Is propane delivered to a New York homeowner's tanks — for a detached garage, the house, and a back-up generator — exempt from sales tax if no business is run on the property?
Plain-English summary
A homeowner in St. Lawrence County has propane delivered into four tanks: two heat a detached garage, two heat the house, and one of the house tanks might also power a back-up generator during outages. No trade, business, or profession is run anywhere on the property, and the garage is used the same way an attached garage would be. The supplier was charging sales tax on the garage propane but not the house propane, so the homeowner asked the Department to sort out the right treatment.
The Department's answer has two layers. At the State level, propane used for residential purposes gets a zero percent sales-tax rate (Tax Law § 1105-A(a)) — provided it isn't sold in small containers under 100 lbs. Bulk delivery into on-site tanks qualifies. Because the entire property is the homeowner's residence with no business activity, all three uses count as residential: heating the house, heating the detached garage, and running a back-up generator for the home. So none of it should carry the 4% State sales tax.
At the local level, though, the break does not automatically apply. The § 1105-A State rate reduction doesn't reach county or city sales taxes unless that locality has elected to reduce its own rate on residential energy (Tax Law § 1210(a)(3)(i)). St. Lawrence County has not elected the reduction and taxes residential energy at 4%, so the homeowner's propane is still subject to that 4% local tax. The net result: 0% State, 4% local. This is the recurring New York energy lesson — "residential energy is exempt" is only half-true, and the local piece depends entirely on your county or city.
What this means for you
Homeowners buying propane, oil, gas, or electricity
If the fuel is used for residential purposes — heating, hot water, cooking, even a back-up generator for the home — you qualify for the 0% State sales-tax rate. A detached garage or outbuilding still counts as residential as long as no business is conducted there; you use it the way you'd use part of your home. But check whether your county/city taxes residential energy: many do. Publication 718-R lists the local rates. If your supplier is wrongly charging the 4% State tax, you can fix your classification.
How to claim the residential rate
No certificate is required if the fuel is used exclusively for residential purposes. If your supplier hasn't classified you as a residential user, give them Form TP-385 (Certification of Residential Use of Energy Purchases) so they apply the 0% State rate (20 NYCRR 527.13).
Mixed-use / home-business owners
The moment a trade, business, or profession uses the structure, that use becomes nonresidential and loses the 0% State rate for the portion used in business. Here the garage qualified only because there was no business activity at all on the property. If you run a business out of a garage, shop, or part of the home, expect that energy to be taxable at the full State rate plus local.
Common questions
Q: Is residential propane fully tax-free in New York?
A: No. It gets a 0% State sales-tax rate, but local (county/city) sales tax still applies unless that locality has elected to reduce its residential-energy rate. In St. Lawrence County, residential propane is taxed at 4% local.
Q: Does a detached garage count as residential?
A: Yes, if no trade, business, or profession is conducted on the property and you use the garage as you would an attached one. "Residential purposes" means use of a structure as a place of abode (20 NYCRR 527.13(d)(1)); business use makes it nonresidential.
Q: What about propane for a back-up generator?
A: Powering a back-up generator for your home during outages is a residential use and also qualifies for the 0% State rate.
Q: Do I need to file anything to get the State rate?
A: Not if the energy is used exclusively for residential purposes. If your supplier hasn't classified you as residential, give them Form TP-385 so they apply the reduced rate.
Q: Can I rely on this opinion?
A: No. An Advisory Opinion binds the Department only as to the petitioner and the facts presented. It illustrates the Department's reasoning but cannot be relied on by another taxpayer, and local rates change — check Publication 718-R for your locality.
Citations and references
Statutes and regulations:
- Tax Law § 1105(a) (four percent State sales tax on retail sales of tangible personal property)
- Tax Law § 1105(b)(1) (sales tax on gas, electricity, and energy services)
- Tax Law § 1105-A(a) (zero percent State rate on energy used for residential purposes; excludes containers under 100 lbs.)
