, following a 2000 law change that dropped the old "directly" requirement.
2. Cylinders (sold, rented, or leased) and their accessories (regulators, gauges, hoses, torches, tips, flashback arresters) are exempt on the same basis when used predominantly for farm-equipment repair, since they're an integral part of the welding process. Cylinder repair/maintenance services and replacement parts are exempt too, when the cylinders themselves are used in farm production — but only if the farmer, not Airgas, owns or leases the cylinders; if Airgas owns cylinders it uses in its own gas-selling business, it owes tax on their repairs itself.
3. Storage items like cylinder carts, wall brackets, and cylinder caps have no specific exemption of their own — only welding rods that literally become a physical component of the repaired equipment qualify, under the separate integral-component-part exemption.
4. Welding machines and safety products (screens, fire blankets) used in the repair/maintenance of farm equipment are exempt on the same predominant-use theory — but signage ("WARNING," "DANGER" signs) isn't, since signs aren't actually part of the welding process itself, even though they serve a safety purpose nearby.
5. Helium used to inflate advertising balloons is fully taxable — no matter that the purchaser is a farm, inflating promotional balloons isn't farm production, so none of the farm exemptions apply.

What this means for you

Agricultural suppliers selling welding/industrial gas products

Break your product line into the same three buckets the Department used: (a) items directly part of the welding/repair process (gases, cylinders, accessories) — generally exempt when predominantly used on farm equipment; (b) items that only become exempt if they physically become part of the repaired property (welding rods, integral parts); and (c) items with no farm-production nexus at all (signage, non-farm uses like balloon helium) — fully taxable.

Farmers and farm-equipment repair shops

The predominant-use (more than 50%) test applies per item, not to your whole operation — a welding machine or set of cylinders used mostly to fix production equipment can be exempt even if the same shop also does some non-farm work.

Accountants and tax professionals

Note the ownership wrinkle buried in Question 2: cylinder repair services are exempt only when the cylinders are owned or leased by the farmer-customer — if the gas vendor itself owns the cylinders it rents out, the vendor (not the farmer) bears the tax on repairing them, since the resale exemption doesn't cover cylinders that are merely "purely incidental" to the vendor's gas-selling business (citing Matter of Albany Calcium Light Co.).

Common questions

Q: Is all gas sold in cylinders treated as tax-exempt "gas service"?
A: No — gas sold in containers or cylinders (as opposed to piped utility service) is treated as tangible personal property, taxable unless a specific exemption like the farm-production exemption applies.

Q: Does the farm exemption cover safety signage near a welding area?
A: No — signage isn't considered part of the actual welding or repair process, even though it serves a safety function, so it doesn't qualify under the farm-production exemption.

Q: Would helium used for something other than balloons — say, purging equipment — be treated differently?
A: Potentially yes, if it were actually used in the farm production process; this ruling only addressed helium used to inflate advertising balloons, which has no connection to farm production at all.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4)(i) (resale exclusion for repair-service components)
• Tax Law § 1105(a) (retail sales tax); § 1105(b)(1)(A) (gas/electric/steam service); § 1105(c)(3)(vi) (farm-production repair exception); § 1105(c)(5) (real property maintenance; farm exception)
• Tax Law § 1115(a)(6)(A) (farm-production tangible personal property exemption); § 1115(a)(15), (16) (contractor purchases for farm real property); § 1115(c)(2) (fuel/gas/electric service for farm production)
• 20 NYCRR § 526.8(b) (gas in containers); § 527.2(b)(3) (small-cylinder gas sales)
• TSB-M-00(8)S (Farmers and Commercial Horse Boarding Operations, Sept. 13, 2000)

Cases referenced:

• Matter of Albany Calcium Light Co. v. State Tax Comm., 44 NY2d 986

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_16s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(16)S
Sales Tax
April 4, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S010709A

