Does a contractor owe sales tax on armored-car transport, delivery, and storage services when it performs them as an authorized agent of a New York State agency?

Plain-English summary

Monetary Management of New York, Inc. arranged armored-car transport, delivery, and bulk storage of the federal government's food-stamp coupons so they could reach roughly 1,300 issuance agents across New York. It did this under a chain of contracts flowing down from the New York State Department of Social Services (the state agency that runs the food-coupon program). The petitioner asked whether the armored-car and storage services it bought were subject to New York sales and use tax.

The Department concluded the charges are exempt:

• These services are normally taxable. New York taxes storage of tangible personal property (Tax Law 1105(c)(4)) and armored-car / protective services (Tax Law 1105(c)(8)).
• But sales to the State are exempt. Tax Law 1116(a)(1) exempts purchases made by New York State and its agencies. A contractor buying on behalf of an exempt government entity, as its agent, stands in the same shoes (20 NYCRR 541.2(c), 529.2(b)).
• A genuine agency relationship existed. The state's contract (and a 1988 letter) expressly named the petitioner and its parent as the Department of Social Services' agent for storing, transporting, and delivering the coupons. That met the agency test from Matter of Hooper Holmes, Inc. v. Wetzler -- the taxpayer consented to act for the agency, under its control, and the agency authorized the relationship.

Because the petitioner acted as the authorized agent of an exempt state agency, the transport and storage charges were not subject to sales tax.

What this means for you

Contractors and vendors serving government agencies

If you buy taxable services (or property) as the agent of an exempt New York government entity, those purchases can qualify for the section 1116(a)(1) exemption -- but you need documentation that the agency actually authorized you to act on its behalf. A written contract designating you as agent, plus supporting correspondence, is what carried the day here.

The exemption follows the government buyer, not the type of service

Storage and armored-car services are taxable in the abstract. What made them exempt was who was really buying them -- the state. Change the buyer and the answer changes.

Keep the paper trail

The invoices themselves stated the petitioner was acting as agent for the state agency. Consistent documentation across the contract, approval letters, and invoices is what establishes the agency relationship.

Common questions

Q: Aren't armored-car and storage services taxable in New York?
A: Yes, generally -- under Tax Law sections 1105(c)(8) and 1105(c)(4). They became exempt here only because the buyer was, in effect, an exempt state agency acting through its agent.

Q: What made the contractor an "agent" of the state?
A: A written contract and a 1988 approval letter named it as the Department of Social Services' agent for transporting and storing the coupons, satisfying the agency test in Hooper Holmes v. Wetzler.

Q: Could any contractor claim this exemption?
A: No. It applies only when the contractor is genuinely authorized to act on behalf of an exempt government entity and can document that authority.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner and the facts described. Treat it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(c)(4) (sales tax on storage services)
• Tax Law section 1105(c)(8) (sales tax on protective/detective and armored car services)
• Tax Law section 1116(a)(1) (exemption for sales to New York State and its agencies)
• 20 NYCRR 541.2(c) and 529.2(b) (contractor acting as agent of an exempt government entity)
• Matter of Hooper Holmes, Inc. v. Wetzler, 152 AD2d 871 (agency-relationship test)
• Matter of MGK Constructors, Tax App. Trib., March 5, 1992

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_45s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (45)S
Sales Tax
August 23, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S930427A

On April 27, 1993, a Petition for Advisory Opinion was received from Monetary Management
of New York, Inc., 150 State Street, Albany, New York 12207.
The issues raised by Petitioner, Monetary Management of New York, Inc., are:
1.

Whether Petitioner's purchases of services for the transportation and delivery of food
stamp coupons from the United States Department of Agriculture (hereinafter the
"USDA") print plants by armored carriers to armored carrier bulk storage facilities
in New York State are subject to New York State and local sales and use taxes.

2.

Whether Petitioner's purchases of services for the storage of food stamp coupons in
armored carrier bulk storage facilities in New York State are subject to New York
State and local sales and use taxes.

3.

Whether Petitioner's purchases of services for the transportation and delivery of food
stamp coupons via armored carriers to food coupon issuance agents are subject to
New York State and local sales and use taxes.

The New York State Department of Social Services, a state agency, has been granted
authority from the Federal government to administer the Food Coupon Program in New York State
in accordance with the Food Stamp Act of 1977 (Public Law 95-113). The New York State
Department of Social Services has, in turn, entered into a contract with Citibank, N.A., to administer
the Alternate Food Stamp Issuance Program in New York State by reassignment of an original
contract from First Texas Savings Association to Citibank's affiliate Citicorp Services, Inc.
(hereinafter "Citicorp"). Citicorp has contracted with Monetary Management Corporation, parent
company of Petitioner, to enable Citicorp to carry out its obligations to the New York State
Department of Social Services in administering the program.
Nearly 1,300 food coupon issuance agents located across New York State receive their
monthly supply of food coupons, which are printed and provided by the USDA as part of the Federal
Food Coupon Program, via armored car services. At present, Petitioner has a contract with two
armored carriers, i.e., Armored Motor Services of America ("AMSA") and Hudson Armored Car and
Courier Service (hereinafter "Hudson Armored") to transport and deliver the food stamp coupons.
Petitioner is required to secure food coupons and arrange for their transportation to issuance
agents via armored car services because State and federal regulations stipulate that food coupons are
an obligation of the Federal government, similar to currency, and as such the same control
procedures must be applied to food coupons. Petitioner is, therefore, contractually bound to hire

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TSB-A-93 (45)S
Sales Tax
August 23, 1993
armored car services for the delivery and storage of food coupons as a participant of the Alternate
Food Stamp Issuance Program.
Section B of the New York State Alternate Food Stamp Issuance Project Second Amendment
Agreement between Citibank, as Contractor, Monetary Management Corporation as Citibank's sub­
agent, and the New York State Department of Social Services provides that Citibank and Monetary
Management Corporation are agents of the Department of Social Services for services performed
in connection with the storage, transport and delivery of food stamp coupons. Section B reads, in
part, as follows:
B.

