Does a commercial landlord have to charge sales tax when it resells submetered electricity to tenants, and are its CAM and trash-removal charges also taxable?

Plain-English summary

A commercial landlord in New York buys electricity from a utility through one master meter, then resells it to office tenants through submeters that track each tenant's actual usage. Tenants are billed monthly based on their submeter reading, and some also pay a management fee covering the cost of reading meters and billing. Separately, tenants pay a fixed monthly common-area-maintenance (CAM) charge — labeled "additional rent" in their leases — that includes an allocated share of common-area electricity based on square footage. Tenants also pay a flat monthly fee for trash removal, again based on square footage rather than actual trash volume, with no option to hire an outside hauler.

The Department split this into several separate answers. The submetered electricity resale IS a taxable sale of electric service: by billing tenants based on actual usage, the landlord becomes a vendor making sales of electricity and must register, collect, and remit sales tax — and the meter-reading/billing fee is part of the taxable receipt too, since it just reimburses the landlord's cost of providing the utility. But the CAM charge is NOT taxable, even though it embeds an electricity cost, because it's billed as "additional rent" for real property rather than as a discrete utility sale — a rule going back to a 1984 memo on shopping-mall CAM charges. Trash removal billed to tenants is also NOT taxable, because it's a flat, lease-required charge incidental to renting the space, not tied to actual service volume — though the landlord's own purchase of trash removal from an outside hauler IS taxable.

On the purchase side, because the landlord consumes some of the master-metered electricity itself (in common areas) rather than reselling all of it, it can't buy the electricity tax-free with a resale certificate — it must pay tax on the entire purchase from the utility, then apply for a refund or credit for the portion it actually resold to tenants. Finally, because utility sales are billed periodically, tax on each tenant's resold electricity is treated as due for the period in which the submeter is actually read, not necessarily when the tenant pays.

What this means for you

Landlords who submeter electricity to commercial tenants

If you resell electricity to tenants based on actual submeter readings, you're a vendor for sales tax purposes on those charges, including any add-on administrative fee — you need to register, collect tax from tenants, and remit it (whether or not you actually collected it from a tenant). You cannot use a resale certificate to buy electricity tax-free from the utility unless you resell 100% of it; if any goes to common-area use, expect to pay tax up front and later apply for a refund or credit on the resold share.

Landlords billing CAM and trash-removal charges

Bundling an electricity cost into a CAM charge labeled "additional rent" keeps that whole charge out of the sales tax base — but your own purchases of utilities, supplies, and services to maintain those common areas remain taxable to you. Flat, lease-mandated trash removal billed to tenants (with no outside-vendor option) is also non-taxable to them, but paying an outside hauler to actually do the hauling is a taxable purchase for you.

Accountants and property managers

This ruling is a useful template for any submetering/CAM/ancillary-service fact pattern: check each charge separately against its own taxability rule (utility resale vs. rent vs. incidental service) rather than assuming one label covers the whole tenant bill.

Common questions

Q: Do I have to charge sales tax on electricity I resell to tenants through submeters?
A: Yes. Billing tenants based on actual submeter usage makes you a vendor of electric service, and that receipt — including any administrative/meter-reading fee — is taxable.

Q: Is my CAM charge to tenants taxable, even if it includes an electricity component?
A: No, as long as it's billed as "additional rent" under the lease rather than as a separate utility sale, following long-standing Department guidance on shopping-mall CAM charges.

Q: Can I buy electricity from the utility tax-free if I'm going to resell some of it?
A: Only if you resell all of it. If any portion is consumed by you (e.g., in common areas), you must pay tax on the full purchase and then seek a refund or credit for the resold share.

