New York Advisory Opinion TSB-A-95(32)S: Are a horse spa's fees for pool use, a walk-around exercise service, horse transportation, and boarding subject to sales tax, and does it matter whether the horse owner or the facility's licensed trainer handles the horse?

Plain-English summary

Horse Spa Farm, Inc. was completing a building over an 8-foot-deep, 4-foot-wide, 50-foot-long oval concrete swimming pool designed to exercise the legs and bodies of racehorses, charging a fee based on a fixed amount of time. The horse is tethered to a rope held either by the horse's own owner (or the owner's appointee) or, for a fee, by an employee of Petitioner assigned by the owner to perform this "walk around service." Petitioner also charges a fee to transport a horse to and from its facility, and separately maintains an indoor stable where it boards horses by the day, week, or month -- charging additional fees for feeding, grooming, walking, and riding boarded horses. Petitioner's president is a licensed horse trainer.

The Department's answer to each question turned on whether a licensed trainer (as defined in Tax Law § 1115(m)(3): a horse trainer licensed under the racing/pari-mutuel-wagering/breeding law) is actually rendering the service to a qualifying racehorse (registered with, or within 24 months eligible to register with, bodies like the Jockey Club). For pool USE where the owner or the owner's own appointee leads the horse (not a Petitioner trainer), the fee isn't taxable -- but not under the trainer exemption; it's simply the rental of real property, which falls outside the sales tax entirely. When Petitioner's OWN licensed trainer (or an employee under that trainer's direct supervision) performs the walk-around exercise service, the fee IS exempt, under § 1115(m)(1)'s exemption for a licensed trainer's services of training and maintaining a racehorse for its owner. Transportation fees follow the same trainer-dependent logic: normally a pickup/delivery charge is part of a taxable service receipt under 20 NYCRR § 526.5(g)(1), but transportation connected to an exempt training/exercise service, or connected to the untaxed pool rental, escapes tax along with the underlying service. Boarding fees (feeding, grooming, walking, riding) are exempt as part of "maintaining" a racehorse under § 1115(m)(1) -- but ONLY if the boarded horse is a racehorse Petitioner's licensed trainer is actually training to race under the racing/pari-mutuel/breeding law; if the boarding isn't connected to that kind of licensed training, the boarding and related fees are fully taxable. Finally, § 1115(m)(2) means a horse OWNER doesn't owe tax on tangible personal property Petitioner transfers as part of an exempt training service -- but Petitioner still must pay sales tax on its OWN purchases of that property, since delivering an exempt service isn't treated as buying for resale.

What this means for you

Horse training, boarding, and exercise facility operators

Whether your fees are taxable often hinges on a single fact: is a LICENSED trainer (as defined by the racing/pari-mutuel/breeding law) actually performing the service on a qualifying racehorse being trained to race? Document your trainers' licenses and each horse's racing eligibility/registration to support exempt treatment.

Facilities offering both pure rental and staffed services

Structuring a fee as pure facility RENTAL (where the customer or their own designee does the work) keeps it outside sales tax entirely as real property rental -- while the same activity performed by YOUR staff shifts the analysis to the racehorse-training exemption, which has its own separate qualifying conditions.

Boarding operations mixing racehorses and non-racing horses

Track which boarded horses are genuinely being trained by a licensed trainer for racing purposes -- boarding, feeding, grooming, and similar services for those horses are exempt, but the identical services for horses not being trained to race are fully taxable.

Common questions

Q: Why is pool rental to the owner untaxed for a different reason than the exercise-service fee?
A: Because they're legally distinct transactions -- pure rental of the pool facility (real property) to the owner, who does the leading themselves, isn't a sale of a service at all; but when Petitioner's own trainer or supervised employee actually performs the exercise service, that's a service transaction that needs its own exemption (§ 1115(m)(1)) to escape tax.

Q: Does Petitioner owe tax on supplies (like feed) it purchases to provide exempt boarding services?
A: Yes -- per § 1115(m)(2), Petitioner must pay sales tax on its own purchases of tangible personal property used in providing an exempt training/maintaining service, since providing that exempt service isn't treated as purchasing the property for resale.