TAXES AND FEES

1.
The Department, as a general and unrestricted agency under the laws
of the State of New York, hereby reconfers to the extent allowed by law such agency
status to the Contractor, and to Monetary Management Corporation, a New York
Corporation as Contractor's subagent responsible for: (i) the receipt for, transport,
and delivery of food stamp coupons from the USDA print plant to armored carrier
bulk storage facilities in New York State; (ii) the storage of food stamp coupons in
bulk storage facilities; and (iii) the transport and delivery of food stamp coupons.
2.
The Department acknowledges that any sales tax exemption resulting
from the delegation set forth in paragraph B.1 above applies solely to services
provided in connection with the storage, transport and delivery of food stamp
coupons pursuant to the Principal Agreement.
In addition a letter dated August 29, 1988, from the Department of Social Services approved
Monetary Management Corporation's request to delegate all work that was to be performed by it, as
subcontractor under its agreement with Department of Social Services to Petitioner, a wholly owned
subsidiary of Monetary Management Corporation.
Invoices from Hudson Armored and AMSA state that "Petitioner is an agent for NYSDSS
when administering the food stamp program which includes the delivery and storage of food
coupons."
Section 1105(c) of the Tax Law provides, in part, as follows:
(c) The receipts from every sale, except for resale, of the following services:
*

*

*

(4) Storing all tangible personal property not held for sale-in the regular
course of business and the rental of safe deposit boxes or similar space.
*

*

*

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TSB-A-93 (45)S
Sales Tax
August 23, 1993
(8) Protective and detective services, including, but not limited to, all
services provided by or through alarm or protective systems of every nature,
including, but not limited to, protection burglary, theft, fire, water damage or any
malfunction of industrial processes or any other malfunction of or damage to property
or injury to persons, detective agencies, armored car services and guard, patrol and
watchman services of every nature other than the performance of such services by a
port watchman licensed by the waterfront commission of New York harbor, whether
or not tangible personal property is transferred in conjunction therewith. (emphasis
added)
Section 1116(a) of the Tax Law provides, in part, as follows:
Sec. 1116.
Exempt organizations--(a) Except as otherwise provided in
this section, any sale or amusement charge by or to any of the following or any use
or occupancy by any of the following shall not be subject to the sales and
compensating use taxes imposed under this article:
(1) 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;
In the Matter of MGK Constructors, Dec Tax App Trib, March 5, 1992, the Tribunal held
that when acting as a purchaser, user or consumer, the City of New York is not subject to sales tax
pursuant to Section ll16(a)(1) of the Tax Law. Moreover, a contractor acting as an agent of the City
would likewise not be subject to sales tax in accordance with Sections 541.2(c) and 529.2(b) of the
Sales and Use Tax Regulations.
The Tribunal further held that the criteria set out in Section 541.3(d)(4) of the Sales and Use
Tax Regulations for establishing whether an agency relationship exists is applicable only to exempt
organizations identified under Sections 1116(a)(3) - (6) of the Tax Law, and as New York City is
an exempt organization pursuant to Section 1116(a)(1) of the Tax Law, it was not subject to such
criteria.
Thus, the Tribunal held that since no regulation sets forth a criteria for establishing whether
an agency relationship exists with an exempt organization identified in Sections 1116(a)(1) and (2)
of the Tax Law, that the general principle of agency as cited in the Matter of Hooper Holmes, Inc.
v. Wetzler, 152 AD2d 871, 544 NYS2d 233, 235, lv denied 75 NY2d 706, 552 NYS2d 929, must
be applied. In Hooper Holmes, Inc. v. Wetzler, supra, the court stated: "To establish an agency or
representative relationship there must be a manifestation that petitioners consented to act on behalf
of their clients, subject to the latter's control and that the clients authorized this fiduciary
relationship."

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TSB-A-93 (45)S
Sales Tax
August 23, 1993
In the instant case, Section B of the New York State Alternate Food Stamp Issuance Project
Second Amendment Agreement between Citibank, as Contractor, Monetary Management
Corporation, as subcontractor, and the New York State Department of Social Services provides that
Monetary Management Corporation is an agent of the Department of Social Services for services
performed in connection with the storage, transport and delivery of food storage coupons, and by
letter dated August 29, 1988, the Department of Social Services further approved of Monetary
Management Corporation delegating its duties to Petitioner, a wholly owned subsidiary. Moreover,
invoices from Hudson Armored and AMSA make reference that "Petitioner is an agent for NYSDSS
when administering the food stamp program which includes the delivery and storage of food
coupons." Therefore, the criteria set forth Hooper Holmes, Inc. v. Wetzler, supra, that the agency
relationship be manifested through petitioners consent to act on behalf of its client under the client's
control and that the client authorized the fiduciary relationship has been met.
Accordingly, since the New York State Department of Social Services is a governmental
entity exempt under Section 1116(a)(1) of the Tax Law and has authorized Petitioner to act as agent
on its behalf in connection with the storage, transport, and delivery of food stamp coupons, the
charges for the transportation and storage of such food coupons as set forth in issues "1", "2" and "3"
are not subject to sales tax as imposed by Sections 1105(c)(4) and (8) of the Tax Law but are exempt
from sales tax in accordance with Section 1116(a)(1) of the Tax Law.

DATED: August 23, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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