Are charges for hot air balloon rides subject to New York sales tax, and can a balloon operator get back tax it mistakenly remitted?

Plain-English summary

1000 Island Balloon Co. operates a hot air balloon ride business, charging $75 per ride. It asked (I) whether the ride charges are exempt from sales tax and (II) whether tax it had remitted for over two years — without ever collecting it from customers or telling them the fee included tax — is refundable.

Issue I — the ride is a non-taxable transportation service if the operator keeps control.

• Transportation isn't a taxed service. Section 1105 taxes tangible personal property and certain listed services; transportation services are not on the list.
• The line is dominion and control. Under § 1101(b)(5) and 20 NYCRR 526.7(e)(4), if the operator transfers possession or control of the balloon to customers, he has rented tangible personal property and the fee is taxable. But if the operator retains dominion and control — keeps possession, uses his own discretion in flying it (or controls it through an employee) and stays responsible for the operation — the charge is a non-taxable transportation service.
• Not an admission charge either. A hot air balloon is not a "place of amusement" under § 1101(d)(10) (Fairland Amusements v. State Tax Commission, 66 N.Y.2d 932), so the fee isn't a taxable admission charge under § 1105(f)(1).

Issue II — a refund depends on the operator's records. Section 1139(a) lets the Department refund tax paid in error, but 20 NYCRR 534.2(c)(1) says a vendor who collected tax from customers must repay them first. The operator says it never collected the tax. Because all receipts are presumed taxable and the burden of proof is on the vendor (Tax Law § 1135(a); 20 NYCRR 533.2; Saltzman v. State Tax Commission, 101 A.D.2d 910), the operator must keep records good enough to show tax was in fact not collected. Whether those records suffice is decided administratively when a refund claim is filed — not in this opinion.

What this means for you

"Driver or renter?" decides the tax on a ride. If you operate the vehicle — plane, boat, balloon, carriage — and keep control and responsibility, you're selling transportation, which New York doesn't tax. Hand the customer the controls, and you've rented equipment, which is taxable. How you run the trip, not what you call it, sets the result.

Collecting tax you didn't owe is expensive to unwind. This operator remitted tax for years and now has to prove a negative — that it never actually collected the tax from riders — before the state will refund it. If you're unsure a charge is taxable, resolve it before you start remitting, and keep transaction-level records either way.

Records carry the burden. New York presumes every receipt is taxable until you prove otherwise. A refund of over-remitted tax lives or dies on whether your books show, transaction by transaction, that the tax wasn't collected from customers.

Common questions

Q: Are sightseeing or ride charges taxable in New York?
A: Not as transportation. If you operate the craft and keep control and responsibility, the fee is a non-taxable transportation service. It becomes taxable only if you effectively rent the craft to the customer.

Q: Is a balloon or ride a taxable "amusement" admission?
A: No. The Department held a hot air balloon isn't a "place of amusement," so the fee isn't a taxable admission charge.

Q: I remitted sales tax I never collected — can I get it back?
A: Possibly, under § 1139(a), but only if your records prove you never collected the tax from customers. If you did collect it, you generally must refund your customers first. The Department decides on a filed refund claim.

Citations and references

Statutes and regulations:

• Tax Law § 1105 — taxes tangible personal property and enumerated services; transportation is not enumerated
• Tax Law § 1101(b)(5); 20 NYCRR 526.7(e)(4) — "sale" includes a rental/lease/license; transfer of possession or control of property
• Tax Law § 1105(f)(1); § 1101(d)(10) — admission charges and "place of amusement"
• Tax Law § 1139(a) — refund or credit of tax erroneously, illegally or unconstitutionally paid
• Tax Law § 1135(a); 20 NYCRR 533.2 — recordkeeping and the vendor's burden of proof
• 20 NYCRR 534.2(c)(1) — a vendor must repay tax to customers before the Department refunds it

Cases cited:

• Fairland Amusements v. State Tax Commission, 66 N.Y.2d 932 — a balloon is not a "place of amusement"
• Saltzman v. State Tax Commission, 101 A.D.2d 910 — vendor's burden to document non-taxable status

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1986.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a86_22s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-86(22)S
Sales Tax
May 28, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S860108A