- Tax Law § 1210(a)(3)(i) (localities tax residential energy unless they elect the reduced rate)
- 20 NYCRR 527.13 (residential vs. nonresidential use; certification; Form TP-385)
Department guidance referenced: Form TP-385 (Certification of Residential Use of Energy Purchases); 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/24-30s.htm
- Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-30s.pdf
Original ruling text
Sales Tax
August 14, 2024
Office of Counsel
The Department of Taxation and Finance received a Petition for Advisory Opinion from [ redacted ] ("Petitioner") of [ redacted ]. Petitioner asks whether: (1) propane delivered to tanks used solely for heating Petitioner’s detached garage on a residential property is exempt from sales tax; (2) use of a detached garage is considered a residential use when there is no business activity on the property; and (3) propane delivered into a tank used for running a back-up generator used to power Petitioner’s home during a power outage is exempt from sales tax.
We conclude that the propane delivered to Petitioner for the purposes described above is exempt from State, but not local, sales tax.
Facts
Petitioner’s primary residence is located in St. Lawrence County. Petitioner has propane delivered by a supplier into four propane tanks on the property. Two of those tanks are used solely for heating a detached garage. The two other tanks are used for heating Petitioner’s home. Petitioner is considering using propane from one of the tanks used for heating his home to power a back-up generator for the home for use during power outages. Petitioner is charged sales tax on the propane delivered into the tanks used for heating the garage, but not on the propane delivered into the tanks used to heat the home. No trade, business or professional activity is conducted on the property, including in the detached garage. Petitioner uses the detached garage in the same manner as an attached garage would be used.
Analysis
Tax Law § 1105(a) imposes a four percent State sales tax on the receipts from every retail sale of tangible personal property. Sales tax is also imposed on “gas, electricity, refrigeration and steam, and gas, electric, refrigeration and steam service of whatever nature” (“energy sources and services”). See Tax Law §1105(b)(1); 20 NYCRR 527.13(a)(1). However, the rate of the tax imposed by Tax Law § 1105(a) and (b) on propane (except when sold in containers of less than 100 lbs.) used for residential purposes is zero percent. See Tax Law §1105-A(a). The propane sold to Petitioner is not sold in containers of less than one hundred pounds; rather, it is delivered into tanks located on the property.
The term “residential purposes” means any use of a structure or part of a structure as a place of abode, maintained by or for a person, whether or not owned by such person, on other than a temporary or transient basis. 20 NYCRR 527.13(d)(1). The term “nonresidential purposes” means any use other than for residential purposes, including any use in a trade, business or profession, whether conducted by the owner of the structure or some other person. 20 NYCRR 527.13(d)(2).
No certification is needed to qualify for the zero percent State rate if the propane is used exclusively for residential purposes. See 20 NYCRR 527.13(e)(1). However, if the purchaser is eligible for the reduced rate and their supplier has not classified them as a residential user, the purchaser should provide the supplier with Form TP-385 – Certification of Residential Use of Energy Purchases. See 20 NYCRR 527.13(f)(4).
Because the property in question is Petitioner’s primary residence and no trade, business or professional activity is conducted on the property, including in the detached garage, the entirety of the property is used for residential purposes. Accordingly, the propane used to heat Petitioner’s detached garage and Petitioner’s residence is used for residential purposes and qualifies for the zero percent State sales tax rate. Petitioner’s use of propane from one of his tanks for a back-up generator to power his home during a power outage would also qualify as a residential use eligible for the zero percent State rate.
The reduction in the State sales tax rate in Tax Law § 1105-A(a) does not, however, apply to taxes imposed by localities pursuant to Tax Law Article 29, unless the locality elects to reduce its tax rate on residential energy sources and services. See Tax Law §1210(a)(3)(i); 20 NYCRR 527.13(a)(2). St. Lawrence County, where Petitioner resides, taxes residential energy at 4% and this tax applies to Petitioner’s propane purchases. See Publication 718-R – Local Sales and Use Tax Rates on Residential Energy.
DATED: August 14, 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.