Q: Does this ruling apply to my building?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to; other landlords should confirm their own facts match before relying on it.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(3) (definition of taxable "receipt")
• Tax Law § 1105(b)(1)(A) (tax on electricity and electric service)
• Tax Law § 1105(c)(5) (maintaining, servicing or repairing real property)
• Tax Law § 1132(c)(1) (presumption of taxability)
• Tax Law §§ 1133(a), 1134(a)(1)(i), 1136(a) (vendor liability, registration, filing)
• Tax Law § 1139(a) (refund/credit procedure)
• 20 NYCRR 525.2, 527.2, 527.7(a)(1), 532.1(a)(2)
• TSB-M-84(9)S, Charges By Shopping Mall Operators (CAM as additional rent)

Prior rulings/cases referenced:

• Matter of Mutual Redevelopment Houses, Inc. v Roth, 307 AD2d 422 (3d Dept 2003)
• Jeffrey J. Coren CPA, P.C., TSB-A-06(21)S
• Bruce A. Mekul, CPA, TSB-A-05(8)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2007.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a07_8s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-07(8)S
Sales Tax
March 19, 2007

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S060321A

On March 21, 2006, the Department of Taxation and Finance received a Petition for
Advisory Opinion from M. B. Real Estate, LLC/Seven Hanover Associates, 181 West Madison,
Suite 3900, Chicago, Illinois 60602. Petitioner, M.B. Real Estate, LLC/Seven Hanover
Associates, submitted additional information with respect to the Petition on January 30, 2007.
The issues raised by Petitioner are:

1. Whether a landlord’s charges to a tenant for electricity or electric service, including
   administrative charges, are subject to sales tax.
2. Whether a landlord’s common area maintenance charges (CAM charges) to its tenants
   are subject to sales tax.
3. Whether a landlord's purchases of electricity from a utility, as described below, are
   subject to sales tax.
4. When is the sales tax due on a landlord's sales of electricity that are subject to tax.
5. Whether a landlord’s charges to a tenant for trash removal services are subject to sales
   tax.
   Petitioner submits the following facts as the basis for this Advisory Opinion.
   Petitioner's client (hereinafter “Landlord”) owns a commercial building in New York
   State and leases office space to business tenants. Landlord purchases electricity from a utility
   company through a master meter. Landlord distributes electricity to tenants through submeters.
   Tenants are billed monthly for electricity based on submeter readings. The rate charged to
   tenants is determined by using Landlord's cost per kilowatt hour of electricity multiplied by the
   submetered usage. In addition to the cost per kilowatt hour, some tenants are charged a
   management fee that covers the cost of reading the meter, billing, and administration of the
   submetering.
   Tenants are billed a separate amount for CAM charges, which include a charge for
   electrical usage in the common areas. A survey and tenant’s leased square footage are used to
   estimate electrical usage for the common areas, and tenants pay CAM charges based on the
   survey and square footage. Tenants are billed a fixed, monthly CAM charge for the year that is
   identified in Landlord’s tenant leases as additional rent.

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Landlord provides trash removal for tenants pursuant to the terms of the lease.
Landlord’s charge to tenants for trash removal is based on square footage leased and is the same
amount each month. The amount of trash generated by the tenant is not reflected in the monthly
charge. The tenants do not have the option of hiring an outside contractor for trash removal.
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:
*

*

*

(3) Receipt. The amount of the sale price of any property and the charge for any
service taxable under this article, including gas and gas service and electricity and electric
service of whatever nature, valued in money, whether received in money or otherwise,
including any amount for which credit is allowed by the vendor to the purchaser, without
any deduction for expenses or early payment discounts and also including any charges by
the vendor to the purchaser for shipping or delivery, and, with respect to gas and gas
service and electricity and electric service, any charges by the vendor for transportation,
transmission or distribution, regardless of whether such charges are separately stated in
the written contract, if any, or on the bill rendered to such purchaser and regardless of
whether such shipping or delivery or transportation, transmission, or distribution is
provided by such vendor or a third party, but excluding any credit for tangible personal
property accepted in part payment and intended for resale. . . .
*

*

*

(8) Vendor. (i) The term "vendor" includes:
(A) A person making sales of tangible personal property or services, the receipts
from which are taxed by this article;
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax. On and after June first, nineteen hundred seventy-one,
there is hereby imposed and there shall be paid a tax . . . upon:
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*

*

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(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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*

