NY TSB-A-12(21)S Sales Tax 2012-08-28

Are an equipment-rental firm's charges to deliver rented equipment, or to tow/transport customer-owned equipment, subject to NY sales tax, and at what rate?

Short answer: It depends on what is being moved. A charge to deliver equipment the firm rents to the customer is taxable -- it is part of the rental receipt whether or not the delivery charge is separately stated. A charge to tow or transport the customer's own equipment is not taxable by itself, because transporting property per se is not a taxable service; it becomes taxable only when done in conjunction with a taxable service (for example, towing equipment to or from a repair). When tax is due, it is collected at the combined State and local rate in the jurisdiction where the customer takes possession of the vehicle or equipment. A rental of a passenger car (9,000 lbs or less, nine seats or fewer, including a pickup) also carries a special statewide 6% tax, plus an additional 5% within the Metropolitan Commuter Transportation District (NYC and Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester counties).

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 rents construction equipment and vehicles (tools, mini-excavators, concrete mixers, etc.) and delivers them by truck or flatbed. It also transports equipment -- both equipment it rents and equipment the customer already owns -- between job sites. It asked whether its delivery, towing, and transport charges are taxable and at what rate.

The Office of Counsel concluded:

Delivering rented equipment -- taxable. Renting construction equipment and vehicles is a taxable rental (Tax Law 1105(a), 1101(b)(5)). A charge to deliver that rented equipment is part of the taxable receipt, so it is taxable whether or not the delivery charge is separately stated on the bill (1101(b)(3); 20 NYCRR 526.5(g)(1)).
Towing/transporting customer-owned equipment -- not taxable by itself. Transportation of tangible personal property, by itself, is not an enumerated taxable service. So moving the customer's own equipment is not taxable -- unless it is done in conjunction with a taxable service (for example, towing in connection with a repair or maintenance), in which case it is taxable (20 NYCRR 526.5(g)(3); TSB-A-10(25)S).
Rate -- where the customer takes possession. When tax is due, it is the combined State and local rate in effect in the jurisdiction where the customer takes possession of the vehicle or equipment (1105 opening language; 526.13).
Passenger-car extra taxes. Renting a passenger car (a motor vehicle of 9,000 lbs or less, nine seats or fewer -- including a pickup) is also subject to the special statewide 6% tax (1160/1165), and an additional 5% if rented or used within the MCTD (NYC plus Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester counties).

What this means for you

Equipment-rental businesses

If you rent out equipment, don't separately state your way out of tax on delivery -- the delivery charge rides along with the taxable rental and is taxable either way. By contrast, a stand-alone haul of the customer's own gear is not taxable on its own; it only becomes taxable if you pair it with a taxable service like a repair. Charge tax at the rate where the customer takes possession, and remember that passenger-car rentals carry extra 6% (and 5% MCTD) taxes on top of regular sales tax.

Customers renting equipment

Expect tax on the rental and its delivery. A separate, stand-alone charge to move equipment you already own should not be taxed unless it's bundled with a taxable repair or maintenance.

Common questions

Q: We separately state our delivery charge -- is it still taxable?
A: Yes. Delivery of equipment you rent is part of the taxable receipt whether or not it's separately stated.

Q: We tow a customer's own equipment between their job sites. Tax?
A: No -- transporting property by itself isn't a taxable service. It becomes taxable only if done together with a taxable service such as a repair.

Q: Which rate do we charge?
A: The combined State and local rate in the jurisdiction where the customer takes possession of the vehicle or equipment.

Q: We rent out pickup trucks -- any extra tax?
A: Yes. A passenger-car rental (9,000 lbs or less, nine seats or fewer, including a pickup) carries a special 6% tax, plus 5% more within the MCTD.