On July 9, 2001, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Airgas East, Inc., 17 Northwestern Drive, Salem, NH 03079.
Petitioner, Airgas East, Inc., submitted the following facts as the basis for this Advisory
Opinion.
Petitioner is a manufacturer and distributor of medical and industrial gases and related
supplies. The gases that are sold by Petitioner include, but are not limited to, oxygen, acetylene,
helium, nitrogen, and argon. Additionally, supplies that are provided by Petitioner include personal
protective equipment, welders, cylinders, hoses, regulators, welding screens, and fire blankets.
Petitioner’s products are sold to and used by many different types of businesses, including
agricultural producers.
Typically, the products which are sold by Petitioner are utilized by agricultural producers
in welding applications for the maintenance and repair of farm equipment and machinery. They may
also be utilized to maintain farm buildings and other real property, such as fences. For purposes of
this Petition, it is assumed that Petitioner’s customers are producing property for sale in a qualifying
agricultural activity eligible for exemption from sales tax under Sections 1115(a)(6)(A) and
1115(c)(2) of the Tax Law.
Petitioner asks whether the receipts from the sales of its products are exempt from tax as
property purchased for use or consumption predominantly in the production for sale of tangible
personal property by farming. Petitioner sets forth five questions, which are found in the opinion
portion of this Advisory Opinion, concerning the application of the New York State sales and use
tax to the sale of its products to agricultural producers.
Applicable Law and Regulations
Section 1105 of the Tax Law imposes sales tax, in part, on:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
(b) (1) The receipts from every sale, other than sales for resale, of the
following: (A) gas, electricity, refrigeration and steam, and gas, electric, refrigeration
and steam service of whatever nature. . . .
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(c) The receipts from every sale, except for resale, of the following services:
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(3) . . . maintaining, servicing or repairing tangible personal property . . . not
held for sale in the regular course of business . . . whether or not any tangible
personal property is transferred in conjunction therewith, except:
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(vi) such services rendered . . . with respect to tangible personal property for
use or consumption predominantly either in the production for sale of tangible
personal property by farming or in a commercial horse boarding operation, or in
both, as such tangible personal property is specified in paragraph six of subdivision
(a) of section eleven hundred fifteen of this article. The exemption provided by this
subparagraph shall not apply to the taxes imposed pursuant to section eleven hundred
seven of this article.
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(5) Maintaining, servicing or repairing real property, property or land, as such
terms are defined in the real property tax law, whether the services are performed in
or outside of a building . . . but excluding . . . services rendered with respect to real
property, property or land used or consumed predominantly either in the production
of tangible personal property, for sale, by farming or in a commercial horse boarding
operation, or in both.
Section 1115 of the Tax Law provides, in part:
(a) Receipts from the following shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating
use tax imposed under section eleven hundred ten:
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(6)(A) Tangible personal property, whether or not incorporated in a building
or structure, for use or consumption predominantly either in the production for sale
of tangible personal property by farming or in a commercial horse boarding
operation, or in both.
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(15) Tangible personal property sold to a contractor, subcontractor or
repairman for use in (i) erecting a structure or building . . . used predominantly either
in the production phase of farming or in a commercial horse boarding operation, or
in both, or (ii) adding to, altering or improving real property, property or land . . .
used predominantly either in the production phase of farming or in a commercial
horse boarding operation, or in both, as the terms real property, property or land are
defined in the real property tax law; provided, however, no exemption shall exist
under this paragraph unless such tangible personal property is to become an integral
component part of such structure, building or real property.
(16) Tangible personal property sold to a contractor, subcontractor or
repairman for use in maintaining, servicing or repairing real property, property or
land . . . used predominantly either in the production phase of farming or in a
commercial horse boarding operation, or in both, as the terms real property, property
or land are defined in the real property tax law; provided, however, no exemption
shall exist under this paragraph unless such tangible personal property is to become
an integral component part of such structure, building or real property.
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(c)(2) Fuel, gas, electricity, refrigeration and steam, and gas, electric,
refrigeration and steam service of whatever nature for use or consumption either in
the production of tangible personal property, for sale, by farming or in a commercial
horse boarding operation, or in both, shall be exempt from the taxes imposed under
subdivisions (a) and (b) of section eleven hundred five and the compensating use tax
imposed under section eleven hundred ten of this article.
Section 526.8(b) of the Sales and Use Tax Regulations provides, in part:
Gas, electricity, refrigeration and steam are not considered tangible personal
property for the purpose of the tax imposed on utility services. Gas sold in
containers or in bulk for purposes other than heating, cooking or lighting is
considered tangible personal property. . . .
Section 527.2(b)(3) of the Sales and Use Tax Regulations provides:
Sales of gas in containers or cylinders having a capacity of less than 100
pounds of gas are considered to be sales of tangible personal property subject to tax
under subdivision (a) of section 1105 of the Tax Law and not the sale of gas service
or gas for the purposes of this section.
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Example 5:

A welding shop purchases a tank of oxygen and a tank of
acetylene. The transaction is not the purchase of a gas service
but is the purchase of tangible personal property.

