Does a company that transports disabled people and developmentally-delayed preschoolers qualify as an omnibus carrier 'in local transit service' eligible for New York's motor fuel, petroleum business, and sales tax refunds?

Plain-English summary

We Care Transportation, Inc. runs a fleet of 56 buses/vans (each seating eight or more) carrying disabled people, under a NYS DOT Certificate of Public Convenience. It asked whether it is an "omnibus carrier … in local transit service" eligible for New York's fuel and sales tax refunds. Its fleet splits into two operations:

• 45 vehicles under an Erie County contract (Education Law § 4410) carrying developmentally-delayed 3- and 4-year-olds to rehabilitation/education facilities, curb-to-door, to specific places at specific times, for children the county screens as eligible.
• 11 vehicles running ADA paratransit under a contract with the transit authority (Niagara Frontier Transit Metro) — curb-to-curb service within Metro's paratransit area (3/4 mile on either side of its fixed bus routes), picking up eligible disabled riders at their convenience — plus the same 11 vehicles doing the same kind of disabled-rider service on weekday daytimes outside the Metro contract.

The answer: it's an omnibus carrier, but only the 11 paratransit vehicles are "in local transit service" — and the two groups get different tax relief.

• Omnibus carrier: yes. The company fits the § 282(9) definition for Articles 12-A, 13-A, and 28.
• The 11 paratransit vehicles are "in local transit service." Metro's paratransit is a mass transit service for disabled persons that regularly picks up/discharges riders at their convenience; the company's Metro-contract runs are an extension of that mass transit, and its off-contract runs in the same paratransit area picking up disabled riders at their convenience qualify too. So those 11 vehicles get the full motor fuel reimbursement (§ 289-c(3)(d)), the petroleum business tax reimbursement (§ 301-c(c)(i)), and the sales/use tax refund or credit (§ 1119(b), subject to proportionate limits).
• The 45 preschool vehicles are NOT "in local transit service." They serve a closed, eligibility-screened group (specific children, places, and times) — not the general public — so that's not mass transit. They get no § 289-c(3)(d) full reimbursement and no § 1119(b) sales tax refund. But they still qualify for the omnibus carrier's partial motor fuel reimbursement (§ 289-c(3)(b): 3¢/gallon on motor fuel, 1¢/gallon on diesel), and — because they run under a school contract — the petroleum business tax reimbursement under § 301-c(c)(ii).

What this means for you

"Local transit service" means genuine mass transit — open to the public and picking people up at their convenience — not any contract carriage of passengers. The biggest fuel tax benefits (the full 8¢/gallon motor fuel reimbursement and the sales/use tax refund on buses, parts, and fuel) are reserved for that mass-transit operation. A paratransit service tied to a public transit authority's ADA obligations counts, because it's an extension of that authority's mass transit for riders who can't use the fixed-route buses.

Contract or school-bus-type service to a closed group doesn't reach "local transit service," but it isn't shut out of everything. The preschool special-education runs here still drew the omnibus carrier's partial motor fuel reimbursement and a petroleum business tax reimbursement under the school-contract prong — just not the full local-transit refunds or the sales tax refund. If you operate a mixed fleet, you likely have to sort your gallons and purchases by operation and claim each vehicle group under the provision that actually fits it.

Same vehicles, different runs, different treatment. Note that the identical 11 vehicles qualified whether or not they were on the Metro contract at the moment — what mattered was that the service was mass transit in the paratransit area, at the riders' convenience. The classification follows the nature of the service, not just the contract label.

Common questions

Q: Does having a Certificate of Public Convenience make all my fuel purchases eligible for the full refund?
A: No. It helps make you an "omnibus carrier," but the full motor fuel reimbursement and the sales tax refund require the fuel to be used by an omnibus "in local transit service" — i.e., mass transit. Contract carriage to a closed group doesn't qualify for those.

Q: Why did the ADA paratransit vehicles qualify as local transit service?
A: Because the transit authority's paratransit is a mass transit service that regularly picks up and discharges disabled riders at their convenience, and the operator's runs were an extension of that service within the paratransit area.

Q: What relief did the preschool special-education vehicles get?
A: The omnibus carrier's partial motor fuel reimbursement (§ 289-c(3)(b): 3¢/gal motor fuel, 1¢/gal diesel) and the petroleum business tax reimbursement for school-contract transportation (§ 301-c(c)(ii)) — but not the full § 289-c(3)(d) reimbursement or the § 1119(b) sales/use tax refund.

Q: Is the sales/use tax refund unlimited?
A: No. The § 1119(b) refund or credit is subject to conditions and proportionate limitations tied to the vehicle's qualifying local-transit use.

