Is the electricity and natural gas a landlord buys for residential apartment buildings eligible for the reduced (zero) New York State sales tax rate, and how is eligibility established?

Plain-English summary

A landlord of several residential apartment buildings (in Onondaga, Oswego, Warren counties and the City of Oneida in Madison County) buys electricity and natural gas on one meter per building, billed to him, with utilities included in the tenants' rent. He leases only to residential tenants — no commercial. He asked whether that energy qualifies for the reduced State sales tax rate and how to claim it. The Department said the residential energy qualifies for the 0% State rate, with local tax depending on the jurisdiction.

State rate. New York imposes a 4% State sales tax on gas and electricity (Tax Law § 1105(b)(1)(A)), but Tax Law § 1105-A reduces the State rate to 0% for energy used for residential purposes (20 NYCRR 527.13). "Residential purposes" means use of a structure as a place of abode (20 NYCRR 527.13(d)(1)). Buildings leased exclusively to residential tenants are used exclusively for residential purposes, so the energy on those meters gets the zero State rate (TSB-A-00(31)S).

Local tax is separate. Counties and cities still tax residential energy unless they've elected to exempt it or tax it at a reduced rate (Tax Law § 1210(a)(3); 20 NYCRR 527.13(a)(2)). Here, Onondaga, Oswego, Warren, and Madison counties have elected to exempt residential energy — so it's exempt from their local tax too. But the City of Oneida taxes at 2% and hasn't elected an exemption or reduced rate, so the landlord's Oneida building's energy is subject to the 2% city tax (see Publication 718-R for local rates).

How to claim it. If a supplier hasn't classified a meter as residential, the landlord furnishes a Form TP-385 (Certification of Residential Use of Energy Purchases) for each eligible meter (20 NYCRR 527.13(f)(4), (g)(2)). Importantly, the rental-office buildings (separate buildings, not occupied by residential tenants) are not eligible — no zero rate, no local exemption, and no TP-385 for those meters.

What this means for you

Landlords and residential property owners

Energy used in residential apartment buildings generally gets the 0% State sales tax rate — even when the landlord is the one billed and folds utilities into rent. You don't lose the residential rate just because you're a business buying the energy; what matters is the residential use of the building.

Don't forget local tax — and mixed-use meters

The State 0% rate doesn't control local tax. Check whether each county/city has elected to exempt residential energy (many have; some, like Oneida, tax it). And non-residential spaces (e.g., your separate rental office) don't qualify — don't file a TP-385 for those meters.

How to get the rate at purchase

Give each supplier a Form TP-385 per eligible residential meter so they bill the reduced rate up front, rather than paying and seeking refunds. Use Publication 718-R or the Department's jurisdiction lookup for local rates.

Common questions

Q: Does residential apartment energy qualify for a reduced New York sales tax rate?
A: Yes. Energy used for residential purposes qualifies for the 0% State rate under Tax Law § 1105-A, even when the landlord is billed and includes utilities in rent.

Q: Does the landlord (a business) lose the residential rate?
A: No. The rate depends on the residential use of the building, not on the buyer being a business. Buildings leased exclusively to residential tenants are residential use.

Q: Is the energy also exempt from local sales tax?
A: It depends on the locality. Counties/cities tax residential energy unless they've elected an exemption or reduced rate. Here several counties exempt it, but the City of Oneida taxes it at 2%.

Q: How do I get the reduced rate at the time of purchase?
A: Furnish each supplier a properly completed Form TP-385 for each eligible residential meter. Don't file it for meters at non-residential buildings like a separate rental office.

Q: Can I 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 and local rates.

Citations and references

New York Tax Law and regulations:
- Tax Law § 1105(b)(1)(A) — 4% State sales tax on gas and electricity
- Tax Law § 1105-A — reduced (0%) State rate on energy used for residential purposes
- Tax Law § 1210(a)(3) — local taxes on residential energy unless the locality elects an exemption/reduced rate
- 20 NYCRR 527.13 — residential energy rate, definitions, and TP-385 certification

Guidance and forms cited:
- TSB-A-00(31)S — buildings leased exclusively to residential tenants are residential use
- Form TP-385 — Certification of Residential Use of Energy Purchases (per meter)
- Publication 718-R — Local Sales and Use Tax Rates on Residential Energy

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/24-26s.htm
• Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-26s.pdf

Original ruling text

Sales Tax
August 5, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ redacted ] (“Petitioner”). Petitioner asks: (i) whether purchases of electricity and natural gas used by his residential apartments are eligible for the reduced state sales tax rate; and (ii) if eligible, how to establish such eligibility so that suppliers charge the reduced tax rate at the time of purchase.