Opinion
The following are the questions presented by Petitioner concerning its sales and the
appropriate answers:
1.

Petitioner’s agricultural customers utilize the fuel and shielding (inert) gases during
their welding processes. The gases provide the heat and environmental conditions
necessary to ensure a proper weld. Typically, the items will be used in the maintenance
and repair of farm production equipment, such as tractors.
Q. Do the gases, as described, qualify for exemption from the sales and use tax under
either Section 1115(a)(6)(A) or 1115(c)(2) of the Tax Law?
A. The sale of welding gas is considered the sale of tangible personal property and not the
sale of a gas service. See Sections 526.8(b) and 527.2(b)(3) of the Sales and Use Tax
Regulations. Section 1115(a)(6)(A) of the Tax Law provides an exemption from sales and
use tax on purchases of tangible personal property used “predominantly” (more than 50%)
in the production of tangible personal property for sale by farming. Effective September 1,
2000, Chapter 63 of the Laws of 2000 eliminated the requirement that property be used
“directly” in the production phase of farming in order to be eligible for exemption under
Section 1115(a)(6)(A) of the Tax Law.
Technical Services Bureau Memorandum Farmers and Commercial Horse Boarding
Operations, September 13, 2000, TSB-M-00(8)S, describes supplies used in administrative
activities (e.g., maintaining feed or animal weight records) related to production as an
example of tangible personal property that, beginning September 1, 2000, is considered to
be used in farm production. Petitioner’s welding gas is as closely related to the production
process as these administrative activities are related to production. Accordingly, welding
gases used predominantly to repair production equipment essential to the farm production
process qualify for exemption from sales tax under Section 1115(a)(6)(A) of the Tax Law.
See TSB-M-00(8)S, supra.

2.

The gases described in Question #1 are provided in specially designed cylinders that
are essential to maintaining the conditions necessary in order to utilize the gases.
There is no other way of conveying these products. The cylinders are returnable and
refillable. They may be purchased, leased or rented by Petitioner’s customers.
Although durable, the cylinders occasionally require repair, refurbishment, painting,
and the replacement of parts. Periodic hydrostatic testing, which ensures the integrity
and the safety of the cylinders, is required by law.

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Additionally, various accessories are needed in order to remove the gases from the
cylinders and utilize them for their intended purposes, such as:
– regulators required to control the pressure of the cylinderized gases;
– gauges used in conjunction with the regulators to display the gas pressures;
– hoses necessary to connect and allow the passage of gases from the regulator to the
torch;
– the torch that directs the flow of the gases;
– the welding or cutting tip that is mounted on the end of the torch handle through
which the gas mixture feeds the flame; and
– flashback arresters (safety devices) that shut off the gas flow if a flashback occurs
within the hose.
Q. 2a. Will the sale, rental, or lease of cylinders qualify for the exemption from sales
tax available under Section 1115(a)(6)(A) of the Tax Law?
A. Yes, when such cylinders are used predominantly to repair production equipment
essential to the farm production process. The cylinders are considered items eligible for the
farming exemption provided under Section 1115(a)(6)(A) of the Tax Law for the same
reason as given in Question #1, i.e., they form a part of the production operation because
they are an integral part of the welding process. Accordingly, Petitioner’s receipts from the
sale, rental, or lease of gas cylinders to its customers for the described use are not subject to
tax.
Q. 2b. Will the sale of cylinder accessory items, as described above, qualify for the
exemption available under Section 1115(a)(6)(A)?
A. Yes. The cylinder accessory items, like the cylinders, are considered to be used in the
production phase of farming when used predominantly to repair production equipment
essential to the farm production process and are therefore eligible for this exemption.
Q. 2c. Will the cylinder repair and maintenance services and replacement parts
qualify for exemption?
A. The services of repair and maintenance of tangible personal property are included in
Section 1105(c)(3) of the Tax Law as taxable services, with an exception being made in
Section 1105(c)(3)(vi) for these services to property that is used predominantly in the
production for sale of tangible personal property by farming. Since the cylinders are used
in the production phase of farming (see Question #2a above), the repair and maintenance of
the cylinders by farmers are also excepted by Section 1105(c)(3)(vi). Likewise, replacement
parts purchased by farmers for repair of cylinders used by them in farm production
operations are exempt from tax.