(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, as distinguished from adding to or improving such real property,
property or land, by a capital improvement as such term capital improvement is defined
in paragraph nine of subdivision (b) of section eleven hundred one of this article, . . .
Section 1132(c)(1) of the Tax Law provides, in part:
For the purpose of the proper administration of this article and to prevent evasion
of the tax hereby imposed, it shall be presumed that all receipts for property or services of
any type mentioned in subdivisions (a), (b), (c) and (d) of section eleven hundred five . . .
are subject to tax until the contrary is established, and the burden of proving that any
receipt . . . is not taxable hereunder shall be upon the person required to collect tax or the
customer. . . . unless (i) a vendor, not later than ninety days after delivery of the property
or the rendition of the service, shall have taken from the purchaser a resale or exemption
certificate in such form as the commissioner may prescribe . . . or (ii) the purchaser, not
later than ninety days after delivery of the property or the rendition of the service,
furnishes to the vendor: any affidavit, statement or additional evidence, documentary or
otherwise, which the commissioner may require demonstrating that the purchaser is an
exempt organization described in section eleven hundred sixteen, the sale shall be
deemed a taxable sale at retail. . . .
Section 1133(a) of the Tax Law provides:
Except as otherwise provided in section eleven hundred thirty-seven, every person
required to collect any tax imposed by this article shall be personally liable for the tax
imposed, collected or required to be collected under this article. Any such person shall
have the same right in respect to collecting the tax from his customer or in respect to
nonpayment of the tax by the customer as if the tax were a part of the purchase price of
the property or service, amusement charge or rent, as the case may be, and payable at the
same time; provided, however, that the tax commission shall be joined as a party in any
action or proceeding brought to collect the tax.

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Section 1134(a)(1)(i) of the Tax Law provides, in part:
Every person required to collect any tax imposed by this article . . . shall file with
the commissioner a certificate of registration, in a form prescribed by the commissioner,
at least twenty days prior to commencing business or opening a new place of business or
such purchasing, selling or taking of possession or payment, whichever comes first. . . .
Section 1136(a) of the Tax Law provides, in part:
(1) Every person required to register with the commissioner as provided in section
eleven hundred thirty-four whose taxable receipts, amusement charges and rents total less
than three hundred thousand dollars, or in the case of any such person who is a distributor
whose sales of automotive fuel total less than one hundred thousand gallons, in every
quarter of the preceding four quarters, shall only file a return quarterly with the
commissioner.
(2) Every person required to register with the commissioner as provided in
section eleven hundred thirty-four whose taxable receipts, amusement charges and rents
total three hundred thousand dollars or more, or in the case of any such person who is a
distributor whose sales of automotive fuel total one hundred thousand gallons or more, in
any quarter of the preceding four quarters, shall, in addition to filing a quarterly return
described in paragraph one of this subdivision, and except as otherwise provided in
section eleven hundred two or eleven hundred three of this article, file either a long-form
or short-form part-quarterly return monthly with the commissioner.
Section 1139(a) of the Tax Law provides, in part:
In the manner provided in this section the tax commission shall refund or credit
any tax, penalty or interest erroneously, illegally or unconstitutionally collected or paid if
application therefor shall be filed with the tax commission (i) in the case of tax paid by
the applicant to a person required to collect tax, within three years after the date when the
tax was payable by such person to the tax commission as provided in section eleven
hundred thirty-seven, or (ii) in the case of a tax, penalty or interest paid by the applicant
to the tax commission, within three years after the date when such amount was payable
under this article, or (iii) in the case of a tax due from the seller, transferor or assignor
and paid by the applicant to the tax commission where the applicant is a purchaser,
transferee or assignee liable for such tax pursuant to the provisions of subdivision (c) of
section eleven hundred forty-one of this chapter, within two years after the giving of
notice by the tax commission to such purchaser, transferee or assignee of the total amount
of any tax or taxes which the state claims to be due from the seller, transferor or assignor.
...
Section 525.2 of the Sales and Use Tax Regulations provides, in part:

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Nature of tax. (a) Sales tax. (1)(i) Except as specifically exempted or excluded,
sales tax is imposed on the receipts from:
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*

*

(b) every sale, other than a sale for resale, of specifically enumerated services, as
provided in sections 1105(b) and (c); . . .
*

