Does a disability pension or Social Security disability status that is exempt from income tax also exempt the recipient from New York's sales tax and motor fuel tax?

Plain-English summary

Robert T. McLaughlin receives a New York City police pension granted in lieu of workmen's compensation for personal injuries or sickness incurred on the job — a pension that is exempt from federal, state and city income taxes. He asked three questions: (1) is he subject to the Article 12-A motor fuel tax on his gasoline purchases; (2) is he subject to the Article 28 sales and use tax; and (3) are recipients of Social Security disability benefits exempt from those taxes?

The Department held that none of these statuses creates an exemption.

• The income-tax exclusion is just that. IRC § 104(a) (and 26 CFR 1.104-1) exclude workmen's-compensation-type payments from federal gross income — an income-tax rule.
• It doesn't reach the fuel tax. Article 12-A (§§ 282-a through 284-c) imposes excise taxes on motor fuel and diesel; § 104 provides no exemption from those taxes for a pension in lieu of workmen's compensation.
• It doesn't reach the sales tax. Section 1105 imposes the sales tax on retail purchases; again, no exemption flows from the pension's income-tax status, and no other law provides one.
• Social Security disability is the same. No provision exempts Social Security disability recipients from the motor fuel tax or the sales and use tax either.
• Result: recipients of a pension in lieu of workmen's compensation, and of Social Security disability benefits, are not exempt from the Article 12-A motor fuel tax or the Article 28 sales and use tax merely by virtue of that status.

What this means for you

"My income isn't taxed" doesn't mean "my purchases aren't taxed." Income-tax exclusions (like the one for workmen's-compensation-type disability pensions) operate on income. Sales tax and the motor fuel tax are consumption taxes paid when you buy goods and fuel — they don't turn on whether the buyer's income is taxable.

Personal hardship or benefit status generally isn't a sales-tax exemption. New York's sales-tax exemptions are keyed to the kind of property or the kind of buyer named in the statute (for example, certain organizations), not to an individual's disability, pension, or benefit status. Absent a specific statutory exemption, you pay the tax like any other purchaser.

Look for property-based or program-based relief instead. If you're seeking relief, the path is usually a specific exemption for the item (for example, certain medical equipment) or a targeted program — not a blanket personal exemption based on receiving a disability pension or Social Security disability.

Common questions

Q: My disability pension is income-tax-free. Doesn't that make my purchases tax-free too?
A: No. The income-tax exclusion under IRC § 104 applies to income. It provides no exemption from New York's sales tax or motor fuel tax, which are taxes on what you buy.

Q: Are Social Security disability recipients exempt from sales or gas tax?
A: No. The Department found no provision exempting Social Security disability recipients from the Article 12-A motor fuel tax or the Article 28 sales and use tax.

Q: Is there any way my status gets me a sales-tax break?
A: Not by itself. Sales-tax exemptions generally attach to specific property or specific categories of exempt buyers, not to an individual's pension or benefit status. You'd need a specific statutory exemption that fits your purchase.

Citations and references

Statutes, regulations and authority:

• Tax Law Article 12-A, §§ 282-a through 284-c — impose excise taxes on motor fuel and diesel motor fuel
• Tax Law § 1105 / Article 28 — impose the sales and compensating use taxes on retail purchases
• Internal Revenue Code § 104(a); 26 CFR 1.104-1 — exclude workmen's-compensation-type payments from federal gross income (an income-tax rule that creates no sales-tax or fuel-tax exemption)

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_5s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81(5)S
Sales Tax
August 7, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. Z810506C

On May 6, 1981, a Petition for Advisory Opinion was received from Robert T. McLaughlin,
24 Goodrich Street, Williston Park, New York 11596.
The issues raised are:
1) whether Petitioner, who receives a pension from the New York City Police Department,
is subject to the motor fuel tax imposed under Article 12-A of the Tax Law on his purchases of
gasoline and other motor fuels;
2) whether Petitioner is subject to the sales and use taxes imposed under Article 28 of the Tax
Law;
3) whether recipients of Social Security disability benefits are exempt from the motor fuel
taxes imposed under Article 12-A of the Tax Law and the sales and use taxes imposed under Article
28 of the Tax Law.
Petitioner avers that he is the recipient of a New York City police pension granted in lieu of
workmen's compensation for personal injuries or sickness incurred in the course of employment, and
that such pension is exempt from Federal, state and city personal income taxes.
Section 104(a) of the Internal Revenue Code and Section 1.104-1(d) of the federal income
tax regulations (26 CFR 1.104-1(b)) exclude from federal gross income, among other things,
amounts received under workmen's compensation acts or under a statute in the nature of a workmen's
compensation act which provides compensation to employees for personal injury or sickness
incurred in the course of employment.
Sections 282-a, 282-b, 282-c, 284, 284-a, 284-b and 284-c of the Tax Law, contained in
Article 12-A, impose excise taxes on motor fuels and diesel motor fuels.
Section 1105 of the Tax Law imposes a tax upon the receipts from every retail sale of
tangible personal property, the receipts from every sale, other than sales for resale, of certain energy
sources, certain communications and certain energy and communication services and the receipts
from certain specified services.
Section 104 of the Internal Revenue Code provides no exemption or exclusion from the
motor fuel or diesel motor fuel taxes imposed under Article 12-A of the Tax Law or the sales tax
imposed under Section 1105 of the Tax Law, with respect to amounts received as pensions in lieu
of workmen's compensation.
JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

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

-2­
TSB-A-81(5)S
Sales Tax
August 7, 1981

No other provision of Law provides an exemption or exclusion from the motor fuel and
diesel motor fuel taxes imposed under Article 12-A of the Tax Law or the sales tax imposed under
Section 1105 of the Tax Law, with respect to amounts received as pensions in lieu of workmen's
compensation.
Similarly, no provision of law provides an exemption or exclusion from the motor fuel and
diesel motor fuel taxes imposed under Article 12-A of the Tax Law or the sales tax imposed under
section 1105 of the Tax Law, with respect to recipients of Social Security disability benefits.
Accordingly, Petitioner is advised that recipients of pensions granted in lieu of workmen's
compensation and recipients of Social Security disability benefits are not exempt from the motor fuel
taxes imposed under Article 12-A of the Tax Law or the sales tax imposed under Article 28 of the
Tax Law, merely by virtue of their status as recipients of such pensions or such benefits.

DATED: July 21, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau