Does a local-transit bus company owe sales tax on the buses, radios, fuel and parts it buys under a county transit contract — or is it exempt?

Plain-English summary

Louis A. Fuoco Bus Line, Inc. is a local transit bus operator holding local consents and a State Certificate of Public Convenience and Necessity. It contracted with Suffolk County to run county-sponsored feeder-line bus service on set routes, fares and procedures. It asked whether sales tax was due on five mini-buses, two-way radios required by the contract, future buses, and motor fuel, parts, equipment and supplies; whether it could get a direct payment permit; and whether the vehicles and equipment were exempt because they're under Suffolk County's direction and control.

The Department held the company isn't exempt — but qualifies for a refund or credit under § 1119(b).

• It's an "omnibus carrier engaged in local transit service." Under 20 NYCRR 525.9(a), an omnibus is a motor vehicle seating more than seven passengers for hire (not a taxicab), and local transit service is mass transit between points in New York. Fuoco fits.
• The benefit is a refund/credit, not an exemption. Section § 1119(b) allows a refund or credit of tax paid on omnibuses, and on motor fuel, parts, equipment (including the radios) and supplies actually used on or in the buses, plus maintenance and repairs performed on them. Tax is paid first, then recovered.
• The amount scales with the "local transit service percentage." That percentage is the carrier's local-transit vehicle mileage divided by its total mileage. The table: under 10% → no refund; exactly 10% → 10%; over 10% but under 70% → 10% plus 1.5× each whole percent above 10; 70% or more → 100% of the combined state and local tax.
• Some items don't qualify. Eligible supplies include grease/oils, first-aid kits, fire extinguishers, fare boxes and sanitary supplies used on the buses. Not eligible: repair/supervisory vehicles and their fuel/parts, garage tools, office/terminal/station equipment, log books and tickets.
• Direct payment permit available. The carrier may apply for a direct payment permit on Form ST-122 (525.9(d)).
• The county contract changes nothing. The Department stressed that operating some buses under a Suffolk County contract "in no way alters the tax status" of the buses or other property — being under county direction and control does not confer exemption.

What this means for you

A government transit contract doesn't make your purchases tax-exempt. Running buses for a county, under its routes and fares, doesn't turn your equipment into exempt property. Don't assume "we operate under the county's control" removes the tax.

The real relief is a mileage-based refund — claim it correctly. As a local-transit omnibus carrier you pay the tax and then recover a percentage tied to how much of your mileage is genuine local transit. A carrier that's mostly local transit (70%+) can recover 100% of the combined state and local tax on qualifying purchases; a carrier under 10% recovers nothing. Your recordkeeping on vehicle mileage vs. total mileage directly drives the dollar amount.

Know which purchases count — and mind the deadlines. Buses, on-board equipment (including radios), fuel, parts, supplies used on the buses, and repairs qualify; garage tools, office/terminal equipment, supervisory vehicles, log books and tickets do not. File refund/credit applications within three years of when the tax was payable, covering at least a three-month period, and consider a direct payment permit (Form ST-122) to simplify compliance.

Common questions

Q: We run this service for the county — aren't the buses exempt?
A: No. The Department said the county contract "in no way alters the tax status" of the buses or equipment. You pay the tax and then claim the § 1119(b) refund/credit; there's no exemption from operating under county control.

Q: How much of the tax can we get back?
A: It depends on your local transit service percentage (local-transit mileage ÷ total mileage). At 70% or more you recover 100% of the combined state and local tax; between 10% and 70% it's 10% plus 1.5 times each whole percent over 10; under 10% you get nothing.

Q: Are the two-way radios and fuel covered?
A: Yes — radios (equipment used on the buses), motor fuel, parts and supplies actually used on or in the omnibuses, and maintenance/repairs on them, all qualify. Garage tools, office equipment, supervisory vehicles, log books and tickets do not.

Citations and references

Statutes and regulations:

• Tax Law § 1119(b) — refund/credit for omnibus carriers in local transit service; local transit service percentage
• Tax Law § 1105(a), § 1105(c)(3), § 1110, Article 29 — taxes to which the refund/credit applies
• 20 NYCRR 525.9 — definitions, eligible/ineligible items, refund computation, application deadlines, direct payment permit (Form ST-122)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_45s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81(45)S
Sales Tax
November 2, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810428C

