Is a used-car dealer's standalone 'Transfer Fee' to ship a vehicle to another location for inspection subject to NY sales tax?

Plain-English summary

The petitioner buys and sells used cars at fixed, non-negotiable prices and is opening a New York store. When a customer wants a car located at a different store, the petitioner will ship it to a closer location for the customer to inspect/test-drive, under a separate Transfer Agreement for a stated Transfer Fee. The agreement covers only shipping (the car is held 72 hours for inspection); the fee is not a deposit or payment toward the car, isn't required to buy any car, isn't refunded if the customer walks, and isn't credited if the customer does buy (the purchase is a separate contract). It asked whether the Transfer Fee is taxable.

The Office of Counsel concluded no -- the Transfer Fee is not taxable:

• Transportation alone isn't taxable. Charges for transporting property are not subject to sales tax except when provided in conjunction with the sale of taxable property or services (20 NYCRR 526.5(g)(1), (3)). Moving a vehicle from one location to another as a carrier of goods -- not tied to its sale, repair, maintenance, or storage -- is a nontaxable transportation service (TSB-A-10(25)S).
• Not part of a vehicle sale here. The Transfer Agreement is separate from any sales contract; paying the fee gives no price adjustment or credit; buying a car never requires paying the fee; and the fee is the same whether or not a purchase follows. So it isn't part of the taxable receipt for any vehicle.
• Contrast (the taxable case). Transportation and destination charges are taxable when included in the sale of a motor vehicle (Publication 838). The result here depends on the fee being genuinely standalone.
• Result: the Transfer Fee is not subject to sales and use tax, whether or not the customer ultimately buys the transferred vehicle.

What this means for you

Auto dealers and multi-location retailers

A pure transportation charge can be nontaxable -- but only if it's truly separate from the sale. Keep it in a standalone agreement, don't credit it toward the purchase, don't require it to buy, and don't refund-or-apply it on sale. Fold the same charge into the car's price (or make it a destination charge in the sale) and it becomes taxable.

Documentation is everything

The conclusion rested on contract language stating the fee is not a deposit/installment/payment toward the vehicle and creates no claim on it. Mirror that clarity to support nontaxability.

Common questions

Q: Is a charge to ship a car to a customer taxable?
A: Not if it's a standalone transportation service unconnected to the sale. If it's part of (or a destination charge in) the vehicle's sale, it's taxable.

Q: What keeps the fee nontaxable?
A: A separate agreement, no credit toward the purchase, not required to buy, and no refund/application if a sale does or doesn't happen.

Q: What if the customer buys the car after paying the fee?
A: Still nontaxable here, because the purchase is a separate contract and the fee isn't credited toward or part of the car's price.

Citations and references

• 20 NYCRR section 526.5(g) (transportation charges; taxable only with sale of taxable property/services)
• Tax Law section 1105(a) (sales tax on tangible personal property)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a13_31s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-13(31)S
Sales Tax
September 10, 2013

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

PETITION NO. S120802A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted. Petitioner asks whether the “Transfer Fee,” considered on a
standalone basis and paid pursuant to a Transfer Agreement, is subject to New York State sales
and use tax, and whether the “Transfer Fee” related to a vehicle that was ultimately purchased by
the buyer would be taxable as part of the sales price of the vehicle in New York.
We conclude that the Transfer Fee is not subject to sales and use tax because the fee is
charged for the transportation of tangible personal property that is not, by itself, a taxable
service, and under the facts provided, the fee is not part of the receipt for the sale of tangible
personal property.
Facts
Petitioner buys and sells previously owned motor vehicles. Petitioner’s sales model is
based on a non-negotiable stated price (hereafter the “Vehicle Sales Price”) for each motor
vehicle. Petitioner maintains business locations in multiple states, and is anticipating opening a
store in New York. Customers may purchase previously owned motor vehicles from Petitioner
directly at Petitioner’s business locations. Petitioner also maintains a website on which
customers with Internet access may view Petitioner’s complete sales inventory on-line.
On occasion, a customer is interested in a vehicle that is not available at Petitioner’s store
in the customer’s immediate vicinity. Because most customers are unwilling to purchase a used
motor vehicle sight unseen and without a test drive, Petitioner offers the customer the option of
having that motor vehicle shipped to another company location of the customer’s choice. This
transfer is accomplished under the terms of a specific and separate Vehicle Transfer Agreement
(hereafter the “Transfer Agreement”) between Petitioner and the customer. Petitioner charges its
customers a Vehicle Transfer Fee (“Transfer Fee”) for this service.
The transfer/shipping process consists of six steps:
1.
Customers contact Petitioner’s location most convenient for them: A customer
calls one of Petitioner’s locations or submits a Vehicle Transfer Form online. If a customer
chooses to submit a form online, an employee of Petitioner will contact the customer to answer
any questions about the vehicle, and to ensure that the vehicle meets the customer’s specific
needs.