We conclude that receipts from the sale of energy used for residential purposes in Petitioner’s apartment buildings are eligible for the reduced State sales tax rate. To receive this reduced residential rate at the time of purchase, Petitioner should furnish his energy suppliers with a properly completed Form TP-385 -- Certification of Residential Use of Energy Purchases for each eligible meter.

Facts

Petitioner is the landlord of several residential apartment buildings located in New York State in the Counties of Onondaga, Oswego and Warren, and in the City of Oneida in Madison County. Each building contains multiple units Petitioner leases to residential tenants. Petitioner does not lease any units to commercial tenants. In addition to the apartments, the buildings contain hallways and staircases, a laundry room and storage area for tenants’ use, and a mechanical room. Each building has one electricity meter and one natural gas meter and the usage is billed directly to Petitioner. Gas and electric services are included as part of the tenants’ leases and Petitioner collects only a rent charge from tenants. Petitioner’s rental offices are in separate buildings from the tenants and those buildings have separate meters.

Analysis

Tax Law § 1105(b)(1)(A) imposes, in part, a 4% State sales tax rate on the receipts from every sale of gas and electricity, and gas and electric service (“energy sources and services”). Tax Law § 1105-A provides for a reduction in the State sales tax rate on energy sources and services to zero percent on the receipts from such energy sources and services used for residential purposes. See also 20 NYCRR 527.13. However, the taxes imposed by a county or city pursuant to the authority of Tax Law Art. 29 apply to residential energy sources and services unless the county or city has elected to impose tax on residential energy sources and services at a reduced rate. See Tax Law § 1210(a)(3); 20 NYCRR 527.13(a)(2).

The term “residential purposes” means any use of a structure as a place of abode that is maintained by or for a person, regardless of ownership. See 20 NYCRR 527.13(d)(1). The term “nonresidential purposes” means any use other than for residential purposes, including any use in the conduct of a trade, business or profession by the owner of the structure or some other person. See 20 NYCRR 527.13(d)(2).

Petitioner’s apartment buildings, which are leased exclusively to residential tenants, are used exclusively for residential purposes. See, e.g., TSB-A-00(31)S. Therefore, the energy sources and services billed on the meters for Petitioner’s residential buildings are eligible for the zero percent State sales tax rate. See 20 NYCRR 527.13(e). The counties of Onondaga, Oswego and Warren have elected to exempt residential energy sources and services from their local sales taxes. Accordingly, the energy sources and services provided to Petitioner’s residential buildings in those counties are also exempt from local sales tax. Madison County has also elected to exempt residential energy sources and services. However, the City of Oneida imposes sales tax at the rate of 2% and has not elected to exempt energy sources and services or to tax them at a reduced rate. Receipts from energy sources and services provided to Petitioner’s residential building in the City of Oneida are subject to the City’s tax at the rate of 2%. Additional information about local tax rates on residential energy sources and services may be found in Publication 718-R – Local Sales and Use Tax Rates on Residential Energy, or on the jurisdiction rate lookup available on the Department’s website.

Where Petitioner’s purchase of energy sources and services are eligible for the zero percent State rate, or a local exemption, or both, but the energy supplier has not classified a meter as residential, Petitioner should furnish the supplier with a properly completed Form TP-385 -- Certification of Residential Use of Energy Purchases for each eligible meter. See 20 NYCRR 527.13(f)(4), (g)(2). However, the meters associated with Petitioner’s rental offices, which are in separate buildings not occupied by residential tenants, are not eligible for the zero percent State rate or the local exemptions and Petitioner may not submit Form TP-385 for those meters.

DATED: August 5, 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.