Are barges (scows) that carry cargo mostly through other states' waters exempt from New York sales and use tax as commercial vessels engaged in interstate commerce?

Plain-English summary

Lone Star Industries proposed that a subsidiary of its New York Trap Rock Corp. (NYTR) form a new transportation company whose only business would be hauling aggregates — crushed stone and sand — by scow (barge). The scows would be loaded at NYTR's New York plants on the Hudson River and towed through New York and New Jersey waters to piers at Weehawken, New Jersey, to customers' New Jersey piers, or to piers in the New York City–Long Island area. Nearly all trips, and over 75% of each vessel's receipts, would come from carrying property for compensation between different states.

The Department held the scows are exempt commercial vessels, so their purchase and the related services are exempt.

• A scow is a "vessel." Under 20 NYCRR 528.9(a), a vessel is any floating craft used to transport things on water — a scow qualifies.
• "Primarily engaged in interstate commerce" means the 75% receipts test is met. The regulation defines "primarily" as at least 75% of the vessel's receipts coming from interstate or foreign commerce (transporting persons or property for compensation between states or countries). Over 75% of each scow's receipts here came from interstate trips, so the test is satisfied.
• The purchase is exempt. Section § 1115(a)(8) exempts commercial vessels primarily engaged in interstate or foreign commerce, plus property used by or bought for them for fuel, provisions, supplies, maintenance and repairs — other than articles for the original equipping of a new ship. Buying the scows and that related property is exempt from sales and use tax.
• Services on the scows are exempt too. Section § 1105(c)(3) normally taxes installing, maintaining, servicing or repairing property, but it specifically excludes those services when performed on qualifying commercial vessels and their related property.

What this means for you

Barges and other vessels can escape sales tax if they're genuinely interstate. The exemption isn't about where the vessel is bought or based — it's about how it's used. If at least 75% of a vessel's receipts come from moving people or property for pay between states or countries, it's "primarily engaged in interstate or foreign commerce."

The exemption reaches consumables and repair services, not just the vessel. Fuel, provisions, supplies, maintenance and repairs for a qualifying vessel are exempt, and so are the labor services of maintaining, servicing or repairing it under § 1105(c)(3). The main carve-out is articles bought to originally equip a brand-new ship.

Keep records that prove the 75%. The whole result turns on the receipts test. Track each vessel's trips and receipts so you can show that at least three-quarters come from interstate or foreign commerce.

This is a different result from a vessel used and delivered in-state. A pleasure or non-commercial boat delivered to a buyer in New York is taxable regardless of where the owner later intends to take it; the interstate-commercial-vessel exemption is a distinct, use-based rule.

Common questions

Q: Does the vessel have to cross state lines on every trip?
A: No. The test is that at least 75% of the vessel's receipts come from interstate or foreign commerce, measured across its activities — not that every single voyage is interstate.

Q: Is only the barge itself exempt?
A: No. The exemption also covers fuel, provisions, supplies, maintenance and repairs bought for the qualifying vessel, and the § 1105(c)(3) services performed on it — except articles bought to originally equip a new ship.

Q: We haul our own company's products between states. Does that still count as interstate commerce?
A: Yes. The regulation looks to transporting property for compensation between states; here the scows carried NYTR's aggregates between states and still qualified.

Citations and references

Statutes and regulations:

• Tax Law § 1115(a)(8) — exemption for commercial vessels primarily engaged in interstate/foreign commerce and their fuel, provisions, supplies, maintenance and repairs
• Tax Law § 1105(c)(3) — tax on installing/maintaining/servicing/repairing property, excluding such services on qualifying commercial vessels
• 20 NYCRR 528.9(a) — defines "vessel," "primarily" (at least 75% of receipts), and "engaged in interstate or foreign commerce"

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_53s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81(53)S
Sales Tax
November 25, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO.S810908A

