Is a company's service of driving railroad crews to their work sites subject to New York sales tax as a transportation service?

Plain-English summary

A company that contracts with railroads to drive their crews to required work sites — not the general public — asked whether that service is subject to New York sales tax. Its vehicles carry eight or fewer passengers. The Department concluded the service is taxable when the trip begins and ends in New York.

New York imposes sales tax on transportation service provided in the State (Tax Law § 1105(c)(10)). "Transportation service" means transporting people by livery service for compensation (Tax Law § 1101(b)(34)). "Livery service" is service by limousine, black car, or other motor vehicle with a driver; a "limousine" seats up to 14 passengers (excluding the driver). Because the company's vehicles seat eight, they are limousines, so the company provides a livery-based transportation service.

The tax applies only if the trip begins and ends in New York. A trip that starts and finishes in New York is treated as intrastate even if it briefly passes outside the State, and the charge is taxable even if billed from out of State (TSB-M-09(7)S).

The petitioner argued it was exempt because its services are "wholly in interstate commerce," relying on Brown's Crew Car of Wyoming, LLC v. Nevada Transportation Authority. The Department rejected that: the case is not controlling and, at most, holds that the federal Motor Carrier Safety Administration has exclusive jurisdiction over licensing rail-crew transport — it does not make those services exempt from New York sales tax.

What this means for you

Rail-crew haulers, shuttle, and livery operators

If you drive people for hire in vehicles seating up to 14 (or certain larger two-axle vehicles), you are likely providing a taxable transportation service in New York — even for a captive customer like a railroad rather than the public. The key question is geography: does the trip begin and end in New York? If yes, collect tax (even on a trip that dips out of State midway, and even if you bill from elsewhere).

"It's interstate commerce" usually isn't a sales-tax exemption

Federal licensing jurisdiction over crew-transport carriers does not automatically exempt the service from State sales tax. Don't assume an interstate-commerce label removes your collection duty; the trip's start and end points control.

Accountants and tax professionals

Anchor on Tax Law § 1105(c)(10) and the § 1101(b)(34) definitions (transportation service / livery service / limousine / black car). Source each trip by its begin-and-end points (TSB-M-09(7)S), and treat federal-jurisdiction arguments like Brown's Crew Car as going to licensing, not taxability.

Common questions

Q: Is driving railroad crews to work taxable in New York?
A: Yes, when the trip begins and ends in New York. The service is a taxable transportation service provided by livery vehicle under Tax Law § 1105(c)(10).

Q: What if the route briefly leaves New York?
A: It is still intrastate and taxable if the trip both begins and ends in New York. A charge billed from out of State is taxable too, as long as the trip starts and ends in New York.

Q: We only serve a railroad, not the public — does that matter?
A: No. Serving a single business customer rather than the general public didn't change the result; the service still meets the definition of a taxable transportation/livery service.

Q: Doesn't interstate commerce make us exempt?
A: Not here. Federal jurisdiction over licensing rail-crew carriers doesn't exempt the service from New York sales tax; the Brown's Crew Car decision didn't support an exemption.

Q: Can my business rely on this opinion?
A: Not as binding. A TSB-A advisory opinion binds the Department only as to the petitioner and the exact facts described. Use it to understand the reasoning, then check your own facts.

Citations and references

New York Tax Law:
- Tax Law § 1105(c)(10) — sales tax on transportation service provided in New York
- Tax Law § 1101(b)(34) — definitions of transportation service, livery service, limousine, and black car

Guidance and case law cited:
- TSB-M-09(7)S — a transportation service is taxable only if the trip begins and ends in New York
- Brown's Crew Car of Wyoming, LLC v. Nevada Transportation Authority (D. Nev. 2009) — federal licensing jurisdiction over rail-crew transport; not controlling on New York taxability

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao.htm
• Opinion: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales/24-13s.htm
• Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-13s.pdf

Original ruling text

Sales Tax
July 30, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ redacted ] (“Petitioner’). Petitioner asks whether its service of providing transportation to railroad employees is subject to sales tax.

We conclude that receipts from the sale of Petitioner’s transportation service are subject to sales tax if service begins and ends in New York State.

Facts

Petitioner contracts with railroad companies to provide transportation services to railroad employees. Petitioner transports their employees exclusively to a required work destination. Petitioner does not provide its services to the general public. Petitioner’s vehicles are designed to transport eight or fewer passengers.

Analysis

Tax Law § 1105(c)(10) imposes sales tax on transportation service provided in New York State, regardless of whether the charge is paid in New York or out of State. Tax Law § 1101(b)(34) defines “transportation service” as the service of transporting, carrying or conveying a person or persons by livery service; whether to a single destination or to multiple destinations; and whether the compensation paid by or on behalf of the passenger is based on mileage, trip, time consumed or any other basis. “Livery service” means service provided by limousine, black car or other motor vehicle, with a driver. “Limousine” is defined as “a vehicle with a seating capacity of up to fourteen persons, excluding the driver, and any vehicle with a seating capacity of between fifteen and twenty persons, excluding the driver, that has only two axles and four tires. A “black car” is a “for-hire vehicle that is dispatched from a central facility.”

Receipts from the sale of a transportation service are subject to sales tax only if the service begins and ends in New York. See TSB-M-09(7)S. Transportation service that begins and ends in New York is deemed intrastate even if it passes outside New York during a portion of the trip. See Tax Law § 1101(b)(34). A charge for transportation service made outside New York is taxable if the service begins and ends in New York. See TSB-M-09(7)S.

Petitioner’s service constitutes a transportation service for sales tax purposes. Petitioner is hired by railroad companies to transport their employees to their work destinations. The vehicles Petitioner uses to provide this service are “limousines,” because they come within the maximum seating capacity of up to fourteen persons, excluding the driver. The vehicles may also be within the definition of a black car if they are dispatched from a central facility. Because the service is provided by limousine, it constitutes a “livery service.” Finally, because Petitioner transports its customer’s employees by livery service, Petitioner is providing a taxable transportation service if the trip begins and ends in New York State.

Petitioner contends it is exempt from New York sales tax because its services are “wholly in interstate commerce,” based on the decision in Brown’s Crew Car of Wyoming, LLC v. Nevada Transportation Authority, No. 2:08-CV000777, 2009 WL 1240458 (D. Nev. May 1, 2009). However, that case is not controlling. Even if it were, its holding is that the federal Motor Carrier Safety Administration has exclusive jurisdiction over the licensing of rail crew transportation services under the Motor Carrier Act (Pub. L. No. 96-296). It does not support a conclusion that such services provided within New York are exempt from State and local sales taxes.

DATED: July 30, 2024

Mary Ellen Ladouceur
Principal Attorney

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.