Ezel / Tax Rulings / NY
NY TSB-A-20(42)S Sales Tax 2020-10-20

Does a car rental company owe sales tax on the repair and maintenance services it buys for the vehicles in its rental fleet?

Short answer: No. Because the vehicles are held exclusively for rental — and a rental is itself a 'sale' under New York law — the fleet is property held for sale in the regular course of business. Repairs, maintenance parts, and labor on that property qualify as purchases for resale, so they aren't taxable. The company should give each repair vendor a properly completed Form ST-120 (Resale Certificate) within 90 days of the transaction.
Currency note: this ruling is from 2020
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
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 passenger car rental company asked whether the repair and maintenance services it buys for its rental fleet (performed by third parties) are subject to sales and use tax.

The Office of Counsel said no. New York normally taxes the service of maintaining, servicing, or repairing tangible personal property "not held for sale in the regular course of business." But a rental is itself a "sale" under Tax Law § 1101(b)(5), so a fleet of vehicles held exclusively for rental is property held for sale in the regular course of business. Repairs, maintenance parts, and labor on that fleet are therefore purchases for resale, not taxable. To buy them without paying tax, the company gives each repair provider a properly completed Form ST-120 (Resale Certificate) no later than 90 days after the transaction.

What this means for you

Car, equipment, and other rental businesses

Maintenance and repairs on property you hold exclusively for rental are purchases for resale — buy them tax-free with a resale certificate. The key word is exclusively: gear you also use yourself, rather than only rent out, won't get this treatment.

Repair shops serving rental fleets

Expect (and accept) a Form ST-120 from rental-company customers instead of collecting tax. Keep the certificate to support the exempt sale.

Accountants and tax professionals

The hook is § 1101(b)(5) (rental = sale) feeding the § 1105(c)(3) "held for sale" carve-out, as in TSB-A-91(33)S. Deliver the ST-120 within 90 days.

Common questions

Q: Why aren't repairs to my rental cars taxable?
A: A rental counts as a sale, so cars held only for rental are "held for sale," making their repair and maintenance a non-taxable purchase for resale.

Q: How do I avoid paying the tax at the shop?
A: Give the repair vendor a completed Form ST-120 (Resale Certificate) within 90 days of the transaction.

Q: What if I also use some of the vehicles myself?
A: The treatment applies to vehicles held exclusively for rental; mixing in personal or business use can defeat the resale treatment.

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 § 1105(c)(3) (tax on installing, maintaining, servicing, or repairing tangible personal property not held for sale)
  • Tax Law § 1101(b)(5) (definition of 'sale' includes a rental or lease)
  • TSB-A-91(33)S (repairs/maintenance of property held exclusively for rental are purchases for resale)
  • Form ST-120, Resale Certificate (delivered within 90 days)

Source

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(42)S
Sales Tax
October 20, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance received a Petition for an Advisory Opinion from
[ REDACTED ] (“Petitioner”). Petitioner is in the passenger car rental business and asks whether its
purchase of car repair and maintenance service for cars in its rental inventory are subject to sales and use
tax. We conclude that maintenance and repairs of vehicles held exclusively for rental are not taxable.
Facts
Petitioner is engaged in the business of passenger car rentals. Petitioner states that its rental car
fleet requires frequent maintenance and occasional repairs. These services are performed by third parties.
Analysis
Tax Law § 1105(c)(3) states that receipts from "[i]nstalling tangible personal property … or
maintaining, servicing or repairing tangible personal property, including a mobile home, not held for sale
in the regular course of business" are subject to sales tax. The rental of a vehicle is included in the
definition of sale. See Tax Law § 1101(b)(5). Thus, Petitioner’s inventory of vehicles held for rental are
vehicles held for sale in the regular course of business. Petitioner’s purchases of vehicle repairs,
maintenance parts, and labor are not taxable, as the repair and/or maintenance (including labor) of tangible
personal property held exclusively for rental are considered purchases for resale. See TSB-A-91(33)S.
Form ST-120, Resale Certificate, is used by certain purchasers to make purchases of tangible personal
property for resale without paying the sales tax. Petitioner should deliver the 3rd party providing the parts
or services with a properly completed Form ST-120, Resale Certificate, no later than 90 days after the
transaction.
DATED: October 20, 2020
/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.