Can a vehicle-rental company buy parts, repairs and fuel for its rental fleet tax-free with a resale certificate, and what happens if a supplier won't accept the certificate?

Plain-English summary

Migay Trucking Corp. purchases, builds and maintains automobiles, trucks and vans that it rents to customers — that rental is its only business. When it orders replacement parts, repairs and specialized services for those vehicles, it gives its automotive suppliers a Resale Certificate (Form ST-120). Some suppliers wouldn't honor the certificate and charged Migay sales tax. Migay asked (1) whether these purchases are taxable and (2) whether suppliers must accept its resale certificate.

The Department held the purchases are for resale — but a supplier isn't obligated to take the certificate.

• Renting the vehicles is a "sale." Section § 1101(b)(5) includes a rental in the definition of a sale, so Migay is reselling the vehicles (and the parts/services that go into them) through its rentals.
• So the inputs are bought "for resale." Replacement parts, and specialized services like welding, body work, painting and frame straightening, plus fuel, grease and motor oil used to maintain the rental vehicles, are purchases for resale under § 1101(b)(4) — not taxable — provided Migay furnishes a properly completed ST-120.
• But a vendor can refuse the certificate. Nothing in the Tax Law requires a vendor to accept a resale or exemption certificate instead of collecting tax. A supplier may decline the ST-120 and charge Migay the tax.
• The remedy is a credit. When a supplier collects tax on Migay's resale purchases, Migay may claim a credit on its quarterly return (Form ST-100, line 2a) — with documentation — and must do so within three years of when the vendor's tax was payable to the State.

What this means for you

Renting property is reselling it — so your inputs can qualify for the resale exclusion. If your business rents out tangible property (vehicles, equipment, tools), the parts, repair services and maintenance supplies that go into that property are generally bought for resale, and you can buy them tax-free with a Resale Certificate (ST-120).

A supplier is never required to accept your certificate. This is a practical trap: even a valid, properly completed ST-120 can be refused, and the supplier may lawfully charge you tax. You can't force the issue at the register.

If you're charged tax on a resale purchase, don't just eat it — take the credit. Claim the tax back on Form ST-100 (line 2a), keep documentation to support the amount, and act within the three-year window. Miss the window and the credit is lost.

Common questions

Q: If my purchases are "for resale," why is my supplier charging me tax?
A: Because no law compels a vendor to accept a resale certificate. Your purchases still qualify for resale treatment, but a supplier may choose to collect the tax anyway.

Q: What do I do when a supplier won't honor my ST-120?
A: Pay the tax, then claim a credit for it on your quarterly Sales and Use Tax Return (Form ST-100, line 2a). Keep records substantiating the amount, and file the claim within three years.

Q: Are the repair services (welding, painting, frame work) also covered?
A: Yes. The Department treated those specialized services, along with parts and fuel/grease/oil used to maintain the rental vehicles, as purchases for resale.

Citations and references

Statutes and forms:

• Tax Law § 1101(b)(4) — "retail sale"; excludes purchases for resale
• Tax Law § 1101(b)(5) — "sale" includes a rental
• Tax Law § 1132(c) — presumption of taxability; a vendor need not collect if given a proper resale certificate
• Form ST-120 (Resale Certificate); Form ST-100 (Sales and Use Tax Return), line 2a credit

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_48s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81(48)S
Sales Tax
November 17, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810609A

On June 9, 1981, a Petition for Advisory Opinion was received from Migay Trucking Corp.,
225 South Fourth Avenue, Mount Vernon, New York 10551.
The issues raised are whether Petitioner's purchases of replacement parts, repairs and
specialized servicing for the building, maintenance and repair of vehicles which are or will be rented
to Petitioner's customers are subject to State and local sales tax and whether Petitioner's suppliers
must accept a Resale Certificate (Form ST-120), when submitted by Petitioner.
Petitioner purchases, builds and maintains automobiles, trucks and vans which it rents to its
customers. Petitioner has no other business interest and receives its income solely from the rental
of vehicles. When placing orders with automotive vendors for replacement parts, repairs, and
specialized servicing, Petitioner issues a Resale Certificate (Form ST-120) to such vendors. Some
vendors do not honor the resale certificate and charge Petitioner sales taxes.
Section 1101(b)(4) defines a retail sale as ". . . a sale of tangible personal property to any
person for any purpose, other than (A) for resale as such or as a physical component part of tangible
personal property . . .". Section 1101(b)(5) defines "sale, selling or purchase" as . . . "Any transfer
of title or possession or both, . . . rental, . . . conditional or otherwise, in any manner or by any means
whatsoever for a consideration."
Section 1132(c) of the Tax Law states, in part: " . . . it shall be presumed that all receipts for
property or services of any type mentioned in subdivisions (a), (b), (c) and (d) of section eleven
hundred five, . . . are subject to tax until the contrary is established, and the burden of proving that
any receipt . . . is not taxable hereunder shall be upon the person required to collect the tax or the
customer. Unless (1) a vendor shall have taken from the purchaser a certificate in such form as the
tax commission may prescribe, signed by the purchaser and setting forth his name and address and,
except as otherwise provided by regulation of the tax commission, the number of his registration
certificate, together with such other information as said commission may require, to the effect that
the property or service was purchased for resale . . . , the sale shall be deemed a taxable sale at retail.
The vendor shall not be required to collect tax from purchasers who furnish a certificate of resale .
. . in proper form."
Petitioner's purchases of replacement parts for damaged or worn parts, purchases of
specialized services, such as welding, body work, painting and frame straightening, and purchases
of fuels, lubricating grease and motor oils for use in the maintenance of Petitioner's rental vehicles
are purchases for resale within the meaning and intent of section 1101(b)(4) of the Tax Law.
Accordingly, such purchases are not subject to State or local sales tax, provided Petitioner furnishes
its supplier a properly completed Resale Certificate (Form ST-120).
JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

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

-2­
TSB-A-81(48)S
Sales Tax
November 17, 1981
However, as the Tax Law does not contain any provision which requires that a vendor accept
an exemption certificate in lieu of collecting sales tax, a vendor may refuse to accept Petitioner's
resale certificate and, instead, may collect sales tax from Petitioner. The vendor is not under an
obligation to accept an exemption certificate.
When a vendor does not accept Petitioner's resale certificate and collects sales tax, Petitioner
may claim a credit for any tax paid on purchases of tangible personal property or services for resale
on its quarterly Sales and Use Tax Return (ST-100), at line 2a, page 1. In such instance, Petitioner
must maintain appropriate documentation to substantiate the amount so claimed. Such credit must
be claimed within three years from the date the tax collected is payable by the vendor to the State
Tax Commission.

DATED: October 29, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau