Are the fees for a vehicle fleet Maintenance Management Program -- arranging discounts, overseeing repairs, and billing -- subject to NY sales tax?

Plain-English summary

The petitioner runs a fleet-leasing business and sells a vehicle Maintenance Management Program to companies that operate their own fleets (no need to lease from the firm). The program bundles a Service Saving Program (negotiated discounts on tires, batteries, repairs, glass), a Preventive Maintenance Program (negotiated oil-change/maintenance pricing plus monitoring reports), a Warranty Recovery Program (acting as liaison to get repairs covered under warranty), and a 24-Hour Roadside Assistance Program. The firm's technicians review whether a suggested repair is necessary and reasonably priced, direct drivers to approved shops, keep each fleet's maintenance records, and consolidate everything into a single monthly bill. It charges a fixed monthly per-vehicle fee plus, for local providers, a separately stated administrative percentage (X%). It asked whether these charges are taxable.

The Office of Counsel concluded:

• The management program -- not taxable. The firm does not own or operate any repair or maintenance facility; it provides its own skill and experience to manage, oversee, and consult on the customer's fleet (e.g., advising that a repair isn't needed) and to administer billing. Those are unenumerated services not taxed under 1105 -- so the monthly per-vehicle fee, the per-occurrence fees, the separately stated X% administrative charge, and the roadside-assistance management/billing charges are not subject to tax (TSB-A-09(51)S).
• The records/reports -- excluded information service. Keeping each customer's fleet maintenance records and generating cost-improvement reports is an information service, but it is excluded as personal/individual: the data is only that customer's own fleet, is not augmented from any public source or other customers, and is not sold to anyone else (1105(c)(1)).
• Underlying taxable items/services -- firm pays the tax. When the firm pays the third-party providers, it pays sales tax on any taxable property or service. Towing a disabled or damaged vehicle to a shop is a taxable maintenance service (1105(c)(3); 20 NYCRR 527.5(a)(3)). But the firm's charges for reimbursement and for its management and billing are not taxable.
• Driver handbooks -- incidental. The handbooks given to drivers are incidental to the management service and not taxable to the customer; the firm pays tax on its own purchase of the handbooks and cannot claim resale.

What this means for you

Fleet-management and maintenance-administration companies

If you arrange, oversee, and bill for vehicle service without owning the shop or doing the wrench-turning, your program fee is generally a nontaxable management/consulting service -- including a separately stated administrative markup. The catch is at the input layer: the actual taxable property and services you buy on the customer's behalf (parts, repairs, towing) are taxable to you, and so are incidental items like handbooks. Keep each customer's data siloed to their own fleet and don't resell it, and your recordkeeping/reporting stays a nontaxable personal/individual information service.

Don't confuse "managing repairs" with "repairing"

1105(c)(3) taxes installing, maintaining, servicing, and repairing property. Recommending, scheduling, and second-guessing repairs -- without performing them -- is not that. Diagnosing problems would push toward a taxable service; here the firm expressly did not diagnose.

Common questions

Q: Is our monthly per-vehicle management fee taxable?
A: No. Managing, overseeing, and billing for fleet maintenance -- without owning a repair facility -- is an unenumerated, nontaxable service.

Q: What about the separately stated administrative percentage we add for local providers?
A: Also not taxable -- it's part of your nontaxable management/administrative charge.

Q: Are the fleet records and cost-improvement reports a taxable information service?
A: No. They're excluded as personal/individual -- each customer's own fleet data, not from a public source and not sold to others.

Q: Do we owe tax on anything?
A: Yes -- you pay sales tax to the providers on taxable property and services (including towing a disabled vehicle), and you pay tax on the driver handbooks you buy.

