Can New York City school custodians buy supplies for the Board of Education tax-free, and what paperwork do they need?

Plain-English summary

School Custodians and School Custodian Engineers employed by the New York City Board of Education receive an allocation of money to buy custodial supplies for their assigned schools, and must account for every dollar spent. In 1995 and again in 1997, the Board of Education issued circulars directing Custodians to hand vendors an Exempt Organization Certification (Form ST-119.1) instead of paying sales tax on these purchases. The union representing Custodians asked the Department whether Custodians really are exempt, and if so, what the correct paperwork actually is.

The Department confirmed Custodians can make tax-exempt purchases on the Board's behalf -- but not using the form the Board had told them to use. The Board of Education is a political subdivision of New York State, so its own purchases are exempt from sales tax under Tax Law § 1116(a)(1), and its employees can buy supplies on its behalf exempt from tax as long as proper procedures and documentation are followed. The catch: Form ST-119.1 (Exempt Organization Certification) is designed for a different category of tax-exempt entity entirely -- nonprofit religious, charitable, scientific, or educational organizations that had to separately apply for and receive their own exempt-organization number. A government entity like the Board of Education isn't that kind of organization and doesn't have that number, so the form the Board circulated wasn't the right tool.

The correct approach for a government purchaser is a government purchase order. Where a purchase order isn't practical, the Department laid out a substitute: a letter on the Board of Education's letterhead, signed by the Custodian, stating that the Custodian is authorized to purchase supplies on the Board's behalf, that the purchase is being paid for with Board funds, and that the Custodian understands personal purchases remain taxable and that misusing the letter can carry civil or criminal penalties. Vendors need to keep these letters on file and be able to match them to specific sales invoices.

What this means for you

School district employees making purchases on the district's behalf

If you're buying supplies for a tax-exempt government employer, use a government purchase order where possible. If one isn't available, a signed authorization letter on the employer's letterhead -- stating your authority, that the funds are the employer's, and acknowledging that personal-use purchases remain taxable -- is an acceptable substitute, but a generic nonprofit-style exemption certificate is not.

School districts and other government entities drafting purchasing procedures

Don't default to the Exempt Organization Certification (Form ST-119.1) for employee purchases made on the entity's behalf -- that form and its accompanying exempt-organization number are built for religious, charitable, scientific, and educational nonprofits under 20 NYCRR § 529.1(j), not for governmental bodies. Government entities exercise their exemption through purchase orders or equivalent documentation instead.

Vendors selling to school district employees or agents

Retain any authorization letters you accept in lieu of a purchase order, and make sure your records tie each letter to the specific sales invoice it supports -- that's what protects you if the exemption is later questioned.

Common questions

Q: Is the Board of Education exempt from New York sales tax?
A: Yes. As a political subdivision of New York State, its purchases are exempt from sales and use tax under Tax Law § 1116(a)(1), as long as proper exemption documentation is used.

Q: Can a school custodian use an Exempt Organization Certification (Form ST-119.1) to buy supplies tax-free?
A: No. That form is designed for nonprofit organizations with their own exempt-organization number, not for government entities like a Board of Education. A government purchase order (or a substitute authorization letter) is the correct documentation instead.

Q: Does this ruling apply to my school district's purchasing procedures?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. It shows how the Department reasons, but your facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 1116(a)(1) (exempt organizations; government entities)
• Tax Law § 1132(c)(1) (presumption of taxability; exemption documentation)
• 20 NYCRR § 529.1(d)(1), (j) (exemption documentation requirements)
• 20 NYCRR § 529.2(a), (b) (governmental entities as purchasers)
• 20 NYCRR § 533.2 (vendor recordkeeping)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_30s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(30)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970806F

On August 6, 1997, a Petition for Advisory Opinion was received from James
J. Kelly, 4600 Broadway, New York, New York 10040.
The issues raised by Petitioner, James J. Kelly, are:

1. Whether Custodians are exempt from paying sales and use taxes on the
   purchase of supplies on behalf of their employer, the Board of Education of the
   City School District of the City of New York, an exempt governmental agency.
2. If the answer to issue 1 is yes, what are the proper procedures and
   documentation to be used by Custodians when purchasing supplies from vendors on
   behalf of the Board of Education?
   Petitioner submits the following facts.
   School
   Custodians
   and
   School
   Custodian
   Engineers
   (collectively
   "Custodians") are classified civil servants employed directly by the Board of
   Education of the City School District of The City of New York (the "Board of
   Education") to provide for custodial care and maintenance of buildings owned or
   leased by the Board of Education.
   Petitioner is a School Custodian Engineer and President of Local 891,
   International Union of Operating Engineers, AFL-CIO, the collective bargaining
   agent for Custodians in their capacity as employees of the Board of Education.
   On February 7, 1995, the Board of Education issued Plant Operations Circular
   No. 17-1994/95 that directed Custodians to use form ST-119.1, Exempt Organization
   Certification, in lieu of paying sales tax on their purchases. Circular No.17­
   1994/95, at paragraph 2, directs that:
   The attached Exempt Organization Certification (ST-119.1)
   shall be submitted to a vendor for all purchases subject to sales
   tax.
   This form should be presented to the vendor before any
   purchase is made.
   The sample form ST-119.1 that was attached to Circular No.17-1994/95
   designates the Board of Education as the exempt organization and displays a
   purported exempt organization number.
   On July 16, 1997, the Board of Education issued Plant Operations Circular
   No. 31-1996/97, which reiterated that "[s]tate sales tax should not be paid in
   purchasing supplies earmarked for school buildings as per Circular No. 17-1994/95
   dated February 7, 1995."
   Circular No. 31-1996/97 indicates that Custodians receive an allocation
   from the Board of Education for custodial supplies for their schools. Custodians
   must account for their expenditures of allocated monies by filing with the Board

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Sales Tax

of Education a prescribed form listing their purchases, together with invoices
and other supporting documentation. Custodians must return unspent allocations
to the Board of Education.
Applicable Law and Regulations
Section 1116(a) of the Tax Law provides, in part:
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; ...
Section 1132(c)(1) of the Tax Law provides, in part:
For the purpose of the proper administration of this article and to
prevent evasion of the tax hereby imposed, it shall be presumed that
all receipts for property ... of any type mentioned in subdivisions
(a),(b),(c) and (d) of section eleven hundred five, ... are subject
to tax until the contrary is established, and the burden of proving
that any receipt,. . . is not taxable hereunder shall be upon the
person required to collect tax or the customer. Except as provided
in subdivision (h) or (k) of this section, unless . . . the
purchaser, not later than ninety days after delivery of the property
. . . furnishes to the vendor: any affidavit, statement or
additional
evidence,
documentary
or
otherwise,
which
the
commissioner may require demonstrating that the purchaser is an
exempt organization described in section eleven hundred sixteen, the
sale shall be deemed a taxable sale at retail.
Where . . . an
affidavit, statement or additional evidence referred to in the
previous sentence is received within the time limit set forth
therein, but is deficient in some material manner, and where such
deficiency is thereafter removed, the receipt of . . . such
affidavit, statement or additional evidence shall be deemed to have
satisfied all of the requirements of the preceding sentence. Where
such . . . an affidavit, statement or additional evidence has been
furnished to the vendor, the burden of proving that the receipt ...
is not taxable hereunder shall be solely upon the customer. The
vendor shall not be required to collect tax from purchasers who
furnish . . . such an affidavit, statement or additional evidence in
proper form, . . . .

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Sales Tax

Section 529.1 of the Sales and Use Tax Regulations provides, in part:
(a) Except as otherwise provided in this Title, any sale by or to
any person or organization described in this Part or any amusement
charge to such a person or organization where it is the purchaser,
or any use or occupancy by any such person or organization is not
subject to the sales or use tax imposed by article 28 or authorized
by article 29 of the Tax Law. Any sale, amusement charge, use or
occupancy by or to any person or organization who or which does not
qualify for exemption pursuant to the provisions of this Part may
qualify for exemption as described in other provisions of this
Title.
*

*

*

(d) (1) Any person or organization claiming exemption from tax must
furnish its vendor with documentation substantiating its right to
the exemption claimed before it may purchase exempt from tax . . .
In addition, the billing must be made directly to the person or
organization and paid for from the funds of such person or
organization, except as otherwise provided in this Title. Any
transaction which is not supported by proper documentation is
subject to tax at the time of purchase. See Part 532 (Collection of
Tax) of this Title.
*

*

*

(j) The provisions of this subdivision apply only to those persons
or organizations described in: sections 529.4 (relating to the
United Nations or other international organizations); 529.5
(relating to diplomatic missions, diplomatic personnel and foreign
government-owned enterprises and agencies); 529.6 (relating to
health maintenance organizations); 529.7 (relating to religious,
charitable, scientific, testing for public safety, literary and
educational organizations, and organizations for the prevention of
cruelty to children or animals and organizations which foster
amateur athletics); 529.8 (relating to organizations consisting of
past or present members of the Armed Forces of the United States);
529.9 (relating to certain Indian nations or tribes); and 529.10
(relating to rural electric cooperatives) of this Part.
*

