Does a private company that licenses a county-owned golf course and must buy its own equipment (which becomes the county's property when the license ends) get the county's sales tax exemption on those equipment purchases?

Plain-English summary

A private company held an exclusive license from Suffolk County to operate the golf course, golf school, driving ranges, pro shop, miniature golf course, and restaurant/catering/bar concessions at the county-owned Bergen Point Country Club. The license required the company to spend at least $10,000 a year on new equipment, furnishings, and refurbishment, all of which -- per the license terms -- becomes the county's property, free of any liens, once the license expires or ends. The company sometimes made purchases in the name of "Global Golf as Agent for Suffolk County" and asked whether that equipment could be bought tax-free, piggybacking on the county's own exemption as a government entity.

The Department said no. A government entity's sales tax exemption doesn't automatically extend to a private contractor's own purchases just because the contractor is performing work for the government and the government will eventually own the resulting property. The exemption passes through only if the contractor is genuinely acting as the government's purchasing agent -- meaning the government actually consents to and controls the purchases, and the government (not the contractor) is legally on the hook to the vendor. Looking at the real terms of the license agreement, the Department found the opposite on every relevant point: the contract expressly says it does not create any agency or employment relationship; the company pays for all equipment and utilities out of its own pocket; the company (not the county) keeps essentially all the revenue from cart rentals, greens fees, and the restaurant/bar; and the equipment has to be handed over debt-free, meaning it's the company's own credit on the line with vendors, not the county's. Calling itself "agent for Suffolk County" on purchase paperwork didn't change any of that, since a true agency relationship requires actual consent and control by the principal (the county), not a unilateral label.

Because there's no genuine agency relationship, the equipment purchases are ordinary taxable retail purchases by the company as a contractor for its own use in operating the concessions. The one narrower exception: if any purchased materials actually get built into -- become an "integral component part" of -- the county's buildings or real property (as opposed to remaining separate equipment, like a lawn mower), those specific purchases can separately qualify for the capital-improvement exemption available to exempt-organization real property, with the proper exemption certificate.

What this means for you

Concessionaires, licensees, and contractors operating government-owned facilities

Don't assume you can buy tax-free just because your equipment purchases will eventually belong to the government agency you contract with, or because your contract lets you describe yourself as the agency's "agent." Read your contract's actual risk-and-control terms: who pays vendors directly, who keeps the revenue, and whether the contract disclaims agency status. If you're paying with your own credit and keeping your own revenue, expect to pay sales tax on your equipment like any other retail buyer.

Municipalities and counties structuring concession or licensing agreements

If you want a contractor's purchases to qualify for your own tax exemption, the agreement needs to genuinely make the contractor your purchasing agent -- with your consent, your control, and your own credit on the line with vendors -- not just eventual ownership of the resulting property.

Accountants and tax professionals

The key test comes from Hooper Holmes v. Wetzler and Kern-Limerick v. Scurlock: a real agency relationship requires the principal's consent to the agent acting on its behalf, subject to the principal's control, plus the principal (not the contractor) actually being bound to the vendor. Watch for contract language expressly disclaiming agency/partnership status (as here) -- that's a strong signal against exemption regardless of how purchase orders are captioned. Separately, remember the narrower capital-improvement exemption in Tax Law § 1115(a)(16)/20 NYCRR § 528.17 only reaches materials actually incorporated into the government's real property, not equipment or supplies that remain distinct personal property (even if eventually surrendered to the government).

Common questions

Q: If my equipment will eventually become government property under my contract, can I buy it tax-free now?
A: Not automatically. Future transfer of ownership isn't enough on its own -- you need a genuine agency relationship (government consent and control, government's own credit on the line) or a specific statutory exemption to apply.

Q: Does labeling my purchase orders "as agent for [government entity]" create a tax exemption?
A: No. A real agency relationship requires actual consent and control by the government principal, evidenced by contract terms -- a unilateral label on purchase paperwork doesn't establish that relationship if the actual contract terms point the other way.

Q: Is any part of a licensee's purchases ever exempt in this kind of arrangement?
A: Yes -- materials that actually become an integral, incorporated part of the government's building or real property (as opposed to freestanding equipment) can separately qualify for the capital-improvement exemption for exempt-organization property, with a properly issued exemption certificate.