Citations and references

Tax Law section 1105(a) (tax on rentals of tangible personal property)
Tax Law section 1101(b)(3) (receipt includes delivery charges)
Tax Law section 1101(b)(5) (definition of sale/rental)
Tax Law section 1105 (opening; tax at place of delivery/possession)
Tax Law sections 1131(3), 1132(a)(1), 1137(a)(i), 1210(a)(1) (local tax/jurisdiction)
Tax Law section 1160; section 1165 (special 6% passenger-car rental tax)
20 NYCRR section 526.5(g)(1) (delivery part of taxable receipt)
20 NYCRR section 526.5(g)(3) (transportation per se not taxable)
20 NYCRR sections 526.7(a)(2), 526.13 (rentals; rate where possession taken)

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_21s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-12(21)S
Sales Tax
August 28, 2012

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

PETITION NO. S120125A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
Name Redacted 133-58 31st Drive, Flushing, New York 11354. The issues raised by Petitioner
are:
1. Are Petitioner’s charges to tow or transport a vehicle or construction equipment to a
customer, or between a customer’s job sites, subject to sales tax if such delivery is separately
stated on its receipt when Petitioner rents the equipment to the customer or the equipment is
customer-owned?
2. Does Petitioner collect any tax due at the full sales tax rate?
We conclude that Petitioner’s charge to its customer to deliver equipment it rents to the
customer is taxable whether or not the delivery charge is separately stated on the receipt.
Petitioner’s charge for transportation or towing of customer-owned equipment is not taxable
unless done in conjunction with a taxable service. When tax is due, it is at the combined State
and local tax rate in effect in the jurisdiction where the customer takes possession of the vehicle
or equipment.
Facts
Petitioner rents construction equipment and vehicles to customers. While Petitioner does
not list types of equipment in its petition, Petitioner’s website shows that this includes various
types of construction equipment, from tools to mini excavators to concrete mixers. It delivers
that equipment to its customers by truck or by use of a flatbed tractor-trailer. It also transports
equipment it rents to a customer and equipment owned by a customer from one job site to
another. For purposes of this advisory opinion, we assume that Petitioner’s customers are not
exempt organizations.
Analysis
Rentals of construction equipment and vehicles are subject to sales tax. See Tax Law
§§1105(a) and 1101(b)(5); 20 NYCRR §526.7(a)(2). A vendor’s charge to its customer to
deliver such equipment or vehicles is part of the receipt subject to sales tax, whether or not the
delivery charge is separately stated on a bill or invoice to the customer. See Tax Law
§1101(b)(3); 20 NYCRR §526.5(g)(1).

-2-

TSB-A-12(21)S
Sales Tax
August 28, 2012

Transportation of tangible personal property, per se, is not, by itself, a taxable service.
Thus, Petitioner’s transportation of equipment owned by its customer is not taxable, if the
transportation is not provided in conjunction with a taxable service. However, Petitioner’s
towing or transport of its customer’s equipment in conjunction with Petitioner’s or a third party’s
providing maintenance or repair services to that equipment would be subject to tax. See 20
NYCRR §526.5(g)(3); TSB-A-10(25)S.
The tax required to be collected is at the full State and local rate in effect in the
jurisdiction where the customer takes possession of the vehicle or equipment. See Tax Law
§§1105 (opening language), 1131(3), 1132(a)(1), 1137(a)(i), and 1210(a)(1); 20 NYCRR
§526.13. We note that if Petitioner rents a passenger car to a customer, that rental would also be
subject to the statewide special 6% tax imposed by section 1160 of the Tax Law. “Passenger
car” means a motor vehicle of 9000 pounds or less, with a seating capacity of nine persons or
less designed for passenger transportation including, for example, a pickup truck. If Petitioner
makes such rentals, it would be required to collect and remit such tax with its sales tax return.
See Tax Law §1165. In addition, the rental of such a passenger car rented or used within the
Metropolitan Commuter Transportation District (MCTD) would be subject to a special
supplemental tax of 5% in addition to the special 6% tax. The MCTD consists of New York City
and the counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester.

DATED: August 28, 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.