NY TSB-A-11(30)S Sales Tax 2011-11-16

Is a fixed-price guided Segway tour a taxable rental of tangible property or an exempt tour service in NY?

Short answer: It's a taxable rental. Tour services aren't an enumerated taxable service, but here the primary thing the customer buys is the right to use the Segway. The customer has physical possession of the Segway during the tour and the right to use and control it, which is a transfer of possession -- so the sale of the tour ticket is a taxable rental or license to use tangible personal property under Tax Law 1105(a). Although a guide comes along, the business emphasizes the Segway itself and the tour has no real stops (just water breaks), so the right to ride the Segway is what's really being sold, making the receipts taxable.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The petitioner is a family business offering fixed-price, prepaid guided Segway tours around Rochester, NY. It owns eight Segways; to take a tour a customer must use one of the petitioner's Segways, and the petitioner provides them only in connection with its tours. After a short safety orientation, customers ride along three scenic routes with a guide; the only described stops are water breaks. It asked whether the tour-ticket receipts are taxable.

The Office of Counsel concluded the tickets are a taxable rental:

Tour services aren't enumerated -- but this is really a rental. Tour services are not among the taxable services in 1105(c). However, a "sale" includes a rental, lease, or license to use tangible personal property (1101(b)(5)).
The customer has possession of the Segway. During the tour the customer has physical possession of the Segway and the right to use and control it -- a transfer of possession under 20 NYCRR 526.7(e)(4).
The Segway is the primary thing sold. Although a guide is included, the petitioner's marketing emphasizes the Segway, and the tour has no stops apart from water breaks -- so the primary thing being sold is the right to use the Segway. The ticket is therefore a taxable rental or license to use tangible personal property under 1105(a).

What this means for you

Tour, experience, and equipment-based activity operators

The label "tour" doesn't make your receipts tax-free. When the core of the experience is riding/using a piece of equipment you own -- a Segway, a kayak, a bike, an ATV -- and the customer possesses and controls it during the activity, New York treats the charge as a taxable rental of that equipment, even if you bundle in a guide. The question is the primary function: if the value is genuinely a guided service with the equipment incidental (real narration, stops, content), you have a stronger argument for a nontaxable tour; if it's mostly "here's the machine, go ride it (with someone leading)," it's a taxable rental.

Common questions

Q: We call it a guided tour -- isn't that a nontaxable tour service?
A: Not when the primary thing the customer buys is the right to ride your Segway. The customer possesses and controls the equipment, so it's a taxable rental.

Q: Does providing a guide change the result?
A: Not here. The marketing emphasizes the Segway and there are no real stops, so the guide doesn't make the equipment incidental; the rental is still the primary thing sold.

Q: When would an equipment-based tour be nontaxable?
A: When the genuine primary function is a guided service and the equipment is truly incidental -- a fact-specific question turning on what the customer is really paying for.

Citations and references

Tax Law section 1105(a) (tax on sales/rentals of tangible personal property)
Tax Law section 1105(c) (enumerated taxable services)
Tax Law section 1101(b)(5) (definition of sale; rental/license to use)
20 NYCRR section 526.7(e)(4) (transfer of possession; right to use/control)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2011.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a11_30s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-11(30)S
Sales Tax
November 16, 2011

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S110419A

The Department of Taxation and Finance received a petition for Advisory Opinion from
Petitioner’s name and address redacted. Petitioner asks whether the receipts from the sale of the
fixed-price, pre-paid guided Segway tours it provides in and around the Rochester, New York
area are subject to the sales tax imposed by Article 28 of the Tax Law.
Facts
Petitioner is a family business that provides guided Segway tours in and around the
Rochester, New York area. Petitioner owns eight (8) Segway two-wheel self-balancing electric
vehicles. The tours are fixed price and pre-paid before the tour begins. To go on the tours, a
customer must use one of petitioner’s Segways. Petitioner does not provide Segways except in
relation to persons using them to go on Petitioner’s tours. The tour guides are familiar with the
area traversed on the tour. According to Petitioner’s website, “[a]fter a short safety orientation
and training session you'll be gliding like an expert, enjoying the great scenery Upstate NY is
famous for.” Petitioner’s website describes three different scenic tour paths. The only break
points described in regard to the three tours are breaks for water.
Analysis
The specific issue raised is whether the sale of the Segway guided tour ticket constitutes
the furnishing of an exempt tour service or a taxable sale or rental of tangible personal property.
Section 1105 of the Tax Law imposes a sales tax on receipts from the retail sale of
tangible personal property and from certain enumerated services. Tax Law §§ 1105 (a), (c). Tour
services are not among the services taxable under section 1105(c) of the Tax Law. Section
1101(b)(5) of the Tax Law defines "sale" as any transfer of title or possession or both, or the
rental, lease or license to use for a consideration.
Sales and use tax regulation 20 NYCRR Section 526.7(e)(4) states that the "transfer of
possession with respect to a rental, lease or license to use, means that one of the following
attributes of property ownership has been transferred: (i) custody or possession of the tangible

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TSB-A-11(30)S
Sales Tax
November 16, 2011

personal property, actual or constructive; (ii) the right to custody or possession of the tangible
personal property; (iii) the right to use or control or direct the use of tangible personal property."
The customer has physical possession of the Segway during the tour and the right to use and
control it during the tour. While Petitioner also provides a guide, given the emphasis on the
Segway on Petitioner’s website and the lack of any stops on the tour, apart from water breaks, it
appears that the primary thing Petitioner is selling is the right to use the Segway. Accordingly,
we conclude that the sale of the Segway tour ticket constitutes a taxable rental or license to use
tangible personal property subject to sales tax under section 1105 of the Tax Law.

DATED: November 16, 2011

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy 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.