Is the gas and electricity that runs coin-operated washers and dryers in an apartment building exempt as residential energy use?

Plain-English summary

Coin Mach Industries Corporation places coin-operated washers and dryers in residential apartment buildings for tenants to use. The machines are in a separate room, and the gas and electricity they consume is separately metered and billed to Coin Mach. It argued that because the machines are used by residents of a residential building, the energy is used for residential purposes and should be exempt under § 1105-A.

The Department disagreed: the energy is business use and is taxable.

• Gas and electricity are taxable, subject to the residential exemption. Section 1105(b) taxes receipts from sales of gas and electricity; § 1105-A exempts gas and electricity "used for residential purposes."
• "Residential purposes" means using the structure as a place of abode. Under TSB-M-78(7)S, residential use is any use of a structure as a place of abode. Non-residential use is any other use, including any use in the conduct of a trade, business, or profession — whether carried on by the owner of the structure or someone else.
• Coin-op laundry is a business use. The gas and electricity here are consumed in Coin Mach's laundry business, not in using the building as a home. So it is not used for residential purposes, and the receipts are taxable under § 1105(b).

What this means for you

Where the energy powers a business, it's taxable — even inside an apartment building. The residential-energy exemption looks at the use, not the building type. Energy that runs commercial equipment (like a laundry concession) is business use and doesn't qualify, even though the equipment sits in a residential building and serves tenants.

"Someone else's business in a residential building" still counts as business use. The regulation expressly reaches a trade or business carried on by a party other than the building owner. A vendor operating machines in a landlord's building is using energy for its own business purposes.

Separate metering makes the business use plain. Because the machines were separately metered and billed to the operator, the business character of the consumption was clear. Operators of in-building concessions should expect their separately metered energy to be taxed.

Common questions

Q: My coin laundry machines are in an apartment building for tenants. Is the electricity exempt as residential?
A: No. The energy runs your laundry business, which is a non-residential (business) use. It's taxable under § 1105(b), not exempt under § 1105-A.

Q: Doesn't tenant use make it residential?
A: No. The exemption turns on whether the structure is being used as a place of abode. Powering commercial laundry equipment is a business use regardless of who operates the machines.

Q: What is "residential purposes" for this exemption?
A: Under TSB-M-78(7)S, it's use of a structure as a place of abode. Any use in a trade, business, or profession — by the owner or anyone else — is non-residential.

Citations and references

Statutes:

• Tax Law § 1105(b) — tax on receipts from sales of gas and electricity
• Tax Law § 1105-A — exemption for gas and electricity used for residential purposes

Department guidance:

• TSB-M-78(7)S — definitions of "residential purposes" and "non-residential purposes"

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1984.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a84_17s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-84(17)S
Sales Tax
May 4, 1984

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S840315A

On March 15, 1984 a Petition for Advisory Opinion was received from Coin Mach Industries
Corporation, 200 Community Drive, Great Neck, New York 11021.
The issue raised is whether Petitioner is entitled to the exemption granted under Section
1105-A of the Tax Law with respect to gas and electricity used to run coin operated washers and
dryers located in residential apartment buildings.
Petitioner supplies coin operated washers and dryers in residential apartment buildings for
use by the tenants. The washers and dryers in question are located in a separate room in the building
and the electricity and gas used by these machines is separately metered and billed to Petitioner. It
is Petitioner's contention that these machines are used by the residents of a residential building and
that, therefore, the electricity and gas consumed by these machines is used for residential purposes.
Section 1105(b) of the Tax Law imposes a sales tax on the receipts from every sale of, among
other things, gas and electricity. Section 1105-A of the Tax Law presently provides for an exemption
with respect to gas and electricity "used for residential purposes."
Taxpayer Services Bureau Memorandum TSB-M-78(7)S defines "residential purposes" to
mean any use of a structure as a place of abode. "Non-Residential Purposes" is defined as any use
other than for "residential purposes", including "any use in the conduct of a trade, business or
profession, whether such trade, business or profession is carried on by the owner of the structure or
some other persons."
Accordingly, as the gas and electricity at issue is used in the conduct of a trade or business
it is not used for residential purposes within the meaning of Section 1105-A of the Tax Law. The
receipts from the sale of such gas and electricity are therefore subject to the tax imposed under
section 1105(b) of the Tax Law.

DATED: April 17, 1984

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR