Does a condominium's common-area electricity qualify for New York's reduced residential energy sales tax rate, including electricity used for the pool, laundry room, and a rooftop antenna lease?

Subject

Whether certain purchases of electricity by Petitioner, a 21-unit condominium, are eligible for the reduced rate of sales tax provided by Section 1105-A of the Tax Law.

What this means for you

A 21-unit oceanfront condominium has each unit owner paying for their own in-unit electricity, while the condominium association itself covers electricity for the building's common areas -- outside lights, hallway lights, stairway lights, and heaters -- plus a small coin-operated laundry room, a swimming pool, and a rooftop space it leases out to an antenna company.

New York gives a reduced statewide sales tax rate on energy sources (including electricity) used for RESIDENTIAL purposes -- meaning use as a place of abode -- but not for nonresidential uses like a trade, business, or profession. The Department's own prior opinions have already established that a condominium's swimming pool is treated as a social or athletic amenity, not residential use, so pool electricity doesn't qualify for the reduced rate. Neither does electricity for the coin-operated laundry machines or the antenna lease -- both are nonresidential uses. But electricity for the hallway lights, stairway lights, heaters, and outside lighting genuinely tied to the residential building itself IS treated as a residential common-area use and does qualify. Since all of this typically runs through a single meter or lump-sum bill, the actual tax result depends on a percentage test: if residential usage is 75% or more of the total, the ENTIRE bill gets the reduced rate without any certification needed; if residential usage is under 75%, only that residential percentage (calculated under the Department's regulations and rounded to the nearest 10%) gets the reduced rate, and a certificate must be filed with the energy supplier to get even that partial reduction.

Q&A

Q: Does our condo association's hallway, stairway, and outdoor common-area lighting qualify for New York's reduced residential energy tax rate?
A: Yes, per this opinion -- lighting and heating tied to the residential building's common areas is treated as residential use.

Q: What about electricity for our condo's swimming pool?
A: No, per this opinion and the Department's own prior rulings -- a condominium pool is treated as a social or athletic amenity, not a residential use, so its electricity doesn't qualify for the reduced rate.

Q: What about our coin-operated laundry room, or electricity tied to a rooftop space we lease to an antenna company?
A: Neither qualifies, per this opinion -- both are nonresidential uses.

Q: All of our electricity is billed on one meter -- how do we figure out what rate applies?
A: Per this opinion and the Department's regulations: if residential use is 75% or more of total usage, the WHOLE bill gets the reduced rate with no certification needed. If it's under 75%, only the residential percentage (rounded to the nearest 10%) gets the reduced rate, and the purchaser must file a certificate with the energy supplier to claim it -- without that certificate, the supplier must collect the full tax on the entire bill.

Q: Can another condominium or homeowners association rely on this opinion?
A: No. This advisory opinion binds the Department only as to the petitioner and the facts described here; another taxpayer cannot rely on it, though the Department applied the same reasoning it used in earlier opinions involving similar condominium and homeowner-association amenities.

Citations

• Tax Law § 1105-A -- provides a reduced statewide sales/use tax rate on specified energy sources (including electricity) sold for residential purposes.
• Sales and Use Tax Regulations § 527.13 -- defines "residential purposes," "nonresidential purposes," and "common area," and sets the certification/allocation rules for energy billed on a single meter or lump sum serving both residential and nonresidential uses (75%-or-more residential gets the full reduced rate; below 75% gets only the residential percentage, subject to certification).
• Stratford RP Inc., Adv. Op. Comm. T&F, TSB-A-87(40)S -- held that a condominium's shared swimming pool is a social/athletic amenity, not a residential use, for purposes of the reduced energy rate.
• Windsor Square Homes Assoc., Adv. Op. Comm. T&F, TSB-A-92(34)S -- applied the same swimming-pool-is-not-residential holding to another homeowners association.

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_53s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-93 (53)S
Sales Tax
October 5, 1993