On January 8, 1986, a Petition for Advisory Opinion was received from 1000 Island Balloon
Co., 5300 Gatehouse Rd., Tully, N.Y. 13159.
The issues raised are (I) whether charges for hot air balloon rides are exempt from sales tax
and, (II) if an exemption applies, whether the taxes Petitioner paid to the Tax Commission are
refundable.
Petitioner operates a hot air balloon ride business. He states that he charges $75.00 per ride,
the customary fee charged by local balloonists. He also states that from March 1, 1983 through
August 31, 1985 he remitted sales tax to New York State on the fees charged for balloon rides even
though he never collected any sales tax from his customers and never represented to his customers
either verbally or in writing that sales tax was included in the fees charged for balloon rides.
Petitioner never gave receipts to any of his customers.
Issue I
Section 1105 of the Tax Law imposes a sales tax on receipts from the retail sale of tangible
personal property and from certain enumerated services. Transportation services are not among the
services taxable under section 1105 of the Tax Law.
Section 1101(b)(5) of the Tax Law defines "sale" as any transfer of title or possession or
both, rental, lease or license to use for a consideration.
Sales and use tax regulation section 526.7(e)(4) states that the "transfer of possession with
respect to a rental, lease or license to use, means that one of the following attributes of property
ownership has been transferred: (i) custody or possession of the tangible personal property, actual
or constructive; (ii) the right to custody or possession of the tangible personal property; (iii) the right
to use or control or direct the use of tangible personal property."
Thus, if Petitioner transferred possession or control of the hot air balloon to his customers,
Petitioner is deemed to have made a rental of tangible personal property. The fees charged for the
rental of such a balloon constitute receipts subject to tax under section 1105 of the Tax Law.
However, if Petitioner retained dominion and control over the balloon, Petitioner is considered to
have provided a nontaxable transportation service. Generally, Petitioner is deemed to have retained
dominion and control over the hot air balloon if Petitioner retained possession of the balloon, used
his own discretion in operating the balloon or controlled the operation of the balloon through an
employee and retained overall responsibility for the operation of the balloon.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

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TSB-A-86(22)S
Sales Tax
May 28, 1986

Moreover, a hot air balloon is not a "place of amusement" for purposes of section
1101(d)(10) of the Tax Law. Fairland Amusements v. State Tax Commission, 66 NY2d 932.
Accordingly, payments for its use are not "admission charges" taxed under section 1105(f)(1) of the
Tax Law.
Issue II
Section 1139(a) of the Tax Law states, in part, that the Tax Commission shall refund or credit
any tax, penalty or interest erroneously, illegally or unconstitutionally paid.
Regulation 534.2(c)(1) provides that "Any person who has erroneously, illegally, or
unconstitutionally collected any tax from a customer and remitted such tax to the Tax Commission
must repay such tax to the customer before the Tax Commission may refund any amounts to him."
Petitioner states it charges $75.00 per ride, the usual fee received by local balloonists, and
does not give receipts to the passengers. Although it has remitted sales tax, Petitioner contends such
amounts do not represent collections from patrons since it has never, either verbally or in writing,
notified customers that the ride fees include sales tax.
Pursuant to Tax Law 1135(a) "[e]very person required to collect tax shall keep records of
every sale or amusement charge or occupancy and of all amounts paid, charged or due thereon and
of the tax payable thereon, in such form as the tax commission may by regulation require. Such
records shall include a true copy of each sales slip, invoice, receipt, statement or memorandum upon
which subdivision (a) of section eleven hundred thirty-two requires that the tax be stated separately."
In addition, the Sales and Use Tax Regulations provide that it is statutorily presumed that all
receipts from sales and all amusement charges of any type mentioned in subdivision (f) of section
1105 of the Tax Law are subject to tax until the contrary is established. The burden of proving that
any receipt, amusement charge or rent is not taxable is on the vendor or the customer. To satisfy his
burden of proof, a vendor must maintain records sufficient to verify all transactions. The sales
record must provide sufficient detail to independently determine the taxable status of each sale and
the amount of tax due and collected thereon. (20 NYCRR 533.2[a][1],[b][2]).
Accordingly, unless Petitioner's records are sufficient to document the exempt status of each
transaction and to establish that in fact sales tax was not collected thereon, the Tax Department will
be unable to determine whether the taxes Petitioner has remitted are refundable and Petitioner will
have failed to meet his burden of proof under regulation section 533.2. See: Murray Saltzman v.
State Tax Commission, 101 AD2d 910.

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TSB-A-86(22)S
Sales Tax
May 28, 1986

It should be noted that advisory opinions interpret the applicability of statutory and regulatory
provisions in relation to the facts set forth in a Petition. Whether Petitioner has maintained records
satisfactory for proving that a refund is due must be decided by administrative procedure upon
Petitioner's filing of a request for refund.

DATED: May 28, 1986

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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