On September 8, 1981, a Petition for Advisory Opinion was received from Lone Star
Industries, Inc., One Greenwich Plaza, Greenwich, Conn. 06830.
The issue raised is whether the purchase by a transportation company of certain scows (and
of property used by or for the use of such scows) will be exempt from State and local sales and use
taxes pursuant to section 1115(a)(8) of the Tax Law, and whether services rendered with respect to
such scows will be exempt from such taxes pursuant to section 1105(c)(3) of the Tax Law.
Petitioner proposes that Petitioner's subsidiary, New York Trap Rock Corp. (NYTR),
establish a new subsidiary corporation for the sole purpose of transporting aggregates such as
crushed stone and sand. Present plans are for this subsidiary to provide transportation services
exclusively to its parent, NYTR. Scows (barges) owned by NYTR's new transportation company will
be loaded with aggregates at NYTR's New York plants along the Hudson River and towed through
New York and New Jersey waters to NYTR's piers at Weehawken, New Jersey; to NYTR's
customers' piers in New Jersey; or to piers in the New York City-Long Island area belonging either
to NYTR or its customers. Scows towed to Weehawken will later be towed by the transportation
company to NYTR's customers, a majority of whom are located in New York State, as directed by
NYTR.
It is anticipated that the carriage of aggregates to Weehawken, New Jersey, and the
subsequent shipment to NYTR's customers will be the normal method of operation. Direct
transportation of a lading from an NYTR facility along the Hudson to its ultimate destination will
be much less frequent.
The Weehawken, New Jersey piers will serve as a distribution center for NYTR's products
and as a depot from which customers' orders can be filled. The aggregates transported to Weehawken
to await shipment to customers will be fungible in nature and NYTR will not necessarily know the
ultimate customer for any particular load as it leaves a plant, as happens when NYTR sends a given
load to Weehawken to satisfy future orders and there is no customer for the load as it begins transit
down the Hudson. The staging of scows and temporary storage of cargoes at the Weehawken piers
will be done for NYTR's business purpose of promoting the orderly distribution of its products. That
is, it will be at Weehawken that various individual barges are organized into groupings of up to four
for ultimate delivery to customers.

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

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

-2­
TSB-A-81(53)S
Sales Tax
November 25, 1981

Nearly 100% of the trips logged by each scow will entail passage through the waters of a
state other than New York, and nearly 100% of the receipts from each vessel will be derived from
such activity. In excess of 75% of the receipts from each vessel will be derived from such activity.
Petitioner states, thus, that in excess of 75% of the receipts earned by each vessel will be derived
from trips between ports lying in different states.
Section 1115(a)(8) of the Tax Law provides for an exemption from sales and use taxes with
respect to "Commercial vessels primarily engaged in interstate or foreign commerce and property
used by or purchased for the use of such vessels for fuel, provisions, supplies, maintenance and
repairs (other than articles purchased for the original equipping of a new ship)."
Section 1105(c)(3) of the Tax Law, which imposes a tax on the receipts from the services of
installing tangible personal property or maintaining, servicing or repairing tangible personal
property, specifically excludes receipts for “. . . services rendered . . . with respect to commercial
vessels primarily engage in interstate or foreign commerce and property used by or purchased for
the use of such vessels for fuel, provisions, supplies, maintenance and repairs (other than with
respect to articles purchased for the original equipping of a new ship). . .”
Section 528.9(a) of the Sales and Use Tax Regulations defines certain of tile terms used in
the above statutory provisions as follows:
“...
(2)

Vessel. A vessel is any type of floating craft used as a means of transportation on water.

(4)
Primarily. Primarily means that at least seventy-five percent of the receipts from the
vessel's activities are derived from interstate or foreign commerce.
(5)
Engaged in interstate or foreign commerce. Engaged in interstate or foreign commerce
means the transportation of persons or property for compensation between states or countries.
. . . ”20 NYCRR 528.9(a)
It is clear that the scows in question are "vessels" as that term is defined in the Regulations
cited above. In addition, the scows will he primarily engaged in interstate commerce in that in
excess of 75% of the receipts from vessel's activities will be derived from the transportation of
property, for compensation, between NYTR's New York plants and its piers at Weehawken, New
Jersey or the piers of customers in New Jersey, and between NYTR's Weehawken, New Jersey
piers and piers of NYTR or its customers its states other than New Jersey.

-3­
TSB-A-81(53)S
Sales Tax
November 25, 1981

Accordingly, the receipts from the purchase of scows (and the related property described in
the statute) used as described above will be exempt from sales tax, and the use thereof will be
exempt from the compensating use tax, pursuant to section 1115(a)(8) of the Tax Law. Similarly,
the services described in section 1105(c)(3) of the Tax Law and performed with respect to such
scows and the related property specified in that statutory provision will be likewise exempt from
sales and compensating use taxes.

DATED: November 5, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau