If I rent an individual free-standing garage to an apartment tenant, either bundled into rent or as a separate charge, do I have to charge New York sales tax on it as a parking or garaging service?

Plain-English summary

An apartment complex landlord asked whether providing individual free-standing garages to residential tenants counts as a taxable "parking, garaging, or storing" service, given that some tenants pay a separate stated charge for the garage while others have the garage cost folded into their base rent. The Department said neither arrangement is taxable — both are simply a lease of real property.

New York taxes charges for operating a parking lot, garage, or similar business that provides parking, garaging, or storing services (Tax Law §1105(c)(6)). But Department guidance (TSB-M-08(14)S) draws a line: an agreement is instead treated as an untaxed lease of real property, not a taxable service, if it meets four conditions — (1) the tenant gets the exclusive right to occupy a specific, defined space; (2) the landlord gives up the right to enter that space except for routine things like repairs, with notice; (3) the tenant (or its people) has an unrestricted right to enter at any time; and (4) the tenant has an insurable interest in the space (bears the risk of loss there).

Here, each tenant's lease named a specific, numbered garage, gave the tenant sole and exclusive use of it, let the landlord in only for maintenance/repairs (or narrow safety reasons) with notice, placed no time restriction on the tenant's own access, and made the tenant responsible for damage, theft, and liability connected to the garage — meaning the tenant bore the insurable risk. All four factors were met, so the charge — whether billed separately as "rent for the garage" or bundled into the apartment's base rent — is real property rent, not a taxable garaging service.

What this means for you

Landlords and property managers who rent garages or storage units to tenants

Whether your garage/storage charge is taxable turns on the terms of the lease, not on how you label the charge or whether it's billed separately. Give the tenant exclusive, largely unrestricted control of a specific numbered space, limit your own re-entry to routine landlord functions with notice, and make the tenant responsible for what happens there, and the charge should qualify as untaxed real property rent rather than a taxable parking/garaging service.

Tenants renting a garage or storage unit

If your lease genuinely gives you exclusive use of a specific space (rather than, say, a shared lot where the operator controls access and liability), you generally shouldn't be charged sales tax on that portion of your rent.

Accountants and tax professionals

Apply the four TSB-M-08(14)S factors mechanically to any lease language before advising on taxability — this opinion is a clean, fact-by-fact application of that guidance rather than a new legal standard. Note that whether the charge is separately stated or embedded in base rent didn't affect the outcome; the lease terms controlling access and risk of loss were what mattered.

Common questions

Q: We charge tenants a separate monthly fee for a garage — does that make it a taxable parking service instead of rent?
A: Not by itself. What matters is whether the lease gives the tenant exclusive control of a defined space, limits the landlord's re-entry, gives the tenant essentially unrestricted access, and puts the risk of loss on the tenant. If those conditions are met, it's an untaxed lease regardless of separate billing.

Q: What if the garage cost is just bundled into the tenant's regular apartment rent?
A: Same analysis and same result here — bundling the charge into base rent didn't change the conclusion, since the underlying lease terms for the garage itself still met all four factors.

Q: What would make a garage/parking arrangement taxable instead?
A: If the operator retains real control — for example, a shared lot or garage where the operator decides who parks where, retains broad access, or bears the risk of loss on stored vehicles/property — that looks more like a taxable garaging or parking service rather than a real property lease.

Q: Does this ruling apply to any garage or storage-unit rental?
A: Not automatically. An advisory opinion binds the Department only as to the taxpayer who requested it and only on the facts described; your own lease terms need to be checked against the same four-factor test.

Citations and references

Statutes and guidance:

• Tax Law §1105(c)(6) (tax on parking, garaging, or storing motor vehicles)
• TSB-M-08(14)S (Sales Tax Treatment of a Lease or Rental of Real Property for the Purpose of Parking, Garaging, or Storage of Motor Vehicles, Dec. 17, 2008)

Source

• Landing page: NY Sales Tax Advisory Opinions, 2009
• Original opinion: TSB-A-09(27)S

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(27)S
Sales Tax
June 26, 2009