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TSB-A-13(31)S
Sales Tax
September 10, 2013

2.
Pre-transfer inspection: An employee of Petitioner at the company location having
possession of the vehicle inspects the car and provides answers to the customer’s questions at no
charge to the customer.
3.
Confirmation: An employee of Petitioner at the location most convenient for the
customer contacts the customer to answer any additional questions and to confirm the customer’s
order to have the vehicle transferred.
4.
Contract: The customer is required to enter into the Transfer Agreement calling
for the transfer of the subject vehicle at a stated fee.
5.
Payment of the Transfer Fee: If the customer executes the Transfer Agreement,
the customer is required either to:
 bring a check for the full amount of the Transfer Fee to Petitioner’s location where the
vehicle will be transferred; or
 pay the Transfer Fee over the phone using the customer’s credit card.
6.
Reservation & Transfer: Once payment is received, an employee of Petitioner
verifies that the vehicle has been reserved and is scheduled for transfer.
It should be noted that the Transfer Agreement relates only to shipping vehicles. No
other services are provided in exchange for the Transfer Fee, although the Transfer Agreement
does provide that the vehicle will be held at the destination location for inspection by the
potential customer for a period of 72 hours. The Transfer Agreement is not dependent upon any
other agreement. In particular, the Transfer Agreement is not dependent on the ultimate sale of
the vehicle. In fact, the Transfer Agreement states “[t]he Vehicle Transfer Fee in no way is
considered a deposit, an installment or payment toward the particular vehicle being transferred.”
Indeed, frequently a vehicle that has been transferred is not purchased by the customer
who executes a Transfer Agreement and has paid the Transfer Fee. In such cases, the Transfer
Fee is not refunded. Likewise, if the vehicle is purchased, that purchase is executed under a
separate purchase and sale contract which neither refers to, nor incorporates by reference, the
Transfer Agreement. The existence of a Transfer Agreement and payment of a Transfer Fee
never impacts the sales price of the motor vehicle. In short, if a customer pays a Transfer Fee to
view and inspect a vehicle, the Transfer Fee is not deducted from, or considered to be part of, the
Vehicle Sales Price.
Analysis
Charges for the transportation of property, except to the extent that the transportation is
provided in conjunction with the sale of taxable property or services, are not subject to sales tax.
See 20 NYCRR § 526.5(g)(1) and (3). The service of transporting property from one location to
another generally is not a service upon which sales tax is imposed. The transportation of a
vehicle or equipment (including as an automobile transporter) from one location to another by a

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Sales Tax
September 10, 2013

company as a private or common carrier of goods, if not otherwise provided in conjunction with
the sale, repair, maintenance or storage of the transported property (e.g., flatbedding a classic car
to or from a car show, transporting a forklift from one customer facility to another, or
transporting a repossessed vehicle), constitutes a nontaxable transportation service. Thus, when a
company is providing transportation of equipment or of vehicles capable of being operated
pursuant to a Department of Transportation (DOT) certificate and ICC permit as a common
carrier or contract carrier of goods by motor vehicle, its charges for those transportation services
are not subject to tax. See TSB-A-10(25)S. However, transportation and destination charges are
taxable when included in the sale of a motor vehicle. See Publication 838, A Guide to Sales Tax
for Automobile Dealers.
Petitioner buys and sells previously owned motor vehicles. Petitioner offers a customer
the option of having a vehicle from another one of its locations shipped to a more convenient
location, upon payment of a Transfer Fee, for the customer to inspect and test drive the car. In
order to have the car shipped, a customer must execute a Transfer Agreement with Petitioner and
pay the stated Transfer Fee in advance. The Transfer Agreement clearly states that the “Vehicle
Transfer Fee in no way is considered a deposit, an installment or payment toward a particular
vehicle being transferred, nor does it create a claim of any kind on the particular vehicle being
transferred.” The Transfer Agreement concerns only the shipping of the vehicle solely for the
purpose of providing the customer with access to it at a more convenient location for up to 72
hours for inspection.
The Transfer Agreement is an agreement separate from any sales contract for a vehicle,
and a customer buying a vehicle does not get a price adjustment or credit for having paid a
Transfer Fee for the purchased vehicle. Further, the purchase of any vehicle from Petitioner does
not require payment of a Transfer Fee by any customer. Accordingly, we conclude that the
Transfer Fee is not subject to sales and use tax, regardless of whether the customer ultimately
purchases the transferred vehicle.

DATED: September 10, 2013

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.