Citations and references

Statutes and regulations:

• Tax Law § 282(9) — definition of "omnibus carrier"; 20 NYCRR 410.2(m), 422.3 — omnibus/omnibus carrier definitions for motor fuel and diesel
• Tax Law § 289-c(3)(b) — partial reimbursement for omnibus carriers (3¢/gal motor fuel, 1¢/gal diesel)
• Tax Law § 289-c(3)(d) — full 8¢/gal reimbursement for an omnibus "in local transit service"; 20 NYCRR 415.3(c) — definition of "omnibus in local transit service"; 20 NYCRR 422.4 (diesel counterpart)
• Tax Law § 301-c(c) — Article 13-A petroleum business tax reimbursement: (c)(i) local transit service; (c)(ii) school-children transport under an Education Law contract
• Tax Law § 1119(b) — Article 28 sales/use tax refund or credit for an omnibus carrier in local transit service; 20 NYCRR 534.4
• Education Law § 4410 — preschool special-education transportation contract

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/gasoline_ao.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a97_1m_79s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

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STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.Z970402A

On April 4, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from We Care Transportation, Inc., 401 East Amherst
Street, Buffalo, NY 14215.
The issue raised by Petitioner, We Care Transportation, Inc., is whether
We Care Transportation, Inc. meets the definition of an omnibus carrier engaged
in local transit service and is eligible for a refund of taxes paid pursuant to
sections 289-c(3)(d), 301-c(c) and 1119(b) of the Tax Law.
Petitioner submitted the following facts as the basis for this Advisory
Opinion.
Petitioner operates 56 vehicles having a seating capacity of eight
passengers or more in the transportation of disabled persons. Petitioner has
obtained a "Certificate of Public Convenience" from the New York State Department
of Transportation to operate as a common carrier of disabled persons.
Forty-five of petitioner's vehicles are operated pursuant to a contract
with the County of Erie as provided for under section 4410 of the New York State
Education Law. The vehicles are used to transport children between the ages of
3 and 4 years old with developmental delays to various rehabilitation facilities.
These facilities offer education programs for aiding the children to become
physically and/or mentally qualified to become educated at a later date when they
qualify for school at the requisite age. Petitioner is required, pursuant to the
contract, to provide curb-to-door service and to provide that the driver and an
attendant will assist children from the curb or driveway of the children's
residences or care giver to the door of the service provider and, on the return
trip, from the door of the service provider to the curb or driveway of the
residence or care giver.
Eligibility for these transportation services is
determined by Erie County and/or the resident school districts of the children.
The children's needs determine the time, place and frequency of service. The
contract does provide, however, certain guidelines regarding routes and schedules
and does provide that if the school district of the residence of a child is
closed and/or the school district of the site of the service provider is closed,
no transportation service will be provided.
Eleven of petitioner's vehicles are operated pursuant to a contract with
Niagara Frontier Transit Metro System, Inc. ("Metro"). The contract provides
that petitioner will provide curb-to-curb paratransit services in designated
service areas for designated service hours (generally during evenings and
weekends). Eligible riders are determined by Metro according to the Americans

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with Disabilities Act (ADA) and regulations. Petitioner receives all requests
for transportation directly from the eligible individuals. Reservation service
is available, through the petitioner, during normal business hours as well as
during times comparable to normal business hours, on a day when petitioner's
offices are not open before a service day. Petitioner is required, pursuant to
the contract, to provide transportation throughout the Metro identified
paratransit service area, which extends 3/4 mile beyond and on either side of any
Metro fixed route bus line. The paratransit service area is subject to change
in the event there is a change in Metro's fixed route system. Fares charged by
petitioner to passengers are governed by the ADA regulations and are directly
related to the amount charged passengers of the fixed route service.
In addition to its weekend and evening operations under its contract with
Metro, petitioner also uses the same 11 vehicles during daytime weekday service
hours to perform the same type of service for disabled persons. During daytime
weekday service hours, petitioner and Metro provide the same type of paratransit
service to disabled persons.
Applicable Law and Regulations
Section 282(9) of Article 12-A of the Tax Law states:
"Omnibus carrier" shall mean every person engaged in operating
an omnibus line subject to the supervision of the state department
of public service under article three-a of the public service law,
including
every
person
operating
omnibuses
used
for
the
transportation of school children under a contract made pursuant to
the provisions of the education law.
Paragraph (1) of section 410.2(m) of Title 20 NYCRR, relating to the taxes
paid on motor fuel, generally incorporates the section 282(9) statutory
definition of "omnibus carrier" and paragraph (2) of such section provides:
(2) "Omnibus" for purposes of paragraph (1) of this
subdivision means every motor vehicle, with a seating capacity of
more than seven persons in addition to the driver, used in the
business of transporting passengers for hire. Such term does not
include a taxicab.
Provisions similar to those in such section 410.2(m)(1) are contained in
section 422.3 of such Title for purposes of the taxes paid on diesel motor fuel.
Section 289-c(3)(b) of Article 12-A of the Tax Law and section 415.3(b) of
Title 20 NYCRR provide that an omnibus carrier may claim a partial reimbursement
of three cents per each gallon of motor fuel purchased upon which the taxes
imposed by sections 284 and 284-a of the Tax Law have been paid.

