Are sales of hydrogen fuel at New York refueling stations for fuel-cell electric vehicles subject to sales and use tax?

Plain-English summary

A company planning a network of hydrogen refueling stations for fuel-cell electric vehicles asked whether its future hydrogen sales would be subject to New York sales and use tax.

The Office of Counsel said no. Hydrogen is a fuel, and the sale of gas is generally taxable (Tax Law § 1105(b)), with motor-fuel distributors normally required to prepay tax (§ 1102(a)). But Tax Law § 1115(a)(42) specifically exempts the sale of hydrogen "for use and consumption directly and exclusively in the engine of a motor vehicle," and § 1115(j) makes that exemption reach both the § 1102 prepaid tax and the §§ 1105/1110 sales and use taxes. So selling hydrogen at refueling stations to power fuel-cell electric vehicles in New York is not subject to State and local sales and use tax.

What this means for you

Hydrogen fuel distributors and station operators

Hydrogen dispensed to fuel motor vehicles is fully exempt — including the prepaid motor-fuel tax — under § 1115(a)(42)/(j). The exemption is keyed to use directly and exclusively in a vehicle engine; hydrogen sold for other (non-vehicle) uses can be taxable.

Fuel-cell vehicle fleets and drivers

Expect hydrogen vehicle fuel to be sold without New York sales tax.

Accountants and tax professionals

Confirm the hydrogen is for direct/exclusive use in a vehicle engine, then apply the § 1115(a)(42) exemption and § 1115(j) to relieve both the prepaid tax (§ 1102) and the §§ 1105/1110 taxes.

Common questions

Q: Isn't the sale of gas generally taxable?
A: Yes, but hydrogen used directly and exclusively in a motor vehicle engine is specifically exempt under § 1115(a)(42).

Q: Does the exemption cover the prepaid motor-fuel tax too?
A: Yes. Section 1115(j) extends the exemption to the § 1102 prepaid tax as well as the §§ 1105 and 1110 taxes.

Q: What if hydrogen is sold for non-vehicle uses?
A: The exemption is tied to direct and exclusive use in a vehicle engine; other uses may be taxable.

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(b) (tax on sales of gas and gas service)
• Tax Law § 1102(a) (prepayment of tax by motor fuel distributors)
• Tax Law § 1115(a)(42) (exemption for hydrogen used directly and exclusively in a motor vehicle engine)
• Tax Law § 1115(j) (exemption applies to the § 1102 prepaid tax and the §§ 1105 and 1110 taxes)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-54s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(54)S
Sales Tax
October 27, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance received a Petition for Advisory Opinion from
[ REDACTED ] (“Petitioner”). Petitioner asks whether its eventual sales of hydrogen gas at
hydrogen refueling stations in New York State that recharge the fuel tanks of Fuel Cell Electric
Vehicles would be subject to sales and use taxes.
We conclude that Petitioner’s sales of hydrogen gas at hydrogen refueling stations
located within New York State for this purpose would not be subject to New York State and
local sales and use taxes.
Facts
Petitioner intends to establish a hydrogen distribution network using high-pressure
hydrogen supply and charging stations in New York to supply vehicles powered by fuel cells.
Fuel cell electric vehicles combine hydrogen and oxygen to create a controlled chemical reaction
to harness electricity in batteries to run the motor that propels the vehicle. Since they are
powered entirely by electricity, fuel cell electric vehicles are considered electric vehicles.
Analysis
Tax Law § 1105(b) imposes a sales and use tax upon the receipt of every sale, other than
sales for resale, of gas, electricity, refrigeration and steam, and gas, electric, refrigeration and
steam service of whatever nature. Hydrogen is fuel comprised primarily of molecular hydrogen,
stored in either gaseous or liquid state, suitable for use and consumption in the engine of a motor
vehicle. The sale of hydrogen generally is subject to tax.
Tax Law § 1102(a) requires every distributor of motor fuel to pay, as a prepayment on
account, the tax due on motor fuel that it imports or causes to be imported into this state for use,
distribution, storage or sale in the state or produces, refines, manufactures or compounds in this
state.
However, Tax Law § 1115(a)(42) exempts the sale of hydrogen for use and consumption
directly and exclusively in the engine of a motor vehicle from sales tax. Tax Law § 1115(j)
provides that the exemption shall apply to both the tax required to be prepaid pursuant to Tax

-2-

TSB-A-20(54)S
Sales Tax
October 27, 2020

Law § 1102 and to the taxes imposed by Tax Law §§ 1105 and 1110. Accordingly, Petitioner’s
sales of hydrogen fuel in New York State are not subject to sales and use tax.
DATED: October 27, 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.