Q: Can another concessionaire operating a government facility rely on this ruling?
A: No. This advisory opinion binds the Department only for the petitioner on the facts described, though the same agency-relationship test applies generally to any contractor claiming a pass-through government exemption.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4)(i) (definition of "retail sale")
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1115(a)(16) (exemption for property incorporated into exempt organization's real property)
• Tax Law § 1116(a)(1) (exemption for New York State and its political subdivisions)
• 20 NYCRR § 528.17 (property for maintaining/repairing exempt organization real property)
• 20 NYCRR § 541.2(c) (definition of agency contract)
• 20 NYCRR § 541.3(d) (contracts with exempt organizations)

Prior rulings/cases referenced:

• Suffolk County Department of Parks, Adv Op Comm T&F, July 11, 1994, TSB-A-94(29)S
• Village of East Aurora, Adv Op Comm T&F, April 8, 1999, TSB-A-99(24)S
• Matter of MGK Constructors, Dec Tax App Trib, March 5, 1992, TSB-D-92(23)S
• Matter of Hooper Holmes v. Wetzler, 152 A.D.2d 871, lv den, 75 N.Y.2d 706
• Kern-Limerick v. Scurlock, 347 U.S. 110
• Matter of West Valley Nuclear Services Co., Inc., Dec Tax App Trib, Nov. 13, 1998, TSB-D-97(37)S
• Bedford Hills Supply, Inc., Adv Op Comm T&F, July 23, 1997, TSB-A-97(46)S
• Sullivan Humes Painting, Adv Op Comm T&F, Aug. 31, 1987, TSB-A-87(31)S

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_34s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(34)S
Sales Tax
September 7, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S000324A

On March 24, 2000, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Global Golf, Inc., 69 Bergen Avenue, West Babylon, NY 11704. Petitioner, Global
Golf, Inc., furnished additional information with respect to the Petition on May 3, 2000.
The issue raised by Petitioner is whether purchases of equipment made by Petitioner as
licensee of the County of Suffolk under contract to operate the concessions at the Bergen Point
Country Club are subject to State and local sales and use taxes.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner operates the concessions at the Bergen Point Country Club ( the “Club”) under a
license agreement entered into with the County of Suffolk. Pursuant to the agreement, Petitioner is
required to purchase equipment to be used on the golf course and related facilities, e.g., triplex
mowers used to cut and maintain the greens. Suffolk County Department of Parks, Adv Op Comm
T&F, July 11, 1994, TSB-A-94(29)S describes Petitioner’s license arrangement with the County of
Suffolk. Suffolk County Department of Parks states:
"The Licensee entered into an agreement with the County of Suffolk (the
‘Licensor’) to operate the concessions at the Bergen Point Country Club which is
owned by the county. By agreement the Licensor granted to the Licensee exclusive
rights and privileges to operate and maintain a golf course, golf school, driving
ranges; to manage the golf professional shop; to operate, construct and maintain a
miniature golf course and to operate and maintain the restaurant, catering and bar
facilities; and to undertake necessary improvements and repairs necessary and
incidental for the operation and maintenance of the facilities.
The term of the agreement is from March 5, 1993 through December 31,
2002, with options to renew for two additional five year terms. The Licensee has to
satisfy certain capital improvement requirements set forth in the agreement within
eight years of the execution of the agreement.
The Licensee is required to expend a minimum of ten thousand dollars each
year during the term of the License for new equipment, furnishings and/or
refurbishment of existing equipment or facilities to be used on the golf course and in
the restaurant, catering and bar concessions and related facilities. All equipment

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becomes the property of the Licensor upon expiration or termination of the
agreement, free and clear of any and all liens and encumbrances.
Further, the Licensee has to pay for the total cost of all construction and
renovations including, professional, legal and permit fees. All improvements, upon
completion, become the property of the Licensor."
Petitioner intends to make equipment purchases in the future in the name of "Global Golf as
Agent for Suffolk County."
As part of its Petition for Advisory Opinion, Petitioner submitted a copy of the agreement
it entered into with the County of Suffolk. The agreement states, in part, as follows:
A) LICENSE
The LICENSOR hereby grants to the LICENSEE and the LICENSEE hereby
accepts from the LICENSOR a License to operate for the period herein stated, subject
to all of the terms and conditions herein contained, the Bergen Point Golf Course,
Golf School, Golf Professional Shop, Golf Driving Ranges, Miniature Golf Course
and Restaurant, Catering and Bar Concession and related facilities located at Bergen
Point Country Club . . .
*

*

*

*

*

B. TERMS AND CONDITIONS
*

3) The License shall consist of the operation, management, supervision, and
maintenance of the aforementioned facilities including the renovation, construction
and improvement contemplated under this Agreement and incidental to its
performance . . .
*

*

*

5) The LICENSEE agrees to provide a minimum of thirty-five (35) electric
or gas powered golf carts for public users of the course. . .
6) The LICENSEE will be responsible for providing a minimum of thirty (30)
pull carts for public use.