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Such section 289-c(3)(b) further provides that an omnibus carrier may claim
a partial reimbursement of one cent per each gallon of diesel motor fuel
purchased upon which the taxes imposed by sections 282-a and 282-b of the Tax Law
have been paid.
Section 289-c(3)(d) of Article 12-A of the Tax Law and section 415.3(c) of
Title 20 NYCRR provide that an omnibus carrier may claim a full reimbursement of
eight cents per each gallon of motor fuel purchased upon which the taxes imposed
by sections 284, 284-a and 284-c of the Tax Law have been paid, provided that the
motor fuel has been consumed in the operation of an omnibus "in local transit
service" in New York State.
Paragraph (2) of such section 415.3(c) further
provides, in part:
(2) An "omnibus in local transit service" is an omnibus
providing a mass transit service (as distinguished from a charter,
contract, school bus, sightseeing or other such service) by carrying
passengers from one point in this State to another point in this
State and which either:
(i) regularly picks up or discharges such passengers at their
convenience or at bus stops on the street or highway, as
distinguished from buildings or facilities used for bus terminals or
station; or
(ii) picks up and discharges passengers at bus terminals or
station, the distance between which is not more than 75 miles,
measured along the route traveled by the bus (emphasis added)....
Such section 289-c(3)(d) and section 422.4 of Title 20 NYCRR contain a
substantially similar reimbursement with respect to diesel motor fuel purchased
upon which the taxes imposed by sections 282-a, 282-b and 282-c of the Tax Law
have been paid provided that the diesel motor fuel has been consumed in the
operation of an omnibus "in local transit service" in New York State.
Section 301-c(c) of Article 13-A of the Tax Law provides for a
reimbursement of the tax imposed by such Article 13-A on motor fuel or diesel
motor fuel gallonage which has been included in the measure of the tax imposed
by such Article 13-A and consumed by an omnibus carrier in the operation of an
omnibus "in local transit service" as described in section 289-c(3)(d) of Article
12-A of the Tax Law or consumed in the transportation of school children in the
State under a contract made pursuant to the provisions of the Education Law.
Section 1119(b) of Article 28 of the Tax Law and section 534.4 of Title 20
NYCRR provide that an omnibus carrier engaged in local transit service is allowed
a refund or credit of state and local sales and uses taxes paid, subject to
certain conditions and limitations, with respect to the omnibus carrier's
purchase or use of an omnibus and of parts, equipment lubricants, motor fuel,
diesel motor fuel and certain maintenance and repair services purchased and used
in the operation of a qualifying omnibus.

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Section 534.4 of such regulations provides, in part:
...(1) "Omnibus Carrier". For purposes of this section, an
"omnibus carrier" is a carrier which provides local transit service
in this State and which operates pursuant to a certificate of public
convenience
and
necessity
issued
by
the
Commissioner
of
Transportation of this State, by the Interstate Commerce Commission
of the United States, or pursuant to a contract, franchise, or
consent between the carrier and a city having a population of more
than one million inhabitants, or any agency of such city....
Section 534.4 further defines "omnibus" and "local transit service" to mean
the same as such terms are defined for purposes of Article 12-A in, respectively,
sections 410.2(m)(2) and 415.3(c) of Title 20 NYCRR.
Opinion
Petitioner meets the definition of an "omnibus carrier" for purposes of
Articles 12-A, 13-A and 28 of the Tax Law.
Petitioner's operations with respect to the 45 vehicles operated pursuant
to petitioner's contract with Erie County do not qualify as operating "in local
transit service" because these vehicles are not providing a mass transit service.
These services are available to only a select group of individuals, namely 3 and
4 year olds with developmental delays whom the County/Local Early Intervention
Official has determined to be eligible to receive transportation services, to
specific locations, and at specific times, as determined by the resident school
districts. Therefore, petitioner does not qualify for the reimbursements, refunds
and/or credits allowed for "in local transit service" pursuant to sections 289­
c(3)(d) or 1119(b) of the Tax Law on such operations. Petitioner's operations
with respect to these 45 vehicles, however, do qualify for the partial
reimbursement allowed omnibus carriers under section 289-c(3)(b) of such law.
Moreover, since these operations are pursuant to a school contract made pursuant
to the provisions of the Education Law, they qualify for reimbursement under
section 301-c(c)(ii) of the Tax Law.
Niagara Frontier Transit Metro System, Inc. has established a paratransit
service for eligible riders within a specified service area.
Since this
paratransit service is a mass transit service available to disabled persons which
regularly picks up or discharges such passengers at their convenience, this
service qualifies as "local transit service."
Since petitioner's operations
pursuant to its contract with Metro are an extension of the mass transit service
provided to disabled persons by Metro, petitioner's operations under that
contract qualify as being "in local transit service." Where petitioner's 11
vehicles are not operated under the Metro contract but are used to regularly pick

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up or discharge disabled persons at their convenience within the same general
area established by Metro as the paratransit service area, these operations of
these vehicles also qualify as being "in local transit service." Accordingly,
petitioner's 11 vehicles qualify for the reimbursements, refunds and/or credits
allowed under Tax Law sections 289-c(3)(d), 301-c(c)(i) and 1119(b)(subject to
the proportionate limitations set forth in such section).

DATED: December 11, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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