*

*

(2) A person or organization other than diplomatic missions,
diplomatic personnel and foreign government-owned enterprises and
agencies described in section 529.5 of this Part is required to
submit an application and supporting documents to the New York State
Department of Taxation and Finance, Taxpayer Assistance Bureau, in
order to establish exemption....
*

*

*

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Sales Tax

(7) An exempt organization certificate applies only to the
organization which requested and was granted such exemption. The
use of an exempt organization certificate by any person or any
organization that was not issued the exemption is a misuse of such
certificate. Such misuse can result in the revocation of the exempt
status previously granted to the organization.
Section 529.2 of the Sales and Use Tax Regulations provides:
(a) Governmental entities.
(1) Agencies and instrumentalities
of the State as used in this section means any authority, commission
or independent board created by an act of the Legislature for a
public purpose.
*

*

*

(3) A political subdivision as used in this section means a
county, town, city, village, school district, fire district, special
district corporation and board of cooperative educational services
of this State. (Emphasis added)
(b) As purchaser. (1) New York State, or any of its agencies,
instrumentalities, public corporations or political subdivisions
(hereinafter referred to as New York State governmental entities)
are not subject to sales or use tax when they are the purchaser,
user, or consumer of tangible personal property or services or when
they are the occupant of a hotel room or a patron at a place of
amusement, club, roof garden, cabaret or other similar places.
(2) New York State governmental entities as purchasers, users,
consumers, occupants or patrons must exercise their right to
exemption through the issuance of governmental purchase orders or
the appropriate exemption document. (Emphasis added)
Opinion
In this case, Petitioner is representing one of the many public schools
under the authority of the Board of Education. The Board of Education employs
Custodians to perform custodial duties and to purchase various supplies for the
schools. In 1995 and 1997 the Board of Education issued circulars to advise
Custodians of the procedures regarding the purchase of supplies for the schools.
The circulars instructed Custodians to issue an Exempt Organization
Certification, Form ST-119.1, to make tax exempt purchases from vendors when
purchasing supplies for the school. The circulars indicated that Custodians must
account to the Board of Education for expenditures of allocated monies, and must
return unspent balances to the Board of Education.

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Sales Tax

The Board of Education is a political subdivision of New York State. Under
Section 1116(a)(1) of the Tax Law, Custodians, acting in their capacity as
employees of the Board of Education, may purchase tangible personal property on
behalf of the Board of Education exempt from tax if the proper procedures and
documentation are used.
However, the document given to the Custodians by the Board of Education
(the Exempt Organization Certification, Form ST-119.1) is not the proper
exemption document to be used by a government entity. A proper document to be
given by a Custodian to a vendor, to make an exempt purchase, is a purchase order
from the Board of Education. An Exempt Organization Certification is not
appropriate for a governmental entity like the Board of Education. The Exempt
Organization Certification is designed for use by organizations of the kind
described in Section 529.1(j) of the Sales and Use Tax Regulations which must
apply for an Exempt Organization Certificate (Form ST-119) and corresponding
exempt organization number.
If a Board of Education purchase order is not available, Custodians may
make exempt purchases under the facts described above by furnishing vendors with
a letter on the Board of Education’s letterhead, signed by the Custodian, which
reads substantially as follows:
I, [name of Custodian], a Custodian at the [name of school], am
authorized to purchase custodial supplies for the Board of Education
of The City of New York (the "Board of Education"), and I am
purchasing these supplies from [name of vendor] on behalf of the
Board of Education. This purchase is being paid for from funds made
available by the Board of Education.
I understand that any purchases I make for personal use, rather than
for use as custodial supplies at my school, are subject to sales
tax. I understand that civil and /or criminal penalties may result
from the misuse of this document.
Vendors should retain these letters to prove the exempt status of sales
made to Custodians, and must be able to associate the letters with particular
sales invoices. See Section 533.2 of the Sales and Use Tax Regulations. Sales
invoices must indicate that the purchases are being made on behalf of the Board
of Education.

DATED: May 20, 1998

NOTE:

/s/
JOHN W. BARTLETT
Deputy Director
Technical Services Bureau

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