Does a company that services and repairs manufacturers' machine tools have to register as a sales tax vendor, collect tax, and file returns on its repair charges?

Plain-English summary

Strobel Service Corp. services and repairs machine tools, mostly for manufacturers who use that equipment to fabricate and produce tangible personal property (including steel processors). It asked the Department whether it needs to collect sales tax and file sales tax returns on its repair and servicing charges.

Repairing and servicing tangible personal property is generally a taxable service in New York, which makes Strobel a "vendor" under the Tax Law -- meaning it must register with the Department, collect sales tax on its taxable receipts, and file returns (quarterly, or annually if its total tax due stays under $3,000 across the four most recent quarters). Registering as a vendor also lets Strobel accept resale certificates from its own suppliers.

But a March 2000 statutory change carved out a specific exemption: repair, maintenance, and servicing charges for machinery, equipment, parts, tools, and supplies used directly and predominantly in manufacturing, processing, or similar production activities are exempt from both state and local sales tax. Since most of the machine tools Strobel repairs are used directly and predominantly in its customers' manufacturing operations, Strobel doesn't have to collect tax on those specific repair charges -- provided it accepts a properly completed exemption certificate from the customer in good faith within 90 days of performing the service.

What this means for you

Equipment repair and servicing businesses

Being in the repair business makes you a taxable-service vendor by default -- you must register, and absent an exemption you must collect and remit tax. But if your customers use the equipment you service directly and predominantly in manufacturing/production, get exemption certificates from them (within 90 days of the service) so you can treat those specific charges as exempt.

Manufacturers who have equipment serviced by outside repair companies

Give your repair vendor a completed exemption certificate promptly (within 90 days of the service) if the equipment being repaired is used directly and predominantly in your production process -- otherwise the repair company may be required to charge you tax it could have avoided.

Accountants and tax professionals

The relevant exemption is Tax Law § 1105-B(b) (added by Ch. 407, Laws of 1999, effective March 1, 2000), which piggybacks on the § 1115(a)(12) production-machinery exemption. Also flag the § 533.3(d)(2) annual-filing option for smaller vendors whose total tax due across the four most recent quarters is under $3,000.

Common questions

Q: Does every machine-tool or equipment repair company have to collect sales tax?
A: Yes, by default -- repair and maintenance services are taxable, making the repair business a vendor required to register, collect tax, and file returns.

Q: Is there any way to avoid charging tax on these repairs?
A: Yes, for repairs to equipment used directly and predominantly in a customer's manufacturing, processing, or similar production activity, as long as the customer provides a properly completed exemption certificate within 90 days of the service.

Q: Can this repair company file returns just once a year instead of quarterly?
A: Only if its total sales tax due for the four most recent quarterly periods (within the six most recent quarters) is under $3,000 -- otherwise quarterly filing is required.

Q: Can another repair business rely on this ruling?
A: No. It binds the Department only as to this petitioner and the facts described, though the underlying statutes and exemption rules apply generally to similarly situated repair businesses.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(8)(i)(A) (definition of "vendor")
• Tax Law § 1105(c)(3) (tax on installing, maintaining, servicing, or repairing tangible personal property)
• Tax Law § 1105-B(b), as amended by Ch. 407, Laws of 1999 (exemption for repair/maintenance of production machinery and equipment)
• Tax Law § 1115(a)(12) (exemption for machinery/equipment used directly and predominantly in production)
• Tax Law § 1131(1), § 1134(a)(1), § 1136(a)(1) (vendor registration and return-filing requirements)
• Tax Law § 1132(c) and 20 NYCRR § 532.4 (resale/exemption certificates)
• 20 NYCRR § 533.3(d)(2) (annual vs. quarterly filing threshold)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2000.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a00_28s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(28)S
Sales Tax
July 21, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S000412A

On April 12, 2000, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Strobel Service Corp., 62 Gould Avenue, Dobbs Ferry, NY 10522.
The issue raised by Petitioner, Strobel Service Corp., is whether Petitioner must collect sales
tax and file sales tax returns in connection with the servicing and repairing of machine tools.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner services and repairs machine tools. Most of the machine tools it repairs are used
by manufacturers who fabricate and produce tangible personal property. Petitioner also repairs and
services machine tools for manufacturers that process steel.
Applicable Law and Regulations
Section 1101(b)(8) of the Tax Law provides, in part:
Vendor. (i) The term "vendor" includes: (A) A person making sales of
tangible personal property or services, the receipts from which are taxed by this
article. . . (emphasis added)
Section 1105(c)(3) of the Tax Law imposes sales tax on installing, maintaining, servicing
or repairing tangible personal property, with certain exceptions described therein.
Effective March 1, 2000, Section 1105-B(b) of the Tax Law was amended by Chapter 407
of the Laws of 1999 to provide:
Receipts from every sale of the services of installing, repairing, maintaining
or servicing the tangible personal property described in paragraph twelve of
subdivision (a) of section eleven hundred fifteen of this article, including the parts
with a useful life of one year or less, tools and supplies described in subdivision (a)
of this section, to the extent subject to such tax, shall be exempt from the tax on sales
imposed under subdivision (c) of section eleven hundred five of this article.
The effect of this amendment was to exempt the services described above from both State
and local sales taxes.

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Sales Tax
July 21, 2000

Section 1115(a) of the Tax Law provides, in part:
Receipts from the following shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating
use tax imposed under section eleven hundred ten:
*

*

*

(12) Machinery or equipment for use or consumption directly and
predominantly in the production of tangible personal property, gas, electricity,
refrigeration or steam for sale, by manufacturing, processing, generating, assembling,
refining, mining or extracting . . . .
Section 1131(1) of the Tax Law provides, in part:
"Persons required to collect tax" or "person required to collect any tax
imposed by this article" shall include: every vendor of tangible personal property or
services....
Section 1134(a)(1) of the Tax Law provides, in part:
(i) Every person required to collect any tax imposed by this article ...
commencing business or opening a new place of business. . . shall file with the
commissioner a certificate of registration, in a form prescribed by the commissioner,
at least twenty days prior to commencing business or opening a new place of business
....
Section 1136(a)(1) of the Tax Law provides:
Every person required to register with the commissioner as provided in
section eleven hundred thirty-four whose taxable receipts, amusement charges and
rents total less than three hundred thousand dollars, or in the case of any such person
who is a distributor whose sales of automotive fuel total less than one hundred
thousand gallons, in every quarter of the preceding four quarters, shall only file a
return quarterly with the commissioner.
Section 533.3(d)(2) of the Sales and Use Tax Regulations provides:
Any person required to file quarterly returns whose total tax due for the four
most recent quarterly periods for which data is available for such person within the

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Sales Tax
July 21, 2000

most recent six quarters for which data is available did not exceed $3,000, may be
notified by the department or may elect to file returns annually in lieu of quarterly.
Opinion
Repair and maintenance services are included in Section 1105(c)(3) of the Tax Law as
enumerated taxable services. Petitioner sells these services and, therefore, qualifies as a vendor
under Section 1101(b)(8)(i)(A) of the Tax Law. Pursuant to Sections 1131(1), 1134(a)(1) and 1136
of the Tax Law, Petitioner, as a vendor defined in Section 1101(b)(8)(i), is required to be registered
as a vendor, collect sales tax on the receipts from its services which are subject to tax and file returns
with the Department of Taxation and Finance. Moreover, Petitioner must be registered as a vendor
in order to furnish suppliers with a resale certificate (Form ST-120) for purposes of the resale
exemption. See Section 1132(c) of the Tax Law and Section 532.4 of the Sales and Use Tax
Regulations.
In accordance with Section 1105-B(b) of the Tax Law, the receipts from installing, repairing,
maintaining or servicing machinery or equipment, parts, tools, or supplies for use or consumption
directly and predominantly in the production of tangible personal property, gas, electricity,
refrigeration or steam for sale, by manufacturing, processing, generating assembling, refining,
mining or extracting are not subject to State and local sales and use taxes. Therefore, Petitioner will
not be required to collect sales and use tax on the receipts from installing, repairing, maintaining or
servicing machinery or equipment, parts, tools or supplies which are for use or consumption directly
and predominantly in production for sale of tangible personal property, gas, electricity, refrigeration
or steam, provided it accepts in good faith a properly completed exemption certificate within 90 days
of the date the service was performed. See Section 1132(c) of the Tax Law and Section 532.4 of the
Sales and Use Tax Regulations.
It is noted that Petitioner may only be required to file annual returns with respect to its
services as provided in Section 533.3(d)(2) of the Sales and Use Tax Regulations if the taxes due are
less than $3,000 for the four most recent quarterly periods.

DATED: July 21, 2000

NOTE:

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

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