Are a trucking company's vehicles exempt from sales/use tax as interstate commerce when its NY-to-NY trips merely pass through other states?

Plain-English summary

S.T.L. Transport, Inc. hauls commodities from western New York (Wayne, Monroe, and Erie Counties) to New York City. On the way, its trucks drive through Pennsylvania and New Jersey. It operated under ICC authority at published interstate tariff rates and argued that, because its equipment moves interstate, the trucks are not subject to New York sales or use tax.

The Department held the trips are intrastate — the trucks are taxable.

• The taxing provisions. Tax Law 1105(a) taxes retail sales of tangible personal property; 1110 imposes a compensating use tax on property used in the state (to the extent not already sales-taxed); and 1111(b) sets the use-tax basis for property bought outside the state for use outside the state.
• The trucking policy. Under TSB-M-83(23)S ("Trucking Industry"), when a company buys a vehicle delivered outside New York, tax is due if the vehicle enters the state while not engaged in interstate/foreign commerce, or enters while so engaged but is later used to any degree in intrastate or localized New York use. No tax is due only if the vehicle stays out of New York, or enters while engaged in interstate commerce and remains exclusively (100%) in interstate commerce.
• What "interstate commerce" means. It means transporting persons or property for compensation between states or countries (20 NYCRR 528.9(a)(5)).
• These trips don't qualify. S.T.L.'s trips begin and end in New York; passing through Pennsylvania and New Jersey is merely incidental to an otherwise intrastate journey, so the vehicles are not engaged in interstate commerce.
• The controlling case. Callanan Marine v. State Tax Commission, 98 AD2d 555 (lv. denied 62 NY2d 606), held that vessels weren't in interstate commerce merely because they crossed state lines — otherwise carriers "could avoid sales and use taxes by the simple expedient of choosing routes for intrastate journeys with an incidental crossing of State lines."
• Result. S.T.L. must pay State and local sales and use tax on trucks used in this manner.

What this means for you

Where the trip starts and ends is what counts — not the route. A haul from one New York point to another is an intrastate journey for sales/use tax, even if the practical route dips through Pennsylvania or New Jersey. An incidental crossing of state lines doesn't convert it into interstate commerce.

Holding ICC authority and interstate tariffs doesn't decide the tax question. New York looks at the actual movement of the goods. Federal operating authority and published interstate rates didn't exempt these trucks.

"Exclusively interstate" is a strict standard. To keep a vehicle tax-free on this theory, it has to remain 100% in interstate commerce. Any intrastate or localized New York use pulls it back into the tax.

Common questions

Q: My New York-to-New York loads pass through another state. Is that interstate commerce for tax purposes?
A: No. If the trip begins and ends in New York, an incidental crossing of another state is treated as intrastate, and your vehicles are subject to New York sales and use tax.

Q: I have ICC authority and charge interstate tariff rates. Doesn't that exempt my trucks?
A: No. Federal authority and interstate rate schedules don't control. New York examines the actual origin and destination of the movement.

Q: When are trucks actually exempt on this interstate theory?
A: Only if the vehicle stays out of New York, or enters while engaged in interstate commerce and remains exclusively (100%) in interstate commerce. Any intrastate or localized New York use makes it taxable.

Citations and references

Tax Law:

• 1105(a) — taxes receipts from every retail sale of tangible personal property
• 1110 — compensating use tax on property used within the state
• 1111(b) — use-tax basis for property purchased outside the state for use outside the state

Regulation and policy:

• 20 NYCRR 528.9(a)(5) — "engaged in interstate or foreign commerce" means transporting persons/property for compensation between states or countries
• TSB-M-83(23)S ("Trucking Industry") — when vehicle purchases are taxable based on subsequent use

Case cited:

• Callanan Marine v. State Tax Commission, 98 AD2d 555, lv. denied 62 NY2d 606 — crossing state lines incidentally does not make an intrastate trip interstate commerce

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_25s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(25)S
Sales Tax
July 8, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S840807A