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S090310A

Petitioner name redacted asks whether the provision of individual free-standing garages to
residential tenants of an apartment complex constitutes the sale of taxable parking, garaging, or storing
services under Tax Law § l105(c)(6), when: (1) the cost of the garage is included in the tenant's rent; or
(2) the tenant pays a separate rental charge for use of the garage. We conclude that, under the lease
agreements described below, the provision of the garages does not constitute a taxable garaging or
parking service.
Facts
Petitioner operates a residential apartment complex and acts as lessor of the units in the complex.
Located on the premises are a number of individual, free-standing, garages. Petitioner's tenants have the
option of renting one of these garages in conjunction with, and for the full-term of, their apartment lease.
In some lease arrangements, the tenant pays a separately-stated charge for use of a garage. This charge is
designated as "rent" for the garage. In other leases, the cost of a garage is included in the tenant's base
rent for the apartment. In all cases, the leases designate the specific garage that is the subject of the lease.
The garages are designed primarily to house motor vehicles. Tenants may use the garages for
storage of personal property or other purposes, either in addition to or instead of placing their motor
vehicle there. With regard to the garages at issue, the lease will say the following:
If Tenant has opted to include a Garage or Storage Unit in conjunction with this Lease,
Tenant shall have the sole and exclusive right to use and occupy the specific Garage/Unit
designated in the Lease for the Lease Term or the Term designated on the Garage/Storage
Addendum, if any. Landlord relinquishes the right to enter Tenant’s designated Garage/Unit
during the Term, except [to prevent the storage of flammable or hazardous materials or excessive
use of electricity] and, at reasonable times and upon notice, to perform routine maintenance,
repairs or other work the Landlord may deem necessary. The Landlord will not be held liable for
any damage, theft, or other liability of any kind or nature to either vehicles stored in the
Garage/Unit or any other personal property contained in the Garage/Unit. All provisions of
Paragraph 10 of this Lease concerning liability shall apply to Tenant’s use of the Garage/Unit.
Paragraph 10, in turn, states the following, in pertinent part:
Tenant must pay for damage suffered and money spent by Landlord relating to any claim
arising from any act or neglect of Tenant, his guest or invitees. If an action is brought against the
Landlord arising from the Tenant's act or neglect Tenant shall defend Landlord at Tenant's
expense with an attorney of Landlord's choice. . . . Tenant is responsible for all acts of Tenant's
family, employees, guests, or invitees. Tenant represents and warrants to-Landlord that Tenant
will carry and maintain sufficient property and liability insurance.

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TSB-A-09(27)S
Sales Tax
June 26, 2009

A separate "Garage/Storage Lease Addendum" is signed by tenants who did not opt for a garage upon
leasing their apartment but chose to add one during their lease term. In pertinent part, this addendum
states:
Tenant will not store flammable or dangerous chemicals or items in the garage/storage
unit. Tenant will not use the electrical supply to the garage for the heaters, freezers, power tools,
additional lighting, etc. Garage doors must be kept closed at all times. Landlord shall be permitted
to make periodic inspections of the Garage/Unit, at reasonable hours, to verify compliance. The
Landlord will not be held liable for any damage, theft, or other liability of any kind or nature to
either vehicles stored in the garage/storage unit or any personal property contained in
garage/storage unit. Risk of loss by fire, vandalism, damage, theft or any hazard whatsoever is
assumed by the Tenant. Tenant will be held responsible for any such loss. Tenant shall indemnify
and save harmless the Landlord from and against any liability or any injury to persons or property
resulting from acts or omissions on the part of the Tenant, his family, employees, agents,
servants, visitors or licensees during the term of the Agreement.
Neither form of lease restricts when the tenant may enter the premises. According to petitioner,
although the apartment complex rules govern tenants' use of "common areas" including "parking areas,"
these rules do not apply to individually rented, numbered garages.
Analysis
Sales tax is imposed upon the charges for “[p]roviding parking, garaging or storing for motor
vehicles by persons operating a garage . . ., parking lot or other place of business engaged in providing
parking, garaging or storing for motor vehicles” (Tax Law section 1105[c][6]). Payments made pursuant
to an agreement to lease real property for the purpose of parking, garaging, or storing motor vehicles are
not subject to sales tax under section 1105(c)(6) of the Tax Law (TSB-M-08[14]S, Sales Tax Treatment of
a Lease or Rental of Real Property for the Purpose of Parking, Garaging, or Storage of Motor Vehicles,
December 17, 2008). Under that TSB-M, the following conditions must be met for the written agreement
under which the payments are made to qualify as a lease of real property:

1. The lessee has the exclusive right to occupy either the entire premises of the lessor or a fixed
   and specific area or areas of the lessor’s premises.
2. The lessor relinquishes the right to enter the fixed and specific area or areas of the lessor’s
   premises subject to the agreement, except for a limited reservation of rights to enter to
   perform activities normally associated with being a lessor of real property, such as to collect
   rent, to perform repairs, etc., at reasonable times and upon notice.
3. The lessee, its employees, or agents have an unlimited right to enter the property during normal
   business hours.
4. The lessee has an insurable interest in the premises.
   Here, the lease agreement gives a tenant the exclusive right to occupy a specified garage. The
   lease agreement gives the landlord the right to enter only for repairs or inspections, while the tenant’s
   right to enter the garage is untrammeled. The tenants also have an insurable interest in the lease because
   they bear the risk of loss in the event their personal property is damaged while stored in the garages and
   they are liable for personal injuries to third parties using the garages. Accordingly, the rent charged under

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TSB-A-09(27)S
Sales Tax
June 26, 2009

the lease agreement for the garages is in the nature of a payment for leased premises and not for garage or
storage services. Those payments are therefore not subject to sales and use tax.

DATED: June 26, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to
the facts set forth therein and is binding on the Department only with respect to
the person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued
or for the specific time period at issue in the Opinion.