Q: What if Petitioner's employee leads the horse but the horse isn't a qualifying "racehorse"?
A: The exemption requires BOTH a licensed trainer performing the service AND a racehorse as defined in § 1115(m)(3) -- if the horse doesn't meet that definition (not registered or eligible for registration with a body like the Jockey Club), the fee would be taxable even with a licensed trainer performing the work.

Citations and references

Statutes and regulations:

• Tax Law § 1115(m)(1) (racehorse training and maintaining exemption)
• Tax Law § 1115(m)(2) (tangible personal property transferred with exempt training service)
• Tax Law § 1115(m)(3) (definitions of trainer and racehorse)
• 20 NYCRR 526.5(g)(1) (shipping/delivery/pickup charges as part of taxable receipts)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1995.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a95_32s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (32)S
Sales Tax
August 8, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S941205B

On December 5, 1994, a Petition for Advisory Opinion was received from Horse Spa Farm,
Inc., 5601 Route 96, Farmingdale, New York 14425.
The issues raised by Petitioner, Horse Spa Farm, Inc., are as follows:
1.

Whether the fee charged by Petitioner for use of it's oval swimming
pool for exercising racehorses is subject to sales and use taxes.

2.

Whether the fee charged by Petitioner to have an employee perform
the walk around service to exercise the racehorses in the swimming
pool is subject to sales and use taxes.

3.

Whether the fee charged by Petitioner to transport a racehorse to and
from Petitioner's facilities is subject to sales and use taxes.

4.

Whether the fee charged by Petitioner to board racehorses, including
fees for feed, grooming, walking, riding, etc., are subject to sales and
use taxes.

Petitioner is in the process of completing a building over an eight foot deep, four foot wide,
fifty foot long oval concrete swimming pool that will be used to exercise the legs and bodies of
racehorses. Petitioner intends to charge a fee for the use of the facility based on a fixed amount of
time. A horse will be tethered to a rope which will be held by the owner of the horse or a designated
appointee to lead the horse around the oval during the entire time the horse is in the water. In some
instances an employee of Petitioner, for a fee, may be assigned by the owner of the horse to perform
the walk around service. Moreover, Petitioner will charge a fee for an employee to transport the
horse to and from the owner's property to the Petitioner's facilities.
Petitioner also maintains an indoor stable in proximity to the pool where horses will be
sheltered. Petitioner will charge by the day, week or month for this service. Petitioner will also
charge a fee to feed, groom, walk, ride, and perform similar services for horses that are boarded at
its stables.
The president of Petitioner is a licensed horse trainer.
Section 1115(m) of the Tax Law provides as follows:
(m)(1) The services of training and maintaining a racehorse to race in a race
or race meet held, maintained or conducted pursuant to the racing, pari-mutuel
wagering and breeding law or a similar law of another state, when the services are

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rendered to the owner of the racehorse by a trainer of the racehorse, shall be exempt
from tax under this article;
(2)
Tangible personal property actually transferred by a trainer to the
owner of the racehorse in conjunction with the rendering of a service that is exempt
under paragraph one of this subdivision shall be exempt from tax under this article.
However, the sale to a trainer of such a racehorse of any such tangible personal
property or such services taxable under this article shall not be deemed a sale for
resale within the meaning of paragraph four of subdivision (b) of section eleven
hundred one and shall not be exempt from retail sales or compensating use tax;
(3)
For purposes of this subdivision, a trainer means a horse trainer
licensed under the racing, pari-mutuel wagering and breeding law or a similar law of
another state, and a racehorse means a horse registered with the jockey club, the
United States trotting association, American quarterhorse association or the National
steeplechase and hunt association or a horse, during the first twenty-four months of
its life, if it is eligible to be so registered.
Section 526.5(g)(1) of the Sales and Use Tax Regulations provides as follows:
(g)
Shipping or delivery.(1) Shipping or delivery charges by a vendor to
its customers for the cost of transporting tangible personal property to the customer
are part of the vendor's receipts subject to tax where the sale of the property is subject
to tax or where taxable services were performed on the property. This is so
regardless of whether the vendor separately states such charges in a written contact
or on an invoice and regardless of whether the vendor ships or delivers the property
itself or hires a third party to ship or deliver the property. Similarly, charges by a
vendor to its customers for picking up the customer's property upon which the vendor
is to perform taxable services are part of the vendor's receipt from the sale of the
service subject to tax. (emphasis added)
With respect to issue "1", Section 1115(m)(1) of the Tax Law exempts from sales tax the
services of training and maintaining a racehorse to race in a race meet held, maintained or conducted
pursuant to the racing, pari-mutuel wagering and breeding law or similar law of another state, when
the services are rendered to the owner of the racehorse by a trainer of the racehorse. In the instant
case, Petitioner will maintain a concrete swimming pool that will be used to exercise the legs and
bodies of racehorses. The horses, however, will be led around the pool by the owner of the horse
or an appointee designated by the owner. Accordingly, since the owner of the racehorse or his
designated appointee will lead the horse around the pool and not a licensed trainer of Petitioner, the
fees paid by the owners of the racehorse are not for services rendered by a licensed trainer in training
and maintaining the racehorse. However, such fees are not subject to sales tax since they constitute
the rental of real property.
As for issue "2", Section 1115(m)(1) of the Tax Law exempts from sales tax the services of
training and maintaining a racehorse to race in a race meet held, maintained or conducted pursuant
to the racing, pari-mutuel wagering and breeding law or similar law of another state, when the