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*

*

*

8) The LICENSEE is authorized by the LICENSOR to retain all revenue
received from the rental of electric or gas golf carts, pull carts, driving ranges, pro
shop, golf lessons, miniature golf fees, greens fees and restaurant, catering and bar
operations except for those amounts prescribed in the License fee under Paragraph
B10.
*

*

*

10) The LICENSEE agrees to pay the LICENSOR as compensation for the
License and for the privilege of operating said License within the Bergen Point
Country Club and for the period aforesaid, as follows: (See Attachment 1)
[Attachment 1 sets forth payment schedule]
D. UTILITIES AND EXPENSES
1) LICENSEE will be responsible for all costs associated with telephone
service. LICENSEE may retain revenues generated by use of pay telephones.
2) LICENSEE shall pay directly for all costs associated with utilities,
including heating oil, electric, water and gas on the premises.
*

*

*

4) a) The LICENSEE shall be required to expend a minimum of ten thousand
and no/100 ($10,000.00) dollars each year during the term of the License for new
equipment, furnishings and/or refurbishment of existing equipment or facilities to be
used on the Golf Course and in the Restaurant, Catering and Bar Concession and
related facilities and must get the written approval of the Commissioner only for any
extraordinary purchases not in the normal course of business for a facility of this
type.
*

*

*

G) IMPROVEMENTS AND RENOVATIONS OF FACILITIES; EQUIPMENT
*

*

*

3) The LICENSEE shall maintain an inventory of all equipment purchased
and/or leased for the operation, service and maintenance of the Bergen Point Country

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Club facilities...All equipment shall become the property of the LICENSOR upon
expiration or termination of this Agreement, free and clear of any and all liens and
encumbrances.
*

*

*

I. MISCELLANEOUS
1) LICENSEE TO ASSUME ALL RISKS
The LICENSEE assumes all risks in the operation and maintenance under this
License and shall be solely responsible and answerable in damages for all injuries
and accidents in person or property. . . .
*

*

*

7) The LICENSEE agrees to conduct and use the Licensed premises for no
other purposes than herein stated and to equip the same at the LICENSEE’s own cost
and expense, except for such equipment and facilities as supplied by the LICENSOR.
*

*

*

17) Nothing herein contained shall create or be construed as creating a
partnership between the Suffolk County Department of Parks, Recreation and
Conservation or of the LICENSOR and the LICENSEE or to constitute the
LICENSEE or the LICENSEE’s employees as agents or employees of the Suffolk
County Department of Parks, Recreation and Conservation or of the County.
Applicable Law and Regulations
Section 1105(a) of the Tax Law imposes a sales tax upon "[t]he receipts from every retail sale
of tangible personal property, except as otherwise provided in this article."
Section 1115(a) of the Tax Law exempts from the sales tax imposed by Section 1105(a) of
the Tax Law and from the compensating use tax imposed under Section 1110:
*

*

*

(16) Tangible personal property sold to a contractor, subcontractor or
repairman for use in maintaining, servicing or repairing real property, property or
land of an organization described in subdivision (a) of section eleven hundred

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sixteen, as the terms real property, property or land are defined in the real property
tax law; provided, however, no exemption shall exist under this paragraph unless
such tangible personal property is to become an integral component part of such
structure, building or real property.
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 528.17 of the Sales and Use Tax Regulations provides:
Tangible personal property sold to a contractor, subcontractor or repairman
for use in maintaining, servicing or repairing real property of an organization
described in Part 529 of this Title is exempt if it is to become an integral component
part of such structure, building or real property.
Example:

A painting contractor uses masking tape on a contract for an
organization described in Part 529 of this Title. The tape is subject
to tax since it will not become an integral component part of the real
property.

