When a trucking firm hauls material for contractors with its own driver, is it providing a nontaxable transportation service or a taxable rental of the truck — and when does it owe tax on the material?

Plain-English summary

C.K. Industries Corp. is a trucking firm that hauls material for building contractors and supply yards. It laid out nine billing scenarios and asked when it must collect sales tax.

The Department's answer turns on who controls the truck — and whether C.K. is also selling the material.

• Trucking with your own driver = a service, not a rental. Under 20 NYCRR § 541.2(p), when a vehicle "rental" includes a driver/operator, it's presumptively the sale of a service (not a taxable rental of tangible personal property) so long as dominion and control stay with the owner. That's shown when the firm: (i) doesn't transfer possession/use of the truck; (ii) hires and fires the drivers; (iii) uses its own discretion and picks its own routes (even if the customer designates pickup/delivery points); (iv) keeps responsibility for operating the vehicle; and (v) directs the work and pays operating expenses (wages, insurance, tolls, fuel).
• Which scenarios are exempt. Scenarios 1, 3, 5, 6, 7, 8, and 9 are exempt transportation services if C.K. supplies the driver and retains dominion and control. No exemption certificates are required, but C.K. must be able to substantiate the § 526.5(g) exclusion.
• Lose control, and it's taxable. If C.K. fails to supply the driver or keep control, the transaction becomes a taxable rental, lease, or license to use the truck.
• Scenarios 2 and 4 — buying and reselling material. Here C.K. is purchasing material for resale. It gives its supplier a Resale Certificate and then either obtains a Resale Certificate from its customer (scenario 4, customer resells) or collects tax on its own subsequent sale (scenario 2).

What this means for you

Furnishing a truck with your driver is a nontaxable transportation service — renting a bare truck is taxable. The dividing line is control. If you keep your driver on the vehicle, run the operation, choose the routes, and pay the operating costs, you're selling a service. Hand the truck over to the customer to run, and you've made a taxable rental/lease/license.

You don't need exemption certificates for the hauling — but keep proof. Transportation that qualifies under § 526.5(g)/§ 541.2(p) doesn't require certificates, but you must be able to substantiate that you supplied the driver and retained dominion and control.

If you buy the material and sell it too, switch to resale handling. When you purchase material and resell it to your customer, use resale certificates: give one to your supplier, and either take one from a customer who will resell, or collect tax on your sale to the end user.

Common questions

Q: We haul contractors' material and bill by the hour or by the ton with our own driver. Do we charge sales tax?
A: No — that's a nontaxable transportation service, as long as you supply the driver and keep dominion and control of the truck (you run it, hire/fire drivers, choose routes, pay operating costs). Keep records to substantiate it.

Q: When would our trucking become taxable?
A: If you turn the truck over for the customer to control, or don't supply the driver — then it's a taxable rental, lease, or license to use the equipment.

Q: What if we buy the material and then deliver/sell it to the customer?
A: That's a resale. Give your supplier a Resale Certificate, and either get a Resale Certificate from a customer who resells, or collect tax on your sale to the end user.

Citations and references

Regulations:

• 20 NYCRR § 541.2(p) — a rental/lease/license of a vehicle or equipment that includes a driver/operator is presumptively the sale of a service where dominion and control remain with the owner (five listed factors)
• 20 NYCRR § 526.5(g) — the separately stated cost of transporting tangible personal property sold at retail is excluded from taxable receipts
• 20 NYCRR § 526.6(c) — resale exclusion; property purchased for resale is not taxed until transferred to the customer
• 20 NYCRR § 527.1(a) — imposes sales tax on receipts from every retail sale of tangible personal property

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a88_14s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88 (14) S
Sales Tax
February 8, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S870804B

On August 4, 1987, a Petition for Advisory Opinion was received from C.K. Industries Corp.,
67 Meadow Road, P.O. Box 128, Montrose, New York 10548.
Petitioner is a trucking firm which transports materials for building contractors, building
supply yards etc.
The issue raised is whether, under the following facts or examples, Petitioner is required to
collect sales tax.
1)

Petitioner contracts to haul material for a contractor to a job site or from a job site.
The contract price is based on an hourly rate. Petitioner maintains an employee who,
at the job site, determines the access to the job sites and insures that the trucks are not
overloaded or abused when loading and dumping.

