Must a company that isn't in the car business collect sales tax when it occasionally sells a company car to an employee or outsider?

Plain-English summary

Modern Maid Food Products, Inc. manufactures and processes food and occasionally sells its company cars to outside parties or employees. It argued that, because it isn't in the car business and because a buyer must pay the tax at DMV registration if it can't show proof of payment, it shouldn't have to collect and remit the sales tax. It asked whether it's responsible for collecting the tax on these car sales.

The Department held the company must collect the tax — it's a vendor making taxable sales.

• Car sales are taxable. Retail sales of automobiles are subject to the State sales tax under § 1105(a) and to local sales taxes.
• Vendors must collect. Section § 1132(a) requires "every person required to collect the tax" to collect it from the customer when collecting the price. Section § 1131(1) says that phrase includes vendors, and § 1101(b)(8)(i)(A) defines a "vendor" as any person "making sales of tangible personal property . . . the receipts from which are taxed" under Article 28.
• Being a food company doesn't matter. Because Modern Maid makes taxable sales of tangible personal property (the cars), it is a vendor and must collect the tax. That it isn't primarily in the car business "has no bearing."
• DMV backstop doesn't excuse the seller. The rule that a buyer pays the tax at registration when the seller failed to collect it does not relieve the seller of its own duty to collect and remit.

What this means for you

Occasional or one-off sales of business property can still be taxable, and you may have to collect. Selling off a company car, a piece of equipment, or other tangible property is a retail sale. If the receipts are taxable, you're a "vendor" for that sale and are responsible for collecting the tax — even if selling isn't your line of business.

"We're not a dealer" is not a defense. The vendor definition turns on whether you make taxable sales, not on whether that's your main business. A manufacturer selling its cars is a vendor for those transactions.

Don't rely on the buyer paying at the DMV. For vehicles, the DMV will collect tax at registration if it wasn't paid — but that's a backstop, not a substitute for your collection duty. Collect and remit at the sale to stay clean.

Common questions

Q: We sold a company car to an employee. Do we have to collect sales tax?
A: Yes. Car sales are taxable, and by making a taxable sale you're a "vendor" required to collect the tax — even though you aren't in the business of selling cars.

Q: Doesn't the buyer just pay the tax when registering the vehicle?
A: The DMV will collect it at registration if it wasn't collected, but that doesn't relieve you, the seller, of your duty to collect and remit the tax at the time of sale.

Q: We're not a car dealer — does the vendor rule still apply?
A: Yes. The definition of "vendor" turns on making taxable sales of tangible personal property, not on it being your primary business.

Citations and references

Statutes:

• Tax Law § 1105(a) — sales tax on retail sales of tangible personal property
• Tax Law § 1132(a) — duty to collect the tax from the customer
• Tax Law § 1131(1) — "persons required to collect tax" includes vendors
• Tax Law § 1101(b)(8)(i)(A) — definition of "vendor"

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_13s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-83(13)S
Sales Tax
March 24, 1983

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S830125B

On January 25, 1983 a Petition for Advisory Opinion was received from Modern Maid Food
Products, Inc., 200 Garden City Plaza, Garden City, New York 11530.
The issue raised is whether petitioner has the responsibility for collecting New York State
and local sales tax when it sells a company car.
Petitioner is a manufacturer and processor of food products. Petitioner owns cars which are
occasionally sold to outside parties or employees. It is Petitioner's contention that as it is not in the
business of selling cars, and that because the purchaser is required to pay the sales tax due if he
cannot show proof of sales tax payment at the time a vehicle is registered with the New York State
Department of Motor Vehicles, it should not be Petitioner's responsibility to collect and remit the
sales tax at the time it sells the car.
Retail sales of automobiles are subject to the State sales tax imposed under section 1105(a)
of the Tax Law, as well as locally imposed sales taxes. Section 1132(a) of the Tax Law provides that
"every person required to collect the tax shall collect the tax from the customer when collecting the
price." Section 1131(1) of the Tax Law provides that "persons required to collect tax" includes
vendors of tangible personal property. The term "vendor" is defined in section 1101(b)(8)(i)(A) as
any person "making sales of tangible personal property or services, the receipts from which are taxed
by this article [viz., Article 28 of the Tax Law]". Accordingly, inasmuch as Petitioner makes sales
of tangible personal property the receipts from which are subject to tax it is required to collect sales
tax. The fact that Petitioner is not primarily in the business of selling cars has no bearing on the issue
at hand. Neither is it relevant that tax is required to be paid at the time of registration in those
instances where a vendor has failed to fulfill his responsibility to collect and remit the tax due.

DATED: March 7, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau

ROBERT W. BOUCHARD, ACTING COMMISSIONER
GABRIEL B. DiCERBO , DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)