Does New York use tax apply to a tractor-trailer used in interstate and foreign commerce, and does the answer change if the owner is an out-of-state corporation with a New York place of business?

Plain-English summary

Monroe Contractors Equipment, Inc. (a New York corporation) bought a tractor-trailer out of state, first brought it into New York while in interstate commerce, and used it exclusively in interstate commerce. After six months it would pick up a load in Buffalo bound ultimately for Venezuela, via one of six possible routes. It asked whether the truck is exempt as used in interstate/foreign commerce, and whether the answer changes if it were a foreign corporation with a New York place of business.

The Department held that use tax turns on whether both trip endpoints are in New York — not on the interstate/foreign character of the commerce.

• Sales tax doesn't apply; use tax framework does. Because delivery was out of state, there's no § 1105 sales tax. The compensating use tax under § 1110 applies, and § 1111(b) sets the base — purchase price, or (if the taxpayer shows over six months of prior out-of-state use) current market value, capped at cost.
• The Department's endpoint policy. New York asserts use tax on vehicles moving goods from one New York point to another New York point, regardless of interstate/foreign commerce — but not where either the departure or destination is outside the state. This is constitutional: interstate and foreign commerce may be made to pay their way (STL Transport; Japan Line; Complete Auto Transit).
• Applying it to the six routes. Routes #1 (directly to Brooklyn) and #4 (to Brooklyn via New Jersey and Pennsylvania) have both endpoints in New York (Buffalo → Brooklyn), so use tax applies. Routes #2, #3, #5, and #6 end outside New York, so no use tax is asserted — even though route #4, like some others, passes through other states, its start and end are both in New York.
• Foreign corporation? Same result. Because Monroe maintains a place of business in New York, it is a "resident" under 20 NYCRR 526.15(b)(1) whether a New York or foreign corporation, so the analysis is unchanged.
• A 1988 change (noted in the opinion). A 1987 amendment effective January 1, 1988 exempts qualifying heavy tractors and trailers (combination gross weight over 26,000 pounds) under Tax Law § 1115(a)(26), and allows a credit or refund for qualifying tax paid on or after July 1, 1987 (§ 1139(g)).

What this means for you

A truck isn't exempt just because it runs in interstate or foreign commerce. New York's use-tax policy looks at the trip: if a haul both starts and ends in New York, it's a taxable in-state use — even if the cargo is ultimately headed abroad and the truck otherwise runs interstate.

A single out-of-state endpoint keeps the trip untaxed. If either the pickup or the delivery is outside New York, the Department does not assert use tax on that movement.

Having a New York place of business makes you a "resident." Out-of-state corporations that do business or keep a place of business here are residents for use-tax purposes, so incorporating elsewhere doesn't change the outcome.

Heavy tractors and trailers got a break in 1988. If your combination exceeds 26,000 pounds gross vehicle weight, the § 1115(a)(26) exemption (and the refund window for tax paid from July 1, 1987) may apply — confirm current law, since rules can change further.

Common questions

Q: My truck runs only in interstate commerce. Is it exempt from New York use tax?
A: Not automatically. If a haul both begins and ends in New York, the Department treats it as a taxable in-state use. Only trips with an out-of-state endpoint escape.

Q: The load's final destination is another country. Does that exempt the New York leg?
A: No, if the New York pickup and the New York drop-off are both in-state on that movement. The ultimate foreign destination doesn't change the endpoint analysis.

Q: Does it matter that I'm incorporated out of state?
A: No. If you maintain a place of business in New York, you're a resident under 20 NYCRR 526.15(b)(1), and the result is the same.

Q: Is there an exemption for big rigs now?
A: The opinion notes a 1988 exemption for tractors/trailers whose combination exceeds 26,000 pounds gross weight, with a refund for qualifying tax paid on or after July 1, 1987. Check current law for details.

Citations and references

Statute, regulation, and cases:

• Tax Law § 1110 — compensating use tax on tangible personal property used in the state
• Tax Law § 1111(b) — use-tax base for a resident's out-of-state purchase (purchase price, or current market value up to cost after 6 months' prior use)
• 20 NYCRR 526.15(b)(1) — "resident" includes New York corporations and out-of-state corporations doing business or maintaining a place of business here
• Tax Law § 1115(a)(26) and § 1139(g) — 1988 exemption and refund for qualifying heavy tractors and trailers (combination over 26,000 lbs)
• STL Transport, Inc. v. NY Dept. of Taxation and Finance; Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434; Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 — interstate/foreign commerce may be constitutionally made to pay its way

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a87_38s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87(38)S
Sales Tax
October 1, 1987