Part 529 of the Sales and Use Tax Regulations provides, in part, for exemption from sales
and compensating use taxes with respect to the state of New York and any of its agencies,
instrumentalities and political subdivisions.
Section 541.2(c) of the Sales and Use Tax Regulations defines agency contract as:
. . .an agreement which permits a contractor and subcontractor to act as an
agent of, that is, in the place of the principal, his customer. Purchases made by the
agent-contractor or agent-subcontractor on behalf of the principal are treated in the
same manner as if the purchases were made by the principal. All purchases
(including rentals of contractor’s tools, supplies, machinery and equipment) made by

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the agent-contractor or agent-subcontractor on behalf of the principal are treated in
the same manner as if the purchases were made by the principal.
Section 541.3(d) of the Sales and Use Tax Regulations provides, in part:
Contracts with exempt organizations. (1) Tangible personal property
incorporated into real property owned by a governmental entity or by an exempt
organization is exempt, whether the contract is on a lump sum, time and material,
cost-plus, or other basis.
(2) Purchase for contracts (other than agency contracts).
(i) Tangible personal property sold to a contractor, subcontractor, or
repairman for use in erecting, repairing, adding to, or altering a structure or building
owned by an exempt organization, described in section 1116(a) of the Tax Law, is
exempt when it is to become an integral component part of such structure or building.
*

*

*

(ii) Purchases of tangible personal property incorporated into the real property
of an exempt organization by subcontractors and repairmen are accorded the same
treatment as purchases by the prime contractor.
*

*

*

(iv) Except for agency contracts, contractors’ purchases of construction
supplies which do not become part of an exempt organization’s real property and are
used or consumed by the contractor, as well as purchases of taxable services, such
as electricity used by the contractor, are subject to the tax.
The following types of property and services are representative, but not
intended to be all-inclusive, of contractor’s purchases which are subject to tax,
irrespective of whether the contractor has a time and material, lump sum, or other
type of contract (except agency contract), with an exempt organization:
(a) construction machinery and equipment, including rentals and repair parts;
(b) contractors’ office supplies;
(c) contractors’ supplies, tools, and miscellaneous equipment, whether
purchased or rented, including materials to make forms and scaffolding; and

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(d) any other items purchased or rented by a contractor for his use in
performing the contract and not incorporated into the realty. (Emphasis added)
Opinion
Petitioner has entered into an agreement with the County of Suffolk to provide concessions
services related to the facilities located at the Club. Section 1116(a)(1) of the Tax Law designates
agencies, instrumentalities and political subdivisions of the State of New York as organizations
exempt from the payment of sales tax. The County of Suffolk is a political subdivision of New York
and is therefore exempt from direct taxation on its purchases and use of tangible personal property
and taxable services. Purchases of tangible personal property and services by a contractor for use
in performing an operations and maintenance contract for an exempt organization are not exempt
merely because the contractor has an agreement with the exempt organization and the organization
will acquire title to the property upon the expiration of the contract. Purchases for such a contract
are exempt from sales and use taxes only if the property and services are purchased by the contractor
or subcontractor as agent for the exempt organization, or if some statutory exemption applies. For
example, Section 1115(a)(16) of the Tax Law would exempt tangible personal property purchased
by a contractor that is used to perform repair services to the exempt organization’s real property, if
the tangible personal property is actually incorporated into (becomes part of) the real property of the
exempt organization (see Village of East Aurora, Adv Op Comm T&F, April 8, 1999,
TSB-A-99(24)S).
Petitioner’s purchases, therefore, of equipment for use in maintaining the facilities located
at the Club, which do not become an integral component part of the facilities, are subject to sales and
compensating use taxes, unless Petitioner makes such purchases as Suffolk County’s agent. In
Matter of MGK Constructors, Dec Tax App Trib, March 5, 1992, TSB-D-92(23)S, the Tribunal held
that, since no regulation sets forth criteria for establishing whether an agency relationship exists with
an exempt organization identified in Section 1116(a)(1) of the Tax Law, the general rule of agency
as cited in Matter of Hooper Holmes v Wetzler, 152 AD2d 871, lv den, 75 NY2d 706, must be
applied. In that decision, the court stated “to establish an agency or representative relationship there
must be a manifestation that petitioners consented to act as agent on behalf of their clients, subject
to the latter’s control, and that the clients authorized this fiduciary relationship.”
Applying this principle to the facts in this Petition, several factors lead to the conclusion that
there is no agency relationship between Petitioner and the County of Suffolk. The Agreement
submitted by Petitioner does not contain any language which expressly confers agency status on
Petitioner; nor does the contract provide that Petitioner accepts its status as such an agent. Rather,
Paragraph I.17 of the Agreement states that “Nothing herein contained shall create or be construed
as creating a partnership between the Suffolk County Department of Parks, Recreation and
Conservation or of the LICENSOR and the LICENSEE or to constitute the LICENSEE or the
LICENSEE’s employees as agents or employees of the Suffolk County Department of Parks,