*

*

(2) Except as specifically provided otherwise, the sales tax is a “transactions tax,”
with the liability for the tax occurring at the time of the transaction. Generally, a taxed
transaction is an act resulting in the receipt of consideration for the transfer of title to or
possession of (or both) tangible personal property or for the rendition of an enumerated
service. The time or method of payment is generally immaterial, since the tax becomes
due at the time of transfer of title to or possession of (or both) the property or the
rendition of such service . . . .
Section 527.2 of the Sales and Use Tax Regulations provides, in part:
Sale of utility and similar services. (a) Imposition. (1) Section 1105(b) of the
Tax Law imposes a tax on the receipts from every sale, except a sale for resale . . . of
(i) gas, electricity, refrigeration and steam, and gas, electric, refrigeration and
steam service of whatever nature; . . .
*

*

*

(2) Although this tax is generally known as the "consumer's utility tax," the
intention of the statute is to tax the enumerated sales and services whether or not rendered
by a company subject to regulation as a utility company. The words "of whatever nature"
indicate that a broad construction is to be given the terms describing the items taxed. The
inclusion of the word "service" indicates an intent to tax, under this provision, items that
are furnished as a continuous supply while the vendor-vendee relationship exists.
Section 527.7(a)(1) of the Sales and Use Tax Regulations provides:
Maintaining, servicing and repairing are terms which are used to cover all
activities that relate to keeping real property in a condition of fitness, efficiency,
readiness or safety or restoring it to such condition. Among the services included are
services on a building itself such as painting; services to the grounds, such as lawn

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services, tree removal and spraying; trash and garbage removal and sewerage service and
snow removal.
Section 532.1(a)(2) of the Sales and Use Tax Regulations provides:
Where a vendor makes a sale for which payment is not received at the time of
delivery, such sale must be reported on the return covering the period in which the sale is
made. Thus, if the sale is a taxable sale, the full amount of tax must be remitted with the
return whether or not any money was collected at the time of sale.
Opinion
Landlord owns a commercial building in New York State and leases office space to
business tenants. Landlord purchases electricity from a utility company through a master meter.
The electricity is distributed to Landlord’s tenants through submeters. The tenants are billed
monthly for electricity based on submeter readings. The rate charged to tenants is determined by
using Landlord's cost per kilowatt hour of electricity multiplied by the submetered usage, and, in
some cases, a fee (called a management fee) that covers the cost of reading the meter, billing,
and administrative costs of the submetering is also included in the bill to tenants.
Section 1105(b) of the Tax Law imposes the sales tax on utility services furnished as a
separate identifiable commodity. The tax applies to separate sales transactions whose primary
purpose is furnishing utilities or utility services. Landlord bills each of its tenants for electricity
or electric service based on actual usage as determined by submeter readings. Accordingly,
Landlord is making sales of electricity or electric service to its tenants through sub-metering and
such sales are presumed to be subject to sales tax unless the contrary is established. See Matter
of Mutual Redevelopment Houses, Inc. v Arthur J. Roth, 307 AD 2d 422 (3d Dept 2003); and
section 1132(c) of the Tax Law. In some cases, Landlord’s bill also includes a fee to cover
administrative costs, such as reading the meter and issuing the bills. Since the fee is merely
reimbursing Landlord for its cost of providing electricity, the fees are part of Landlord’s taxable
receipts from its sales of electricity. See section 1101(b)(3) of the Tax Law.
Landlord charges tenants a monthly common area maintenance charge (CAM charge).
This charge is a fixed monthly amount, includes an allocated cost of electricity for common areas
based on the results of a survey and on each tenant's leased square footage, and is identified in
Landlord’s lease with tenants as additional rent.
Common area charges of the kind described by Petitioner that are designated as
"additional rent" or similar language in the lease agreement are considered to be receipts from
the rental of real property and are not subject to sales tax when billed to tenants. See Technical
Services Bureau Memorandum entitled Charges By Shopping Mall Operators, May 7, 1984,
TSB-M-84(9)S. Accordingly, Landlord’s common area charges to its tenants are not subject to
sales tax.