On August 7, 1984 a Petition for Advisory Opinion was received from S.T.L. Transport, Inc.,
P.O. Box 538, Newark, New York 14513.
The issue raised is whether equipment (trucks) used in interstate trucking operations are
subject to the sales or compensating use tax.
Petitioner is in the business of transporting commodities from western New York State
(Wayne, Monroe & Erie Counties) to New York City. In the course of making its deliveries,
Petitioner's vehicles are driven through the states of Pennsylvania and New Jersey before arriving
at their destination. Petitioner has been transporting goods under ICC authority and charges rates
published in the Interstate Commerce Commission Tariff. It is the Petitioner's contention that its
equipment is used in interstate movement and, therefore, not subject to the New York State Sales
or Compensating Use Tax.
Section 1105(a) of the Tax Law imposes a sales tax on the receipts from every retail sale of
tangible personal property unless otherwise excluded or exempt.
Section 1110 of the Tax Law provides that: "Except to the extent that property or services
have already been or will be subject to the sales tax under this article, there is hereby imposed on
every person a use tax for the use within this state . . . of any tangible personal property purchased
at retail. . ." (emphasis added).
Section 1111(b) of the Tax Law provides that: "Tangible personal property, which has been
purchased by a resident of New York State outside of this state for use outside of this state and
subsequently becomes subject to the compensating use tax imposed under this article, shall be taxed
on the basis of the purchase price of such property, provided, however: (1) That where a taxpayer
affirmatively shows that the property was used outside such state by him for more than six months
prior to its use within this state, such property shall be taxed on the basis of current market value of
the property at the time of its first use within this state. The value of such property, for compensating
use tax purposes, may not exceed its cost. . ."
On August 31, 1983 the Technical Services Bureau released TSB-M-83(23)S (entitled
"Trucking Industry") which stated the Department's policy regarding the application of sales and
compensating use tax to purchases of vehicles, parts and repair services by trucking companies. In
addressing vehicle purchases where the purchaser takes delivery of the vehicle outside New York
State, this memorandum states:

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

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

-2­
TSB-A-85(25)S
Sales Tax
July 8, 1985
"a.

Purchases. When a trucking company purchases a vehicle which is delivered
by the seller or a common carrier at a point outside the State, tax liability is
determined based on subsequent vehicle use as follows:
1)

2)

Tax is due pursuant to Tax Law section 1110 if:
a)

the vehicle entersthe State while not engaged in interstate or
foreign commerce, even though the vehicle is thereafter used
in interstate or foreign commerce.

b)

the vehicle enters the State while engaged in interstate or
foreign commerce, but is subsequently used to any degree in
intrastate commerce or any localized use within New York
State.

No tax is due on the vehicle if:
a)

the vehicle is not brought into this State.

b)

the vehicle enters this State while engaged in interstate or
foreign commerce and remains exclusively (100%) in
interstate commerce. . ."

The Sales and Use Tax Regulations define the phrase "engaged in interstate or foreign
commerce" to mean "the transportation of persons or property for compensation between states or
countries. 20 NYCRR 528.9 (a)(5).
Petitioner's trips both begin and end in New York State with the traverse of Pennsylvania and
New Jersey being merely incidental to what is otherwise an intrastate journey. Therefore, Petitioner's
vehicles are not engaged in interstate commerce within the meaning and intent of the Sales and Use
Tax Regulations. Id. This conclusion is mandated by the decision of the court in the case of Callanan
Marine v State Tax Commission, 98 AD 2d 555, mot. for lv. to app. den. 62 NY 2d 606. In that
proceeding the Court held that certain vessels (scows) were not used in interstate commerce merely
because they crossed State lines. The Court stated that to hold such interstate traverse as interstate
commerce ". . . would allow carriers to avoid sales and use taxes by the simple expedient of choosing
routes for intrastate journeys with an incidental crossing of State lines . . . ." Id.
Accordingly, Petitioner is required to pay State and local sales and use tax on its purchase
of trucks used in the manner described herein.

DATED: June 11, 1985

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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