Citations and references

• Tax Law section 1105(a) (tax on retail sales of tangible personal property)
• Tax Law section 1105(c)(3) (installing/maintaining/servicing/repairing tangible personal property)
• Tax Law section 1105(c)(1) (information services; personal/individual exclusion)
• 20 NYCRR section 527.5(a)(3) (towing as maintenance service)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a12_19s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-12(19)S
Sales Tax
August 27, 2012

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

PETITION NO. S090901A

Petitioner, Name Redacted requests an Advisory Opinion about whether charges to its
customers for the services comprising its vehicle Maintenance Management Program are subject to
State and local sales and use tax.
We conclude that Petitioner’s monthly per-vehicle fee and occurrence fees related to the
Service Savings, Preventive Maintenance and Warranty Recovery components of Petitioner’s
Maintenance Management Program are not subject to the sales and use tax. Similarly, a separately
stated Percentage Amount Redacted (X)% administrative charge related to Petitioner’s additional
costs in tracking customer data in certain instances and any separate charges for roadside assistance
service managed and billed for by the Petitioner are not subject to tax. When making payment,
Petitioner pays tax to the service providers providing any item or service subject to tax.
Facts
Petitioner is engaged in its own sizable fleet vehicle leasing business. Petitioner uses the
expertise it has acquired in its own business to offer a wide array of services to customers who own
or operate their own vehicle fleets. Petitioner provides these services to customers that lease
vehicles from Petitioner, but there is no requirement to lease a vehicle from Petitioner in order to
purchase any of Petitioner’s services. Through these services, Petitioner assists the customer with
almost any aspect of vehicle fleet maintenance. Petitioner describes this program as relieving the
customer of the daily task of administering its fleet by the Petitioner acting as the “liaison” between
the service providers and its customers’ drivers. Petitioner groups four of its services into its
Maintenance Management Program. These services include: (1) Service Saving Program; (2)
Preventive Maintenance Program, (3) Warranty Recovery Program, (4) 24-Hour Roadside
Assistance Program.
These aspects of the Maintenance Management Program are described as:
•

Service Saving Program. Under this program, Petitioner negotiates agreements with
unrelated third party providers of vehicle services, so that all its customers receive discounts
on their purchases of products such as tires, batteries, repair services, and glass replacement.
Services are provided at recognized nationwide third-party tire and service outlets. Services
may be obtained using a service card that is issued to a customer’s driver, which evidences
participation in this program, or by the third-party provider contacting the Petitioner for
authorization and a purchase order. The customer must notify Petitioner of any limitations it
wants to place on a driver’s ability to request certain repairs or a dollar limitation, so that
these limitations may be included on the service cards.

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•

Preventive Maintenance Program. Like the Service Saving Program, Petitioner negotiates
contracts on behalf of all its customers with national automotive maintenance companies
(e.g., oil change providers). Petitioner negotiates a fixed discounted price for which the
maintenance company agrees to provide services to all of Petitioner’s customers. Petitioner
may also negotiate similar agreements with local automotive maintenance providers on
behalf of specific customers that have vehicles in areas not serviced by the national
companies. Petitioner also acts as liaison between the service providers and the customers’
drivers. This program also includes the provision of reports, which enable customers to
monitor and verify that necessary vehicle maintenance is performed on time.

•

Warranty Recovery Program. Petitioner also acts as liaison between vehicle manufacturers,
the customers’ fleet managers, and repair shops. If a vehicle needs a repair, Petitioner’s
technicians will see if the repair is covered under a vehicle or component warranty. If
necessary, Petitioner may act on its customer’s behalf to advocate for a manufacturer or
repair shop to cover repair work outside the normal warranty service.

•

24-Hour Roadside Assistance Program. Petitioner also provides a 24-hour toll-free roadside
assistance phone line, to arrange for towing of a covered vehicle suffering from some form
of mechanical distress. Customers participating in this program are billed and pay on a peroccurrence basis. Petitioner is billed by third party contractors for the services (towing,
repairs, etc.) provided to its customers. Petitioner, in turn, bills its customer for the costs of
the services provided, plus its per-occurrence fee. In addition, Petitioner’s technician will
help customers avoid a provider outside its service network from over-billing for emergency
repairs.

As part of providing these four services, Petitioner provides its customers these additional benefits:
•

Individual driver handbooks on standard vehicle operating guidelines. These handbooks are
provided to the customer’s drivers and provide basic advice about the operation of the
vehicle used by the driver. Each vehicle is issued a packet, which contains information such
as the customer ID, vehicle number, maintenance intervals, a list of the approved national
automotive maintenance companies, and other pertinent information.
In addition,
Petitioner's toll-free telephone number is included.

•

Control and approval of all servicing requirements by Petitioner’s technicians. Petitioner’s
in-house service technicians answer customer phone calls and advise about the necessity of
maintenance or repairs suggested by a service provider other than those pre-approved by
Petitioner. The driver of the covered vehicle will call Petitioner’s technicians, who will
verify the customer’s service/repair policy and review the vehicle history. Petitioner's
technician will analyze the current vehicle issues as described by the driver and will direct
the driver to an approved repair facility. If possible, the technician will arrange an
appointment with the repair facility. If the vehicle is brought into an approved repair facility
by the customer’s employee without contacting Petitioner’s technician, the repair facility
will contact Petitioner for authorization of the repair. As with the 24-hour roadside

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assistance, the cost of suggested repairs or maintenance services is evaluated by
Petitioner’s technicians to prevent over-billing. Petitioner's technicians do not, however,
diagnose problems called in by customers.
•

Maintenance of individual vehicle daily operating records. Petitioner maintains individual
vehicle daily operating records and Petitioner’s technicians monitor all servicing
requirements. Purchase orders, service cards, and coupon books are used by the customer in
securing the services of unrelated third party service providers. The coupon books, service
cards, and purchase orders are marked in such a way as to allow Petitioner to track a
vehicle’s maintenance and repairs as services are performed. This enables the Petitioner to
bill for the services provided, and to inform customers about maintenance performed and
maintenance that is due (e.g., it has been 2 months since last oil change). In addition to
documenting when required maintenance or repairs were performed, Petitioner provides
customers access to this information through its website. In this way, the Petitioner may
provide the most current information possible, and the customer can view certain
information about its vehicle fleet, including the status of vehicle maintenance. The website
enables a customer to print out a report of fleet maintenance information. Petitioner also
provides its customers with comprehensive customized reports that identify cost
improvement areas.

•

Direct communication between Petitioner’s technicians and its customers’ drivers using a
national toll free number.

Pursuant to contracts with Petitioner, both the national and local third-party service
contractors and maintenance providers bill Petitioner monthly for services provided to Petitioner’s
customers. Petitioner aggregates the bills of each service contractor for each customer, and the
customer receives a single monthly bill from Petitioner for all services rendered to all the
customer’s vehicles. For example, Petitioner separately bills Customer A for the oil changes, new
tires purchased, etc., for Customer A’s vehicles; and separately bills Customer B for the oil changes,
new tires purchased, etc., for Customer B’s vehicles. Petitioner adds a separately-stated X% charge
to the charges for property or services purchased from local service contractors to account for its
additional administrative costs in tracking the customer’s data when they use the local contractor.
Petitioner does not mark-up the charges for the property and services provided by the national
service contractors.
Petitioner also charges customers a fixed monthly fee per-vehicle for administering the
customer’s maintenance program. Petitioner’s fee for administering the maintenance program is
based on the number of vehicles covered by the program, not on the cost of services purchased.
The customer pays this monthly fee regardless of the number of actual services performed. The
charges for the actual services performed on a customer’s vehicles are stated separately from the
monthly per-vehicle fee. Petitioner will reduce its per-vehicle fee if a customer operates its own
repair and maintenance facilities, and only purchases Petitioner’s service of identifying cost
improvement areas.

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August 27, 2012

The third-party service contractors collect sales taxes from Petitioner on all taxable
maintenance or repair purchases. These taxes are then passed through to the customer, along with
the charges for parts, services and the X% charge for its administrative costs, if applicable.
Petitioner invoices customers once a month for the services performed that month by all third-party
service contractors. Customers that operate their own repair facilities have access to Petitioner’s
database and their maintenance and repair data.
As part of its Petition for Advisory Opinion, Petitioner provided samples of its customer
contracts (i.e., Fleet Management Services Agreement) and its third-party vendor contracts. Under
the terms of its customer agreements, Petitioner states that when it purchases property or repair or
maintenance services, Petitioner acts only as the customer’s purchasing agent. The contract
characterizes Petitioner’s service as an administrative billing and processing service. The
agreements also provide that Petitioner makes no express or implied warranty as to the condition of
any goods and services furnished by the third-party contractors, or the merchantability or fitness for
any purpose of such goods and services. The language of Petitioner’s contracts with its customers
disclaims any responsibility for any damages that may occur as a result of the maintenance services
provided by the unrelated third parties. Neither Petitioner nor any entity related to Petitioner owns
or operates a vehicle repair or maintenance facility used by its vehicle Maintenance Management
Program customers.
Analysis
The charges for Petitioner’s Maintenance Management Program (i.e., the Service Saving
Program, Preventive Maintenance Program, and Warranty Recovery Program) are not subject to
tax. Section 1105(c)(3) of the Tax Law imposes tax on the receipts from the services of installing,
maintaining, servicing, and repairing tangible personal property. However, in this instance,
Petitioner does not actually own or operate any repair or maintenance facility. Petitioner’s
Maintenance Management Program consists of an assortment of services where it provides its own
specialized skills and experience to provide management and oversight to reduce its customers’
costs. Petitioner’s technicians recommend whether or not a maintenance or repair service is
necessary or reasonably priced. Petitioner’s service provides for the daily administration of the
maintenance and repair needs of its customers’ vehicle fleets. It augments this service by offering
aspects of what appears to be a consulting service (e.g., advising a customer that a certain repair is
not necessary).
However, Petitioner's technicians do not attempt to diagnose problems called in by
customers. Petitioner’s charges in relation to its management and consulting services are charges
for unenumerated services that are not subject to tax under section 1105 of the Tax Law. See
TSB-A-09(51)S. In providing its Maintenance Management Program, Petitioner collects, compiles,
and maintains vehicle and fleet maintenance records for individual customers. Petitioner provides a
customer access to this information for the customer’s own fleet, and it generates reports using this
information that identify cost improvement areas. Petitioner adds a separately-stated X% charge to
the charges for property or services purchased from local service contractors to account for its
additional administrative costs in tracking the customer’s data when they use the local contractor.
However, Petitioner does not augment this information with information taken from any public

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source or other customers and it does not sell information pertaining to any particular customer’s
vehicles to any other party. This information is relevant only to a particular customer’s vehicle
fleet. Consequently access to this information and the reports generated using this information do
not constitute a taxable information service under section 1105(c)(1) of the Tax Law, because it
qualifies for the exclusion from sales tax for information services that are personal and individual in
nature.
Charges paid by the Petitioner for the purchase of tangible personal property are subject to
the sales tax imposed under section 1105(a) of the Tax Law on retail sales of tangible personal
property. Section 1105(c)(3) of the Tax Law imposes tax on sales of the service of installing,
maintaining, servicing, and repairing tangible personal property. When making payment, Petitioner
pays tax to the service providers providing any item or service subject to tax. This would include
charges to have a disabled or damaged vehicle towed to a repair shop. This service constitutes a
maintenance service for purposes of section 1105(c)(3) of the Tax Law. See 20 NYCRR
527.5(a)(3); TSB-A-09(50)S; TSB-A-10(25)S. However, Petitioner’s charges for reimbursement
and for its management and billing services are not subject to tax.
The handbooks transferred to the customer’s drivers as part of the Maintenance
Management Program are incidental in nature, and are provided only in conjunction with the
management services provided by Petitioner. Accordingly, they are not subject to sales tax when
provided to the customer. See Matter of Atlas Linen Supply Company v. Chu 149 AD2d 824 (3d
Dep’t 1989). Petitioner must pay tax on its purchase of the handbooks and it cannot claim the resale
exemption at the time the handbooks are purchased.

DATED: August 27, 2012

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. The information provided in this document does not
cover every situation and is not intended to replace the law or change its meaning.