When a dealer or builder picks up modular home modules at a New York factory, is the sale taxed at the factory's location or at the installation site?

Plain-English summary

A New York manufacturer of modular home modules sells them FOB origin (title and possession pass at its factory dock) to dealers and builders, who pick them up in their own trucks. It asked where the sale is sourced for sales tax -- at the factory, or at the home installation site -- including when the buyer installs the modules outside New York.

The Office of Counsel concluded the sale is taxed at the factory's location in every case:

• Modular home modules are tangible personal property; a new module sold at retail is taxable under Tax Law section 1105(a).
• New York sales tax is a "destination tax," but the controlling point is where possession is transferred to the purchaser or the purchaser's designee -- here, the factory dock where the dealer or builder picks up the modules. So the sale is taxed at the State and local rate in effect at the factory.
• This holds whether the modules are installed in New York or in another state -- the later installation site does not change where the sale occurred.
• The manufacturer must collect tax unless it gets a properly completed exemption document, and it may not accept one in bad faith (e.g., when it knows the buyer is a contractor who will install the modules -- contractors generally cannot buy materials for resale).
• A contractor that takes the modules out of state and installs them there may apply for a New York refund or credit (see TB-ST-130).

What this means for you

Manufacturers and wholesalers shipping FOB origin

If your customer takes possession at your dock (FOB origin, customer's own truck), the sale is sourced to your location and taxed at your local rate -- you don't chase the buyer's destination. Collect tax unless you hold a valid exemption certificate you can accept in good faith.

Dealers and builders / contractors

You generally cannot buy installation materials for resale. If you pay New York tax and then install out of state, look at TB-ST-130 for a possible refund or credit.

"Destination tax" doesn't mean "where it's used"

The phrase trips people up: the tax follows the point of delivery/possession transfer, not the eventual job site.

Common questions

Q: I picked up the modules at the NY factory but install them in Pennsylvania -- do I still pay NY tax?
A: Yes. Possession transferred at the NY factory, so NY tax applies at the factory's rate. You may be able to claim a NY refund or credit for materials installed out of state (TB-ST-130).

Q: Can I give the manufacturer a resale certificate?
A: Generally no if you're the contractor installing the modules -- contractors can't buy materials for resale. The manufacturer also can't accept a certificate it knows is improper.

Q: What sets the local rate?
A: The rate in effect at the manufacturer's factory, where you take possession -- not the installation site.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(a) (sales tax on retail sales of tangible personal property)
• Tax Law section 1101(b)(4)(i) (retail sale; sale to a contractor deemed a retail sale)
• Tax Law section 1101(b)(6), (35), (36) (tangible personal property; modular home/module definitions)
• 20 NYCRR 525.2(a) (destination tax; point of delivery controls incidence and rate)
• 20 NYCRR 541.2(d) (construction contractor)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_52s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(52)S
Sales Tax
December 16, 2015

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE

ADVISORY OPINION

PETITION NO. S141223C

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTED
(Petitioner).
Petitioner asks whether its sale of modular home modules to a dealer or builder that picks up the
modules at Petitioner’s factory in New York using the dealer's or builder’s own trucks are
sourced and subject to New York State and local sales taxes at its factory or at the home
installation site in New York. Petitioner also asks whether its sale of such modules to a dealer or
builder that picks up the modules at Petitioner’s factory in New York using the dealer's or
builder’s own trucks are sourced and subject to New York State and local sales taxes at its
factory if the dealer or builder installs them at a site outside of New York.
We conclude that, in each of these cases, Petitioner’s sales of modular home modules are
subject to New York State and local sales taxes at the rate in effect where Petitioner’s factory is
located. Petitioner must collect tax when it does not receive a properly completed exemption
document or when it lacks good faith to accept one, including when it knows that the purchaser
is installing the modules.

Facts
Petitioner is registered for sales tax purposes in New York. It manufactures modular
home modules at a factory in New York and sells the modules to dealers and builders. Petitioner
sells its modular home modules FOB origin, meaning that the purchaser takes ownership at
Petitioner’s location and is responsible for the modules at that point. Therefore, the sale is
complete once the modules are picked up by the purchaser. Petitioner’s sales contracts specify
that title to the modules passes at the point the dealer or builder picks up the modules at
Petitioner's factory dock. The dealer or builder picks up the modular home modules using its
own trucks. Petitioner is not involved in installing the modular home modules sold to dealers or
builders. Petitioner states that the dealer or builder is responsible for the installation of the
modular home modules at an installation site in New York or in another state and will sell the
modular home made from the installed modules to its customer.
Analysis
Modular home modules are tangible personal property. A new modular home module is
one that is sold for the first time at retail. See Tax Law § 1101(b)(6), (35), and (36). Tax Law §
1105(a) imposes sales tax on retail sales of tangible personal property, unless an exemption or
exclusion applies. As relevant here, Tax Law § 1101(b)(4)(i)(A) defines “retail sale” as the sale
of tangible personal property to a person for any purpose, other than for resale as such or as a
physical component part of tangible personal property. However, a sale of tangible personal

TSB-A-15(52)S
Sales Tax
December 16, 2015

-2-

property to a contractor for use or consumption in erecting structures or buildings, or building
on, or otherwise adding to, altering, improving, maintaining, servicing or repairing real property
is deemed to be a retail sale regardless of whether the tangible personal property is to be resold
as such before it is so used or consumed. A person that engages in erecting, constructing, adding
to, altering, or improving buildings, other structures, or improvements on or to real property is a
construction contractor for sales tax purposes. See 20 NYCRR § 541.2(d).
The sales tax is a "destination tax." The point of delivery or point at which possession is
transferred by the vendor to the purchaser, or to the purchaser's designee, controls both the tax
incidence and the tax rate. See 20 NYCRR § 525.2(a)(3). Thus, if a vendor sells property and
delivers it in this State, New York sales tax would apply, but if the vendor delivers the property
to the purchaser outside the State, New York sales tax would not apply. The tax is due at the
time that Petitioner transfers title or possession (or both) of the property. See 20 NYCRR §
525.2(a)(2).
When Petitioner sells modules to a dealer or builder and the dealer or builder picks up the
modules in its own trucks at Petitioner’s factory in New York, both title and possession of the
modules are transferred to the dealer or builder at the location of Petitioner’s factory. Thus, the
sale is subject to State and local sales tax at the rate in effect at that location. Petitioner must
collect tax at that time, unless it receives a properly completed exemption document, provided
that it may not accept an exemption document if it lacks good faith to accept one, such as if it
knows that the purchaser is responsible for installing the modules. For more information how
sales tax applies to the sales of modular home modules, see TSB-M-09(19)S, Sales and Use Tax
Treatment for Sales of Modular Homes Modules Used to Build Modular Homes, and TSB-M10(1)S, Supplemental Summary of Legislation Affecting Sales and Use Tax Enacted in 2009.
Also see TB-ST-130, Contractors - Sales Tax Credits, for information how Petitioner’s
contractor customers may be able to apply for a refund or credit of tax paid to Petitioner if the
customer takes the modules outside the State and installs them in the other state and in certain
other cases.

DATED: December 16, 2015

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

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.