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services are rendered to the owner of the racehorse by a trainer of the racehorse. In the instant case,
Petitioner will maintain a concrete swimming pool that will be used to exercise the legs and bodies
of racehorses. Further, the services rendered by Petitioner of leading the racehorse around the pool
will be provided by a licensed trainer, or an employee of Petitioner under the direct supervision of
the licensed trainer. Accordingly, provided the licensed trainer is a trainer as defined under Section
1115(m)(3) of the Tax Law and the racehorses are one of those set forth in Section 1115(m)(3), the
fees paid to exercise the racehorses in the oval swimming pool and to perform the walk around
service will not be subject to sales tax.
Concerning issue "3", Section 526.5(g)(1) of the Sales and Use Tax Regulations provides that
charges by a vendor to its customers for picking up the customer's property upon which the vendor
is to perform taxable services are part of the vendor's receipt from the sale of the service subject to
tax. In the instant case, the services provided by Petitioner relating to the training and exercising of
racehorses will not be subject to sales tax provided the services are rendered by a licensed trainer
defined under Section 1115(m)(3) of the Tax Law and the racehorse is one of those set forth in
Section 1115(m)(3). Accordingly, provided that the service by Petitioner of transporting the
racehorse to and from Petitioner's facilities is in connection with the performance of an exempt
service, the fee paid for the transportation of the racehorse will not be subject to sales tax.
Furthermore, if the transportation services are provided in connection with the rental of the pool by
the owner, the transportation charges will not be subject to sales tax.
In regard to issue "4", Section 1115(m)(1) of the Tax Law exempts from sales tax the services
of training and maintaining a racehorse to race in a race meet held, maintained or conducted pursuant
to the racing, pari-mutuel wagering and breeding law or similar law of another state, when the
services are rendered to the owner of the racehorse by a trainer of the racehorse. The maintaining
of a racehorse would include boarding, feeding, grooming, walking and riding the racehorse provided
the services are rendered by a licensed trainer defined under Section 1115(m)(3) of the Tax Law and
the racehorse is one of those set forth in Section 1115(m)(3). Therefore, provided that the horse
being boarded by Petitioner is a racehorse being trained by Petitioner to compete in a race meet held,
maintained or conducted pursuant to the racing, pari-mutuel wagering and breeding law or similar
law of another state, the fees charged to board the horse, including the feeding, grooming, walking
and riding of such horse will not be subject to sales tax. However, if the services being rendered to
the owner of the racehorse while the horse is being boarded are not provided by a licensed trainer
in connection with the training of a racehorse to race in a race meet held, maintained or conducted
pursuant to the racing, pari-mutuel wagering and breeding law or similar law of another state as set
forth in Section 1115(m)(1) of the Tax Law, then the fees charged by Petitioner to board the horse
including fees to feed, groom, walk, and ride the racehorse will be subject to sales and use taxes.

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It is noted that pursuant to Section 1115(m)(2) of the Tax Law that the owner of a racehorse
is not required to pay sales or use tax on tangible personal property that is transferred to the owner
by Petitioner in conjunction with performing a nontaxable training service. However, Petitioner is
required to pay sales tax on purchases of such tangible personal property since Petitioner is not
considered to be purchasing the property for resale when providing such exempt services.

DATED: August 8, 1995

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

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