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S870205A

On February 5, 1987, a Petition for Advisory Opinion was received from Monroe Contractors
Equipment, Inc., 749 Phillips Road, P.O. Box F, Fishers, New York 14453.
The issues raised by Petitioner are (1) whether its truck is used in interstate or foreign
commerce and thereby exempt from the sales and compensating use taxes imposed under sections
1105 and 1110 of the Tax Law and (2) whether the results would differ if Petitioner were a foreign
corporation with a principal place of business in New York.
Petitioner, a domestic (New York) corporation, owns a tractor-trailer which was purchased
outside of the state and which first entered the State while engaged in interstate commerce.
Thereafter, it was used in interstate commerce exclusively. After six months of such use, the truck
will pick up a load in Buffalo, New York with the ultimate destination of such load being Venezuela,
South America. The tractor-trailer may take one of the following routes from Buffalo:
1) Directly to Brooklyn,
2) To New Jersey Port Authority,
3) To Connecticut,
4) To Brooklyn via New Jersey and Pennsylvania,
5) To New Jersey via New York and Pennsylvania,
6) To Connecticut via New York.
Issue (1)
Section 1105 of the Tax Law imposes a sales tax upon "[t]he receipts from every retail sale
of tangible personal property, except as otherwise provided in this article. However, inasmuch as
Petitioner took delivery of the tractor-trailer outside of the state, its purchase of the tractor-trailer
cannot be subject to the sales tax imposed by section 1105 of the Tax Law.
Section 1110 of the Tax Law provides that: "[e]xcept 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).

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

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

-2­
TSB-A-87(38)S
Sales Tax
October 1, 1987
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... .
The definition of resident includes, "Any corporation incorporated under the laws of New
York, and any corporation, association, partnership or other entity doing business in the State or
maintaining a place of business in the State, or operating a hotel, place of amusement or social or
athletic club in the State . . . ." 20 NYCRR 526.15(b)(1).
It is the policy of the Department of Taxation and Finance to assert use tax against vehicles
used within the State when transporting goods or persons from one point in New York State to
another point within New York State regardless of whether such vehicles are engaged in intrastate,
interstate or foreign commerce. Tax is not asserted against a vehicle exclusively engaged in
interstate or foreign commerce where either the point of departure or destination is outside of the
State. It is now well established that a state tax is not per se invalid because it burdens interstate of
foreign commerce since interstate and foreign commerce may constitutionally be made to pay their
way. STL Transport, Inc. v New York Department of Taxation and Finance. (In Re STL Transport,
Inc.), Case No. 85-20201, Adv. No. 86-0832T, (W.D.N.Y.) May 21, 1987); Japan Line, Ltd. v
County of Los Angeles 441 U.S. 434, 60 L. Ed. 2d 336, 99 S. Ct. 1813; Complete Auto Transit, Inc.
v. Brady 430 U.S. 274, 97 S. Ct. 1076, 51 L. Ed. 2d 326.
The use tax imposed by section 1110 of the Tax Law clearly meets the applicable
constitutional tests enunciated in the above cases with respect to Petitioner inasmuch as the tax is
imposed upon a New York resident with respect to vehicles operated upon the highways of New
York State with points of departure and destination both in New York State and subject to the
provisions of section 1118(7)(a) of the Tax Law. It should be noted that the vehicle at issue could
not come within the taxing or regulatory jurisdiction of a foreign government as was the case in
Japan Line, Ltd, supra.
Accordingly, use tax would be properly imposed under situations #1 and #4 above. The
remainder of the trips (#2, #3, #5 and #6) have a destination outside of New York State. For this
reason, the Department of Taxation and Finance would not assert a use tax.

-3­
TSB-A-87(38)S
Sales Tax
October 1, 1987
Issue (2)
Inasmuch as Petitioner maintains a place of business within New York State, it is a resident
of New York State for purposes of section 526.15(b)(1) of the sales and use tax regulations
regardless of whether it is a New York corporation or a foreign corporation.
Accordingly, the results described above would not change merely by virtue of Petitioner
being a foreign corporation.
However, it should be noted that a recent amendment to section 1115 of the Tax Law
(Chapter 755 of the Laws of 1987, 5 and 6) which will take effect January 1, 1988, will change the
results discussed in Issues (I) and (II) above. This amendment exempts from sales and use tax:
Tractors, trailers or semi-trailers, as such terms are defined in article
one of the vehicle and traffic law, and property installed on such
vehicles for their equipping, maintenance or repair, provided such
vehicle, is used in combination where the gross vehicle weight of
such combination exceeds twenty-six thousand pounds; and
[Services] if performed upon tractors, trailers or semi-trailers or on
property installed on such vehicles for their equipping, maintenance
or repair when receipts from the retail sale of such items are exempt
from tax under the provisions of paragraph twenty-six of subdivision
(a) of this section. (Tax Law 1115(a)(26); (g)(2)).
Additionally, effective April 1, 1988, a taxpayer may obtain a credit or refund of any tax paid
on or after July 1, 1987 with respect to:
(1) tractors, trailers or semi-trailers, as such terms are defined in
article one of the vehicle and traffic law, and property installed on
such vehicles for their equipping, maintenance or repair provided
such vehicle is used in combination where the gross vehicle weight
of such combination exceeds twenty-six thousand pounds; and (ii)
services, if performed upon tractors, trailers or semi-trailers described
in paragraph (i) of this subdivision or on property installed on such
vehicles for their equipping, maintenance or repair. (Tax Law
1139(g)).
DATED: October 1, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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