On April 28, 1981 a Petition for Advisory Opinion was received from Louis A. Fuoco Bus
Line, Inc., 645 South Country Road, East Patchogue, New York 11772.
The issues raised are whether sales tax is due on (1) Petitioner's purchase of five mini-buses
to be used in connection with a contract with Suffolk County to provide special feeder line bus
service between various communities; (2) Petitioner's purchase of two-way radios for those buses
as required by the contract; (3) future purchases of buses by Petitioner; and (4) Petitioner's purchases
of motor fuel, parts, equipment and supplies. Petitioner also asks whether he is eligible to apply for
a direct payment permit. In addition, Petitioner asks whether the vehicles and related equipment used
to provide this bus service will be exempt from sales tax by virtue of the fact that these items will
be under the direction and control of Suffolk County.
Petitioner is a local transit bus operator with consents and certificates of authority issued by
the County of Suffolk, Town of Brookhaven and Village of Patchogue to provide local bus service
between various points within Suffolk County, as well as a Certificate of Public Convenience and
Necessity issued by the State of New York. Petitioner has entered into a contract with Suffolk
County to furnish county-sponsored bus service according to fare schedules, routes and operating
procedures as specified in the contract.
Section 1119 of the Tax Law provides for refunds or credits of sales tax paid based on proof
of certain uses. Subsection (b) therein specifies the refunds and credits which are available to
omnibus carriers as follows:
"(b) Subject to the conditions and limitations provided for in this subdivision, a refund or
credit shall be allowed for a tax paid pursuant to subdivision (a) of section eleven hundred five,
paragraph three of subdivision (c) of section eleven hundred five, or section eleven hundred ten and
any tax imposed pursuant to the authority of article twenty-nine on the sale to or use by an omnibus
carrier described in this subdivision of any omnibus, and of parts, equipment, lubricants, motor fuel,
diesel motor fuel, maintenance, servicing or repair purchased and used in the operation of any such
omnibus by such carrier. Any such omnibus carrier must provide local transit service in this state and
operate pursuant to a certificate of public convenience and necessity issued by the commissioner of
transportation of this state or by the interstate commerce commission of the United States or pursuant
to the contract, franchise or consent between such carrier and a city having a population of more than
one million inhabitants, or any agency of such city. The amount of such refund or credit shall be
determined by first computing the local transit service percentage which shall be the proportion that
such carrier's vehicle mileage in local transit service in this state in the calendar year immediately
preceding the end of the quarterly return period, prescribed by section eleven hundred thirty-six, to

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

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Sales Tax
November 2, 1981
which such refund or credit relates bears to such carrier's total mileage operated in this state in such
year. . . . The amount of the refund or credit allowable on the combined state and local tax paid on
such purchases or uses then shall be determined in accordance with the following table:
If the local transit service percentage is

The refund or credit is:

Less than 10 percent . . . . . . . . . . . . . . .

None

10 percent . . . . . . . . . . . . . . . . . . . . . . .

10 percent of such combined tax

Greater than 10 percent but less than
70 percent . . . . . . . . . . . . . . . . .

10 percent plus (the product of
1.5 times each whole percent in
excess of 10 percent of such
combined tax

70 percent or more . . . . . . . . . . . . . . . .

100 percent of such combined tax

For purposes of this subdivision, local transit service, vehicle mileage and total mileage operated
shall be defined by rule or regulation of the state tax commission and records satisfactory to the tax
commission shall be maintained by the carrier."
The Sales and Use Tax Regulations elaborates on section 1119 as follows:
"525.9.

Omnibus Carriers Engaged in Local Transit Service - (a) Definitions.

(1) Omnibus carrier. For purposes of this section, an "omnibus carrier" is a carrier which
provides local transit service in this State and which operates pursuant to a Certificate or Public
Convenience and Necessity issued by the Commissioner of Transportation of this State, by the
Interstate Commerce Commission of the United State or pursuant to a contract, franchise or consent
between the carrier and a city having a population of more than one million inhabitants or any agency
of such city.
(2) Omnibus. For purposes of this section, an "omnibus" is a motor vehicle with a seating
capacity of more than seven passengers used for the transportation of passengers for hire. Such term
does not include a taxicab.
(3) Local transit service. For the purposes of this section, "local transit service" means a mass
transit service (as distinguished from a charter, contract, school bus, sightseeing or other service)
provided by an omnibus carrier in which passengers are carried by omnibuses from one point in this
State to another point in this State and in performance of which the omnibuses either
(i) regularly pick up or discharge such passengers at their convenience or at bus stops on the
street or highway, as distinguished from buildings or facilities used for bus terminals or stations, or
(ii) pick up and discharge passengers at bus terminals or stations, the distance between which
is not more than 75 miles, measured along the route traveled by the bus.

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(4) Vehicle mileage. "Vehicle mileage" means the number of miles run by all omnibuses
operated by a carrier in the performance of local transit service plus the number of idle miles run to
the point at which such service begins and from the point at which such service terminates. Such
mileage includes only miles operated within New York State.
(5) Total mileage operated. Total miles operated includes the vehicle mileage computed in
paragraph (4), supra, plus the number of miles operated in charter service, and other passenger
service which is not included within the meaning of vehicle mileage. Such mileage includes only
miles operated within New York State.
(6) Local transit service percentage. (i) The local transit service percentage is the proportion
that the carrier's vehicle mileage operated in local transit service, as defined in paragraph (4) of this
subdivision, bears to the carrier's total mileage operated in this State, as defined in paragraph (5) of
this subdivision, for the calendar year immediately preceding the end of the quarterly return period
to which such refund or credit relates . . .
(b) Allowability of refund or credit of tax paid. (1) An omnibus carrier engaged in local
transit service is allowed a refund or credit of tax paid with respect to the purchase, lease or use of
an omnibus.
(2)(i) An omnibus carrier engaged in local transit service is allowed a refund or credit of tax
paid with respect to its purchase or use of motor fuel or diesel motor fuel, parts, equipment,
(including supplies) actually used or consumed only on or in omnibuses and with respect to its
purchase of maintenance services or repairs actually performed on an omnibus.
(ii) The following lists of equipment and supplies are intended to indicate the scope of items
covered by section 1119(b) of the Tax Law. . . . it is recognized that these lists are not all inclusive,
(a)

