NY TSB-A-16(34)S Sales Tax 2016-12-13

Are materials an IDA agent buys for off-site utility improvements exempt from New York sales tax?

Short answer: No. An Industrial Development Agency (IDA) is exempt from tax on its own property and activities, and a private developer acting as the IDAs agent can share that exemption — but only for property the IDA owns, controls, or supervises in connection with its project. Here the off-site electrical improvements are purchased by or for the local utility and will be owned by the utility, not the IDA, and the IDA will not own, control, or supervise them, so the agent exemption does not apply. It also fails because the materials are not located at the projects fixed location. Whether a utility tariff requires the developer to pay for the improvements is irrelevant.

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

A developer acting as an agent of a local Industrial Development Agency (IDA) on a project planned to appoint the local utility as a subagent (and the utility a subcontractor) to buy materials and build off-site electrical infrastructure improvements supporting the project. The developer is required by the utility tariff to pay for the improvements, which will be owned by the utility once installed. It asked whether the IDA agent sales-tax exemption covers those material purchases.

The Office of Counsel concluded the purchases are not exempt:

An IDA performs a governmental function and pays no tax on its property or activities (General Municipal Law section 874(1); powers in section 858(10)).
A private developer acting as the IDAs agent can share that exemption — but only for property the IDA owns, controls, or supervises in connection with its project (Fagliarone, Grimaldi).
Here the improvements are purchased by or for the utility and will be owned by the utility, not the IDA; the IDA will not own, control, or supervise them. So the agent exemption does not apply.
It also fails on location: a projects location is fixed for tax purposes (General Municipal Law section 854(4); Elmer W. Davis), and these materials are off-site, not at the project location.
Whether the utility tariff requires the developer to fund the improvements is irrelevant to the conclusion.

What this means for you

Developers using IDA agent status

The IDA exemption flows to an agent only for property the IDA owns, controls, or supervises as part of the project. The moment property is bought for, and owned by, a third party (here, the utility), the agent exemption is gone — no matter who pays.

Off-site work is a red flag

Because the project location is fixed, materials installed off the project site generally dont qualify for the agent exemption, even if they support the project.

Being contractually obligated to pay doesnt create an exemption

A utility tariff (or any contract) forcing the developer to fund the work does not make the purchase exempt. Exemption depends on IDA ownership/control and project-site location, not on who bears the cost.

Common questions

Q: Im the IDAs agent — doesnt everything I buy for the project qualify?
A: No. Only property the IDA owns, controls, or supervises in connection with the project qualifies. Materials bought for and owned by the utility do not.

Q: Does it matter that the tariff requires us to pay for the improvements?
A: No. That obligation is irrelevant; exemption turns on IDA ownership/control and the project location, not who pays.

Q: Why does off-site location defeat the exemption?
A: A projects location is fixed for tax purposes, so materials not at the project location are not entitled to the agent exemption.

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

General Municipal Law section 874(1) (IDA tax exemption on its property and activities)
General Municipal Law section 858(10) (IDA powers to acquire/construct projects)
General Municipal Law section 854(4) (fixed project location for tax purposes)
Fagliarone, Grimaldi & Assoc. v. Tax Appeals Trib., 167 AD2d 767 (3d Dept 1990) (agent benefits only if IDA owns/controls/supervises the property)
Elmer W. Davis, Inc., 104 AD3d 50 (3d Dept 2012) (project location is fixed)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_34s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel

TSB-A-16(34)S
Sales Tax
December 13, 2016

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S160518A

The Department of Taxation and Finance (“the Department”) received a Petition for Advisory
Opinion from REDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTED
(“Petitioner”). Petitioner asks whether sales and use tax exemption benefits apply to materials purchased
by an agent or subagent of the local Industrial Development Agency (IDA) for off-site improvements that
will subsequently be owned by the local utility (“Utility”). Petitioner also asks if the conclusion is different
if the improvements are required to be funded by the Petitioner under the utility rate tariff established with
the Public Service Commission.
Facts
Petitioner and the IDA have entered into an agent agreement, a related lease/leaseback with respect
to a project (“the Project”) to be located in New York. Petitioner, in accordance with the agent agreement,
desires to appoint the Utility as a subagent and the Utility will designate a subcontractor as subagent to
purchase materials and perform electrical infrastructure improvements supporting the Project (“the
Improvements”). Petitioner is required to pay for the Improvements pursuant to the relevant utility tariff.
The Improvements are located off the site of the Project and the work will be performed by subcontractors/subagents at that off-site location, but wholly within the municipality for which the IDA was
organized. The Improvements will be owned by the Utility upon installation.
Analysis
IDAs are empowered “[t]o acquire, construct, reconstruct, lease, improve, maintain, equip or
furnish one or more projects.” General Municipal Law (“GML”) § 858(10). An IDA is “regarded as
performing a governmental function in the exercise of the powers conferred upon it . . . and shall be
required to pay no taxes or assessments upon any of the property acquired by it or under its jurisdiction or
control or supervision or upon its activities.” GML § 874(1).
“While the statute explicitly confers this exemption only on the industrial development agency,
private developers who act as the agency’s agent for project purposes may also enjoy this tax benefit.”
Fagliarone, Grimaldi & Assoc. v. Tax Appeals Trib., 167 AD2d 767 (3d Dep’t 1990) citing Wegmans Food
Mkts. v. Department of Taxation & Fin. of State of N.Y., 126 Misc2d 144, 150 (Sup Ct Monroe County,
Nov. 2, 1984) aff’d 115 AD2d 962 (4th Dep’t 1985) lv to app denied 67 NY2d 606 (1986); Elmer W.
Davis, Inc., 104 AD3d 50, 52 (3d Dep’t 2012). However, “the fact is that General Municipal Law § 874(1)

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TSB-A-16(34)S
Sales Tax
December 13, 2016

specifically exempts only the industrial development agency itself from paying taxes upon its ‘property’ or
its ‘activities.’” Id. at 769. Accordingly, the property purchased by an agent of the IDA will be exempt
from tax as long as the IDA owned, controlled or supervised it in connection with the IDA’s activities,
including the equipping and furnishing of a project. See Fagliarone, Grimaldi & Assoc. v. Tax Appeals
Trib., 167 AD2d at 768-769.
Here, the Improvements will be purchased by or for the Utility, not the IDA. The IDA will not
own, control or supervise the installation or use of the Improvements. Accordingly, the Improvements
purchased for the Utility are not exempt from sales tax as purchases by an agent of the IDA. See
Fagliarone, Grimaldi & Assoc. v. Tax Appeals Trib., 167 AD2d at 768-769. Whether or not the Utility is
requiring the Petitioner to pay for the Improvements pursuant to a utility tariff is irrelevant to this
conclusion.
Similarly, while a project may include movable equipment, it does not have a transitory location.
See Elmer W. Davis, Inc., 104 AD3d at 55. General Municipal Law § 854(4) “references the ‘location’ of
the designated facility, which is fixed, and that is ‘the project location for tax purposes’ . . . .” Id. Here, the
materials purchased by Petitioner for the Improvements will not be located at the project location.
Therefore, the purchases are not entitled to a tax exemption as a purchase by an agent of the IDA.

DATED: December 13, 2016

/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.