When a trucking company temporarily stores goods 'in transit' while waiting for delivery instructions, does that storage make its transportation charges taxable, and when does the storage itself become taxable?

Subject

, is whether certain transportation charges become subject to sales tax when they are provided in conjunction with taxable storage charges.

What this means for you

Galasso Trucking transports goods and, along the way, sometimes has to temporarily hold ("in-transit" store) goods for customers who haven't yet decided when and where delivery should happen. It bills customers monthly, typically breaking out separate line items for transportation, packaging, hauling, and storage.

New York doesn't tax transportation/delivery services on their own. In-transit storage that's genuinely incidental to a shipment -- meaning it lasts 30 days or less -- is treated as part of that untaxed transportation service. But once in-transit storage runs longer than 30 days, the storage charge for the FULL period becomes taxable on its own under the general storage tax (Tax Law § 1105(c)(4)) -- it doesn't retroactively become exempt just because it started as incidental transit storage. The transportation charge itself, though, stays untaxed regardless of storage duration -- as long as the taxable storage charge is separately stated on the invoice. If the storage and transportation charges aren't broken out separately, the regulation treating a bundled taxable-plus-exempt sale as one taxed unit kicks in, and the ENTIRE combined charge (transportation included) becomes taxable.

Q&A

Q: We're a trucking/logistics company that occasionally has to hold a customer's goods until they tell us where and when to deliver -- is that storage taxable?
A: Not if it's 30 days or less -- per this opinion (citing TSB-M-82(22)S), incidental in-transit storage of 30 days or under is treated as part of the untaxed transportation service. Past 30 days, the storage charge for the whole period becomes taxable.

Q: Does taxable long-term storage make our whole invoice -- including the transportation charge -- taxable?
A: Only if you don't separately state the storage charge. Per 20 NYCRR § 527.1(b), a single bundled charge covering both taxable and exempt items gets taxed in full; separately stating the storage line item keeps the transportation charge untaxed.

Q: What if a customer hires a separate delivery company directly, rather than the delivery being part of our own sale of goods?
A: Per Tax Law § 1101(b)(3), delivery charges purchased directly from someone other than the vendor of the taxable goods/services being delivered aren't taxable, unless those delivery charges end up included on the vendor's own bill to the customer.

Citations

• Tax Law § 1101(b)(3) -- defines taxable "receipt" to include vendor-billed shipping/delivery charges, while delivery purchased directly from a third party (not the vendor) generally isn't taxed.
• Tax Law § 1105(c)(4) -- imposes sales tax on storage of tangible personal property not held for sale in the regular course of business.
• 20 NYCRR § 527.1(b) -- when taxable and exempt items are sold as a single bundled unit, tax is collected on the total price.
• TSB-M-82(22)S -- establishes the 30-day threshold distinguishing untaxed incidental in-transit storage from taxable storage.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a94_40s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-94 (40)S
Sales Tax
September 9, 1994

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S940615B

On June 15, 1994, a Petition for Advisory Opinion was received from Galasso Trucking, Inc.,
2 Galasso Place, Maspeth, New York 11378.
The issue raised by petitioner, Galasso Trucking Inc., is whether certain transportation
charges become subject to sales tax when they are provided in conjunction with taxable storage
charges.
Petitioner's primary business activity is the transportation of tangible personal property from
one location to another. In conjunction with its transportation services, Petitioner provides
temporary "in-transit" storage services. Petitioner stores tangible personal property for a specific
period of time or until notified by its customers when and where such goods are to be delivered.
Often, the Petitioner is hired to transport goods that have an undetermined delivery date. In such
instances the goods are picked up and temporarily stored until the Petitioner is notified by the
customer as to when to make delivery.
Petitioner generally bills its customers on a monthly basis. A bill typically reflects separate
charges for transportation, packaging, hauling and storage services rendered for that billing period.
When a bill reflects a charge for in-transit storage, Petitioner considers these services to be incidental
to the transportation service and not subject to sales tax.
Section 1101(b)(3) of the Tax Law defines receipt as "The amount of the sale price of any
property and the charge for any service taxable under this article, valued in money, whether received
in money or otherwise,. . . including any charges by the vendor to the purchaser for shipping or
delivery regardless of whether such charges are separately stated in the written contract, if any. . .
Section 1105(c)(4) of the Tax Law imposes sales tax upon "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."
Section 527.1(b) of the Sales and Use Tax Regulations provides that "When tangible personal
property, composed of taxable and exempt items is sold as a single unit, the tax shall be collected
on the total price."
Since sales tax is not specifically imposed on transportation services, delivery services
purchased by a customer directly from someone other than the vendor of the taxable property or
services to be delivered are not subject to sales tax under Section 1101(b)(3) of the Tax Law, unless
the charges for the delivery services are included on the vendor's bill to the customer.

-2­
TSB-A-94 (40)S
Sales Tax
September 9, 1994
Storage in-transit is recognized as being incidental to the transportation service and not
subject to sales tax only where the period of such storage does not exceed thirty (30) days. If the
period of storage does exceed 30 days, the storage charge for the full period is taxable under Section
1105(c)(4) of the Tax Law. (TSB-M-82(22)S).
Accordingly, charges by Petitioner for transportation services, where the in-transit storage
of the goods being transported does not exceed 30 days, will not be subject to sales tax. Likewise,
such charges by Petitioner for transportation services of in-transit goods, where the goods are stored
in excess of 30 days will not be subject to sales tax provided Petitioner separately states the charge
for the taxable storage services on its invoice.
If Petitioner does not separately state its taxable charges, its entire charge will become subject
to sales tax as indicated by Section 527.1(b) of the Sales and Use Tax Regulations.

DATED: September 9, 1994

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

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