Items of equipment, and of supplies that are eligible for refund or credit of tax paid
are:

(1)

grease, lubricating oils and fluids, and anti-freeze

(2)

first aid kits

(3)

fire extinguishers

(4)

fare boxes

(5)

sanitary supplies and chemicals; provided such items are actually used or consumed
only on or in the omnibuses.

(b)

Items of equipment, and of supplies that are not eligible for refund or credit of tax
paid are:

(1)

repair trucks and supervisory vehicles, and fuel, parts and lubricants used in the
operation, maintenance and repair of such vehicles

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Sales Tax
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(2)

tools and equipment used in garages

(3)

office, terminal and station equipment, furniture and fixture

(4)

log books

(5)

tickets

(iii) If parts, equipment or fuel are purchased and placed in inventory, a refund or credit
will be allowed for the quarter in which purchased if they are actually used or consumed on
omnibuses in such quarter, or if a statement is furnished by the carrier that such items will actually
be used or consumed only on or in omnibuses.
(3)

Determination of amount of refund or credit. The refund or credit is determined in
accordance with the following table:

If the local transit service percentage is:

The refund or credit is:

Less than 10 percent

None

10 percent

10 percent of the combined State and local
taxes paid

Greater than 10 percent but less than
70 percent

10 percent plus the product of 1.5 times
each whole percent in excess of 10
percent of the combined State and local
taxes paid

70 percent or more

100 percent of the combined State and local
taxes paid

(4)
Application for credit or refund. (i) An application for refund or credit must be filed
. . . and must cover a period of not less than three months.
(ii)
The application for refund or credit must be filed, in the case of tax paid by the
applicant to a person required to collect tax, within three years after the date when the tax was
payable by such person to the tax commission, or in the case of a tax paid by the applicant to the tax
commission, within three years after such amount was payable.
(iii) The applicant may immediately take credit on the return which is due coincident with
or immediately subsequent to the time he files his application for refund or credit.
(iv)

No interest may be paid upon any refund or credit allowed.

(c)
Records to be maintained. (1) An omnibus carrier must maintain records relating to
its purchases or rentals of all omnibuses, parts, equipment (including supplies), motor fuel or diesel
motor fuel, maintenance services or repairs purchased and used in the operation of its omnibuses
which disclose:

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Sales Tax
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(i)

the vendor's name,

(ii)

the invoice number,

(iii)

the invoice date,

(iv)

the amount of the purchase,

(v)

the amount of the sales tax paid on the invoice, and

(iv)

a brief description of the item purchased.

(2)

An omnibus carrier must maintain records which disclose:

(i)

vehicle mileage operated in local transit service in this State,

(ii)
the number of miles operated in the State that qualifies as charter service, school
contract service, excursion service, sight-seeing service, and other passenger service not included
within the meaning of vehicle mileage in local transit service, and
(iii)
(d)
an omnibus.

total mileage operated within the State.
Direct payment. (1) Application for direct payment permit for the purchase or use of

(i)
An omnibus carrier engaged in local transit service may make application for a direct
payment permit with respect to his purchase or use of an omnibus. The carrier must apply for such
direct payment permit on form ST-122. Such permit will not be granted unless the carrier has filed
a certificate of registration with the State Tax Commission and the State Tax Commission has issued
a certificate of authority . . . to the carrier . . . .
(2)
Application for direct payment permit for all taxable purchases and uses. An omnibus
carrier may apply for a direct payment permit on form ST-122 with respect to all of its purchases and
uses. Such permit . . . may be granted . . . in the appropriate factual situation and upon the carrier's
compliance with the requirements and procedures established . . . for the issuance of a direct payment
permit to persons other than omnibus carriers." 20 NYCRR 525.9.
Petitioner is an omnibus carrier as defined in Regulation 525.9(a)(1). Therefore, Petitioner
is entitled to a refund or credit, subject to the time limitation set forth in Regulation 525.9(b)(4), of
tax paid on the purchase of omnibuses, as defined in Regulation 525.9(a)(2), as well as on purchases
of motor fuel, parts, equipment (including radio equipment) and supplies, as listed in Regulation
525.9(b)(2), actually used or consumed on or in omnibuses and maintenance services or repairs
actually performed on such omnibuses. The amount of such refund or credit is dependent upon
Petitioner's local transit percentage as determined in accordance with section 1119(b) of the Tax Law
and Regulation 525.9(b) (3).
Petitioner may apply for a direct payment permit as provided in Regulation 525.9(d).

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The fact that some omnibuses are operated by Petitioner under a contract with Suffolk
County in no way alters the tax status of such omnibuses or other property purchased by Petitioner.

DATED: October 7, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau