Is a not-for-profit stamping organization created by statute a New York State agency or public corporation exempt from sales and use tax?

Plain-English summary

The Excess Line Association of New York is a not-for-profit advisory organization created by an act of the Legislature (Insurance Law § 2130(a)). It reviews, records, and stamps excess-line insurance documents — insurance placed through licensed brokers with insurers not otherwise authorized in New York — certifying that the insurer meets state eligibility standards, and it flags non-conforming filings to the Superintendent of Insurance. Its only funding is a stamping fee on each document, paid by the member licensee (who may pass it to the insured). The Association asked whether it is a State agency, instrumentality, or public corporation exempt from sales and use tax under Tax Law § 1116(a)(1).

The Department held it is not exempt.

• Created by statute is not the same as owned by the State. The § 1116(a)(1) exemption covers New York State and its agencies, instrumentalities, public corporations, and political subdivisions. The Association is not owned by the State.
• It functions as a board of trade, not a public body. The Association is organized to operate as a board of trade rather than for a public purpose — underscored by its own application to the IRS for exemption as a § 501(c)(6) business league (business leagues, chambers of commerce, boards of trade).
• No legislative designation as a government entity. When the Legislature intends an entity to be a governmental agency or public corporation, it usually says so in the enabling statute. Here, no such provision appears. So the Association is not listed in § 1116(a)(1), and no Insurance Law provision exempts it — meaning it must pay New York State and local sales and use tax.

What this means for you

A statutory creation isn't automatically a tax-exempt government body

Being created by the Legislature and performing a regulatory-support role does not make an organization a State agency or public corporation for sales-tax purposes. New York looks at whether the State owns the entity, whether it serves a public purpose versus operating like a trade board, and — importantly — whether the enabling statute expressly designates it as governmental.

Applying for § 501(c)(6) status can cut against you

The Association's own IRS application as a business league helped show it operates as a board of trade, not a public body. How you characterize yourself for federal tax purposes can undercut a claim to be a governmental instrumentality under state law.

Exemption needs a clear statutory hook

To be exempt, an entity must fit within § 1116 (or a specific Insurance Law provision). Absent an express legislative designation as an agency or public corporation, expect to pay sales and use tax on your purchases.

Common questions

Q: We were created by state statute — are we exempt from sales tax?
A: Not automatically. Being created by statute doesn't make you a State agency or public corporation under § 1116(a)(1); the State must own you or the statute must designate you as governmental.

Q: Why did operating a "stamping" function not qualify as a public purpose?
A: The Department viewed the organization as operating like a board of trade for its member licensees, not for a public purpose — reinforced by its § 501(c)(6) application.

Q: What would it take to be exempt?
A: A clear statutory hook — either an express legislative designation as an agency/public corporation under § 1116(a)(1) or a specific exempting provision of the Insurance Law.

Citations and references

Statutes and regulations:

• Tax Law § 1116(a)(1) — exemption for New York State and its agencies, instrumentalities, public corporations, and political subdivisions
• Insurance Law § 2130(a) — statute creating the Excess Line Association and deeming all excess-line licensees members
• IRC § 501(c)(6) — federal exemption for business leagues, chambers of commerce, and boards of trade

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a90_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-90 (13)S
Sales Tax
March 21, 1990

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S891109B

On November 9, 1989 a Petition for Advisory Opinion was received from Excess Line
Association of New York, 195 Broadway, 20th Floor, Suite 2003, New York, New York 10007.
The issue raised by Petitioner, Excess Line Association of New York, is whether it is an
agency, instrumentality or public corporation of the State of New York exempt from the payment
of sales and compensating use taxes within the meaning of Section 1116(a)(1) of the Tax Law.
Petitioner was created by an Act of the New York State Legislature (L. 1988, c. 630, §2,
codified at New York Insurance Law §2130(a)). Petitioner is a not-for-profit advisory organization
created to assist New York-licensed excess line insurance brokers (licensees) to comply with the
many detailed and complicated features of New York's current excess line regulatory system; to
protect persons seeking insurance in New York; to permit excess line insurance to be placed with
reputable and financially sound unauthorized insurers; and to protect the revenues of New York.
Petitioner reviews, records and stamps excess line insurance (i.e. insurance obtained through
licensed brokers from insurers that are not otherwise authorized in New York) documents required
to be submitted under New York's Insurance Law. It issues a stamp on all declaration pages of
insurance policies, cover notes or other insurance premium bearing documents, providing that it
believes the excess line insurer from which the particular coverage was procured meets the minimum
standards of eligibility imposed by New York law and the rules and regulations of the Superintendent
of Insurance. In the event that it receives documents not meeting minimum standards, it notifies the
Superintendent prior to stamping such documents.
Petitioner's sole present and future source of financial support is the stamping fee assessed
on each declarations page, cover note or other premium bearing document submitted to it. This fee
is paid by the member excess line licensee, which may collect the fee from the insured on whose
behalf the licensee is procuring insurance. All New York excess line licensees are deemed by section
2130(a) of the Insurance Law to be members of Petitioner.
In the event Petitioner is dissolved, its Board of Directors are required to transfer its
remaining assets to another non-governmental organization established for the same or similar
purposes as Petitioner or, if no such organization exists, to one or more charitable organizations
selected by the Board of Directors.
TP-9 (9/88)

-2­
TSB-A-90 (13)S
Sales Tax
March 21, 1990

On September 29, 1989 Petitioner applied to the Internal Revenue Service for recognition
that it is a tax-exempt organization as described in section 501(c)(6) of the Internal Revenue Code
of 1986, as amended.
Section 1116(a)(1) of the Tax Law exempts from sales and compensating use tax:
The state of New York, or any of its agencies,
instrumentalities, public corporations (including a public corporation
created pursuant to agreement or compact with another state or
Canada) or political subdivisions where it is the purchaser, user or
consumer, or where it is a vendor of services or property of a kind not
ordinarily sold by private persons.
To be exempt from the payment of sales and use tax, Petitioner would have to be exempt
under one of the provisions of Section 1116 of the Tax Law or a specific provision of the Insurance
Law.
Petitioner is not owned by the State. It is organized for the purpose of operating a board of
trade rather than for some public purpose as is usually the case with public corporations. This is
further evidenced by the fact that Petitioner has applied to the Internal Revenue Service for
exemption from Federal income tax under § 501(c)(6) of the Code. Section 501(c)(6) exempts:
Business leagues, chambers of commerce, real-estate boards,
boards of trade, or professional football leagues (whether or not
administering a pension fund for football players), not organized for
profit and no part of the net earnings of which inures to the benefit of
any private shareholder or individual.
Finally, the implementing statute usually specifies that an entity is a governmental agency
or a public corporation if it is intended to be one by the legislature. No such provision is found in
the applicable statutes. Consequently, Petitioner is not an organization set forth in Section 1116(a)(1)
of the Tax Law that is exempt from the New York State or local sales tax or compensating use tax.

DATED: March 21, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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