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S930219A

On February 19, 1993, a Petition for Advisory Opinion was received from The Tower At
Montauk Condominium, Edgemore Street, Montauk, New York 11954.
The issue raised by Petitioner, The Tower At Montauk Condominium, is whether certain
purchases of electricity by Petitioner are eligible for the reduced rate of sales tax provided by Section
1105-A of the Tax Law.
The Tower At Montauk Condominium is made up of 21 unit owners. Each unit owner pays
for electricity in his own unit. The condominium covers the cost of electricity for the common area
(outside lights, hall lights, stairway lights, heaters, etc.). The condominium has a small laundry room
with coin-operated machines, a swimming pool, and in addition, rents out part of the roof to an
antenna company.
Section 527.13 of the Sales and Use Tax Regulations provides, in part, as follows:
(a) Reduction in rate
(1) Section 1105-A of the Tax Law provides for a reduction in the four-percent
statewide sales tax rate imposed under sections l105(a) and 1105(b) of the Tax Law
and in the four-percent statewide compensating use tax rate imposed under section
1110(a) of the Tax Law, as set forth in subdivision (c) of this section, on the receipts
from every sale, other than for resale, used for residential purposes of:
(i) fuel oil (except diesel motor fuel);
(ii) coal;
(iii) wood (for heating purposes only);
(iv) propane (except when sold in containers of less than 100 pounds);
(v) natural gas;
(vi) steam; and
(vii) gas, electric and steam services.
For purposes of this regulation, the term energy sources is used to describe the above
mentioned tangible personal property and services.
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TSB-A-93 (53)S
Sales Tax
October 5, 1993
(d) Definition
(1) The term residential purposes means any use of a structure or part of a structure
as a place of abode, maintained by or for a person, whether or not owned by such
person, on other than a temporary or transient basis with the exclusion of
accommodations subject to tax under subdivision (e) of section 1105 of the Tax Law.
(2) The term nonresidential purposes means any use other than for residential
purposes, as defined in paragraph (1) of this subdivision, including any use in the
conduct of a trade, business or profession whether such trade, business or profession
is carried on by the owner of the structure or some other person.
(3) The term common area means any area of the premises of a structure used
without distinction for both residential and nonresidential purposes.
(e) Certification and allocation
(1) Purchases of energy sources used exclusively for residential purposes shall
receive the reduced tax rate without the necessity of certification. (emphasis added)
(2) Where energy sources billed on a single meter or in a lump sum are used
for both residential and nonresidential purposes, and the residential purposes
constitute 75 percent or more of the usage, the entire amount billed shall be taxed at
the reduced sales tax rate without certification. See paragraph (5) of this subdivision
to determine the percentage of residential use.
(3) Where energy sources billed on a single meter or in a lump sum are used
for both residential and nonresidential and less than 75 percent of the usage is for
residential purposes, the purchaser is entitled to the reduced tax rate on only the
percentage of energy sources used for residential purposes. This percentage shall be
determined in accordance with paragraph (5) of this subdivision and shall be rounded
off to the nearest 10 percent. A certificate shall be filed in the form provided and
shall be given by the purchaser to the supplier of the energy sources. In the absence
of such a certificate, the supplier of energy sources shall collect the full tax on the
entire usage.
(4) Where a structure is exclusively used for nonresidential purposes, no
certification or statement is required, since no eligibility for a reduced sales tax rate
shall exist for purposes of energy sources and services.

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TSB-A-93 (53)S
Sales Tax
October 5, 1993
(5) To determine the percentage of the area of a structure used for residential
purposes, the following formula shall be used by the purchaser of the energy sources
and services: total area of space used for residential purposes, excluding common
areas, divided by the total area (residential and nonresidential), excluding common
area, equals the percentage rounded off to the nearest 10 percent applicable to use for
residential purposes. Thus, if the percentage before rounding is 74.9 percent, the
percentage when rounded is 70 percent.
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(f)(4) Where a customer is eligible for the reduced tax rate, as a residential
customer described in paragraph il) or (2) of subdivision (e) of this section, but the
supplier of energy sources has not classified him as a residential user, the customer
should furnish the supplier with a certification.
Swimming pools owned in common by the owners of units in a condominium are not
considered residential in nature but social or athletic. Thus, energy used in the operation of the pool
owned by Petitioner does not qualify for the reduced rate of sales tax. (see: Stratford RP Inc., TSBA-87(40)S, Windsor Square Homes Assoc. TSB-A-92(34)S.) In addition, the energy consumed by
the antennas and laundry machines is not used for residential purposes and thus does not qualify for
the reduced rate of sales tax. The hall lights, stairway lights, heaters and outside lighting used in
conjunction with the residential building are considered common area uses for purposes of Section
l105-A of the Tax Law and Section 527.13 of the Sales and Use Tax Regulations.
It is noted that pursuant to Section 527.13(e)(2) of the Sales and Use Tax Regulations if the
energy source for the above items is billed on a single meter or in a lump sum and the energy used
for residential purposes constitutes 75% or more of the usage then the entire amount billed will be
taxed at the reduced rate. On the other hand pursuant to Section 527.13(e)(3) of said regulations if
the residential usage is less than 75%, then the Petitioner would be entitled to a reduced rate only on
the residential portion of energy usage calculated in accordance with the regulations.

DATED: October 5, 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.