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Landlord’s purchases of tangible personal property, utilities, or other enumerated services
taxable under section 1105 of the Tax Law that Landlord uses to maintain such common areas
are subject to sales tax. See Jeffrey J. Coren CPA, P.C., Adv Op Comm T & F, July 25, 2006,
TSB-A-06(21)S.
Electricity is purchased by Landlord from a utility company on a master meter. One
portion of this electricity is consumed by Landlord in the common areas (making it a taxable
purchase by Landlord) and the other portion is resold by Landlord to its tenants. The electricity
is not exclusively purchased for resale by Landlord since a portion of the purchased electricity is
consumed by Landlord in the operation of common areas of the commercial building. Therefore,
Landlord cannot properly issue a resale certificate to the utility company to make such purchase
without payment of sales tax. Accordingly, Landlord must pay sales tax on all of the electricity
it purchases from the utility company. Landlord may apply for a credit or refund of the sales tax
it paid for the portion of the electricity Landlord resold as submetered utility services to its
tenants. See section 1139(a) of the Tax Law. The credit may be claimed on Landlord’s sales tax
return and may be deducted from the amount of sales tax remitted by Landlord when filing its
sales and use tax return. See Bruce A. Mekul, CPA, Adv Op Comm T & F, March 18, 2005,
TSB-A-05(8)S.
Since Landlord is a person making sales of electricity or electric service, the receipts
from which are taxed by Articles 28 and 29 of the Tax Law, Landlord is required to register as a
vendor for sales tax purposes and undertake the responsibilities of a registered vendor, including
filing sales and use tax returns and collecting and remitting sales tax on its taxable sales for the
period covered by the return. See Bruce A. Mekul, CPA, supra. Landlord must remit the sales
tax on its taxable sales whether or not such tax has actually been collected from its tenants, as
well as any tax due that the utility company failed to collect on its sales of electricity to
Landlord. See sections 1134(a)(1) and 1136 of the Tax Law.
The sales tax is a “transactions tax,” with liability for the tax occurring at the time of the
transaction. Generally, in the case of the sale of services, the taxed transaction occurs when the
service is rendered. The time or method of payment is immaterial, since the tax becomes due at
the time of the rendition of the service. See section 525.2(b)(2) of the Sales and Use Tax
Regulations. Utility services, including metered electric services, unlike other taxable services,
are generally furnished as a continuous supply while the vendor-vendee relationship exists, and
such services are billed on a periodic basis. See section 527.2(a)(2) of the Sales and Use Tax
Regulations. The utility company or other vendor (in this case, Landlord) cannot know the
quantity of service rendered to its customer for the period for which the electric service has been
provided and the amount the customer is to be billed until the meter or submeter is read or an
estimated reading is made. Therefore, for purposes of Landlord’s obligation to remit the sales
tax with its sales tax return, the electric service provided to a tenant will be considered to have
been rendered at the time the tenant’s submeter is read or an estimated reading is made
establishing the amount of service consumed by the tenant for the particular billing cycle.

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Accordingly, the sales tax will be due with Landlord’s sales tax return covering the period in
which the submeter reading or an estimated reading is made establishing the tenant’s purchase
for the billing cycle, whether or not the tenant has paid the tax to the Landlord. See section
532.1(a)(2) of the Sales and Use Tax Regulations.
Landlord charges its tenants a fixed monthly fee for trash removal based on each tenant's
leased square footage. Tenants may not hire an outside contractor for trash removal; rather,
payment is made directly to Landlord. Landlord is required by its lease to provide trash removal
for its tenants, and Landlord charges a flat rate that does not vary with the actual amount of a
tenant’s garbage. Accordingly, the trash removal service provided by Landlord is incidental to
the lease of real property and, therefore, Landlord’s charges for trash removal are not subject to
sales tax. The purchase by Landlord of trash removal services from a third party is subject to
sales tax under section 1105(c)(5) of the Tax Law. See Jeffrey J. Coren CPA, P.C., supra; and
section 527.7(a)(1) of the Sales and Use Tax Regulations.

DATED: March 19, 2007

NOTE:

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

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