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Recreation and Conservation or of the County.” (Emphasis added) Paragraph I.7, as well as various
provisions in Paragraph D, provide that Petitioner will be responsible for and shall pay directly all
costs for equipment and utility services associated with operating the club facilities. Paragraph B.8
provides that Petitioner is to retain all revenues from golf cart rentals, usage fees and restaurant and
bar revenues. Moreover, Paragraph G(3) of the Agreement provides that, while the equipment
purchased or leased for the operation, service and maintenance of the Club facilities shall become
the property of the County of Suffolk upon expiration or termination of the Agreement, it must be
given by Petitioner to the County of Suffolk free and clear of any and all liens and encumbrances.
Thus, it appears that Petitioner’s credit, not the credit of the County of Suffolk, is bound on the
purchases of equipment and other expenses. Accordingly, the Agreement provides that Petitioner
does not act as agent of Suffolk County, with respect to any of the purchases of property or services
required or contemplated under the License Agreement. Nor is Suffolk County obligated to any of
the vendors which sells such property or services to Petitioner for the purchase price of such property
or services. Such factors were found significant to establishing the existence of an agency
relationship in Kern-Limerick v. Scurlock (347 US 110). The lack of these elements here indicates
a lack of consent by Suffolk County and Petitioner to create an agency relationship with respect to
Petitioner’s purchases (see Matter of West Valley Nuclear Services Co., Inc., Dec Tax App Trib,
November 13, 1998, TSB-D-97(37)S). Therefore, it cannot be shown that Petitioner is acting on
behalf of the County of Suffolk as its purchasing agent, subject to the County of Suffolk’s control;
and Suffolk County has not authorized this fiduciary relationship, notwithstanding that Petitioner
may identify itself as agent for Suffolk County when making purchases. Thus, Petitioner’s purchases
are not exempt on the basis that it is acting as an agent for Suffolk County as an exempt organization
under Section 1116(a)(1) of the Tax Law.
Petitioner, rather than Suffolk County, is making the purchases required under the contracts.
Petitioner purchases such tangible personal property and services in its capacity as contractor; and
uses such property and services itself to perform its contract obligations. Thus, such sales to
Petitioner are retail sales, as defined under Section 1101(b)(4)(i) of the Tax Law, subject to the tax
imposed under Section 1105(a) or 1110 of the Tax Law. Accordingly, Petitioner must pay sales or
use tax on its purchases or uses of such property. However, under the provisions of Section
1115(a)(16) of the Tax Law, Petitioner’s purchases of tangible personal property which it uses to
maintain or repair County owned property are exempt from sales and use taxes, provided that the
tangible personal property is incorporated as an integral component part of a structure, building or
real property owned by the County. See Section 528.17 of the Sales and Use Tax Regulations. See
also Bedford Hills Supply, Inc., Adv Op Comm T&F, July 23, 1997, TSB-A-97(46)S. When
purchasing property qualifying for exemption under Section 1115(a)(16) of the Tax Law from a
supplier, Petitioner or its subcontractor must issue Form ST-120.1, Contractors Exempt Purchase
Certificate, to the supplier within 90 days of delivery of the property. See Section 1132(c) of the Tax
Law and Section 541.3(d)(2)(v) of the Sales and Use Tax Regulations.

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Equipment and supplies purchased by Petitioner do not become an integral component part
of the County’s real property. Equipment and supplies are considered to be used or consumed by
Petitioner in the performance of its contracts. No tax exemption applies to such equipment and
supplies purchased for Petitioner’s own use. Therefore, Petitioner must pay tax on equipment and
supplies purchased for use in complying with its contractual obligations which are not incorporated
into the realty of the County (see Suffolk County Department of Parks, supra; Sullivan Humes
Painting, Adv Op Comm T&F, August 31, 1987, TSB-A-87(31)S; Bedford Hills Supply, Inc.,
supra).

DATED: September 7, 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.