2)

Same facts as #1, except that the material is purchased by Petitioner. There is no
profit added to the cost of material, specifically separate from the hourly rate. The
material is delivered to a building supply yard or to a job site for a building
contractor.

3)

Petitioner contracts to move material from a job site to a plant site. The contract price
is based on a price per yard or ton. The material is owned by Petitioner's customer.

4)

Petitioner contracts to haul material and sell it to his customer. The contract provides
for a combined price based on the yard or ton. Petitioner is buying material and
selling it to his customer who in turn is reselling the material.

5)

Petitioner contracts to haul material to a building contractor who is acting as a
general contractor for an exempt organization or a governmental entity. The pricing
for this type of contract is by the yard or ton and the material is owned by the general
contractor.

6)

Petitioner contracts to truck for an exempt organization. The contract price is based
upon the yard or ton.

7)

The same as #6, but the material is owned by a contractor who has a direct payment
permit.

8)

Petitioner contracts to truck material for an exempt organization. The contract price
is based upon an hourly rate.

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

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TSB-A-88 (14) S
Sales Tax
February 8, 1988

9)

The same as #8, but for a contractor who has a direct payment permit.

The following sections of the sales tax regulations apply:
§541.2(p) Rental, lease and license to use. (1) The terms rental, lease and license to use refer
to all transactions in which there is a transfer of possession of tangible personal property without a
transfer of title to the property.
(2)
For the purposes of this Part, when a rental, lease or license to use a vehicle or
equipment includes the services of a driver or operator, such transaction is presumptively the sale
of a service, rather than the rental of tangible personal property, where dominion and control over
the vehicle or equipment remain with the owner or lessor of the vehicle or equipment. (Emphasis
supplied) Dominion and control remain with the owner or lessor of the vehicle or equipment when
pursuant to an agreement or contract the lessor:
(i) does not transfer possession, control and/or use of the equipment or vehicle to the
lessee during the term of the agreement or contract;
(ii) maintains the right to hire and fire the drivers and operators;
(iii) uses his own discretion in performing the work (even though the lessee may
designate the area where material is to be picked up and delivered) and generally selects his
own routes;
(iv) retains responsibility for the operation of the equipment or vehicle; and
(v) directs the work, pays all operating expenses, including drivers' and/or operators'
wages, insurance, tolls and fuels.
§526.5(g) Transportation. (1) The cost of transportation of tangible personal property, sold
at retail, which is separately stated in written contract, if any, and on the bill rendered to the
purchaser is excluded from the receipts subject to the tax.
§527.1(a) Imposition. The sales tax is imposed on the receipts from every retail sale of
tangible personal property ....
§526.6(c) Resale exclusion. (1) Where a person, in the course of his business operations,
purchases tangible personal property or services which he intends to sell, either in the form in which
purchased, or as a component part of other property or services, the property or services which he
has purchased will be considered as purchased for resale, and therefore not subject to tax until he has
transferred the property to his customer.

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TSB-A-88 (14) S
Sales Tax
February 8, 1988

Pursuant to section 541.2(p) of the Sales Tax Regulations, the situations as described in
paragraphs 1, 3, 5, 6, 7, 8 and 9 are exempt transportation services if Petitioner supplies the driver
or operator and retains dominion and control over the vehicle or equipment. Transportation charges
do not have to be evidenced by any exemption certificates, however, Petitioner must be able to
substantiate that it falls within the exclusion described by section 526.5(g).
Of course, if Petitioner fails to supply the driver or operator or fails to retain dominion and
control over the vehicle or equipment, then the transaction is a taxable rental, lease or license to use.
In situations 2 and 4, Petitioner is purchasing material for resale. In such instances, Petitioner
may give its supplier a Resale Certificate and obtain a Resale Certificate from its customer (situation
4) or collect the tax on its subsequent sale (situation 2).

DATED: February 8, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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