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Purchases of parts by Petitioner for sale to farmers as components of a repair service are
exempt if the components are actually transferred to the farmer in conjunction with the
performance of a repair service. See Section 1101(b)(4)(i) of the Tax Law.
It should be noted that, generally, the resale exemption does not apply to purchases of gas
cylinders used by a vendor of gas and occasionally rented to customers where the receipts collected
for the rentals are “purely incidental” to the vendor’s primary business of selling gas. (See Matter
of Albany Calcium Light Co. v. State Tax Comm., 44 NY2d 986, 988). The answer for Q.2c.
presumes that the repairs are purchased by farmers for cylinders owned or leased by the farmers.
If, however, Petitioner is the owner of the cylinders which it is using in its business of selling gas
to customers, Petitioner will owe tax on its costs for the repairs to the cylinders.
3.

Petitioner also sells items which are used by agricultural producers for the proper
storage of cylinders and welding supplies. For example, cylinder carts and wall
brackets are used by Petitioner’s customers to safely store cylinders in a secure and
upright manner. Cylinder caps are screwed onto the top of the cylinder when not in
use in order to protect the cylinder valves. Rod guards are used for the storage of
welding rods, which become a physical component of the property repaired.
Q. Will Petitioner’s sales of property of the type described above qualify for exemption
from sales and use tax?
A. With the exception of items which become a physical component of property repaired,
or added to or improved, no specific statutory exemption exists with regard to Petitioner’s
sales of the property described above. Welding rods sold to a contractor, subcontractor, or
repairman for use in repairing and maintaining real or tangible personal property used
predominantly in the production phase of farming are exempt from the imposition of sales
tax, provided they become an integral component part of such real or tangible personal
property. See Section 1115(a)(16) of the Tax Law.

4.

Q. Will the purchase or lease of the following items by Petitioner’s agricultural
customers qualify for exemption from sales and use tax under Section 1115(a)(6)(A) of
the Tax Law as tangible personal property for use or consumption in the production
for sale of tangible personal property by farming?
– welding machines which will be used predominantly in the repair and maintenance
of exempt production equipment;
– safety products (which do not qualify as personal protective items) that are utilized
to ensure safety during the welding process, such as:

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•

welding screens – these are typically flame retardant vinyl or PVC
screens which surround the welding work area and block sparks and UV
rays; they may be free-standing or permanently installed.

•

fire blankets – these are used in an emergency to smother flaming
clothing or objects.

•

signage – these include signs such as “WARNING,” “DANGER,” and
“HAZARD,” which are intended to ensure the safety of farm personnel
and visitors.

A. With the exception of signage, which is not actually a part of the welding process, sales
of the above items qualify for exemption. See Question #1. The functions of the above
described items used in conjunction with the repair and maintenance of farm production
equipment occur during and in connection with welding operations.
5.

Q. Helium is sometimes purchased by agricultural producers. The helium is typically
used to inflate balloons which are used for advertising purposes. Would the helium
which is used in this manner qualify for exemption from sales and use tax?
A. There is no provision in the Tax Law to exempt the sale of helium gas for such purpose.
Helium used in this manner is not used in farm production for purposes of Section
1115(a)(6)(A) of the Tax Law. Accordingly, sales of helium gas used to inflate balloons are
subject to tax under Section 1105(a) of the Tax Law. See Sections 526.8(b) and 527.2(b)(3)
of the Sales and Use Tax Regulations.

DATED:

April 4, 2003

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.