Is a highway contractor's purchase of steel materials to build a temporary traffic-detour crossover for a state expressway interchange exempt from sales and use tax?

Plain-English summary

DeFoe Corp. contracted with the New York State Department of Transportation (NYSDOT) to rehabilitate the highway interchange between the Bruckner Expressway and the Cross Bronx Expressway. To keep traffic moving during construction, the contract required a "traffic maintenance plan" that included building a temporary steel "crossover" — steel beams and a steel deck installed between sections of the two roadways to divert traffic around the work zone. Once built, the crossover belongs to NYSDOT as part of the highway, and NYSDOT (not DeFoe) handles routine upkeep like snowplowing. When the rehabilitation is finished, DeFoe's contract requires it to tear the crossover back out, restore the interchange, and scrap the removed materials, which by then are worth only scrap value.

The Department held that the steel materials DeFoe buys to build the crossover are exempt from sales and use tax. Even though the crossover is temporary and gets removed later, it functions as an integral, seamless part of the roadway while it's in place, and title to it passes to NYSDOT — a state agency that's itself exempt from sales tax as a purchaser under § 1116(a)(1) — the moment it's installed. That satisfies the exemption for materials that become an integral component of an exempt government entity's real property (or that are used to maintain/repair such property). DeFoe needs to give its material suppliers a properly completed Contractor Exempt Purchase Certificate (Form ST-120.1) within 90 days of purchase to buy the materials tax-free.

What this means for you

Highway and infrastructure contractors working for state DOT agencies

Materials that get built into government-owned real property — even a temporary structure that's designed to be torn out later, like a traffic detour crossover — can qualify for the government-entity materials exemption, as long as title passes to the exempt government owner and the materials genuinely become an integral part of its property while installed. Get the Contractor Exempt Purchase Certificate (Form ST-120.1) to your suppliers within the 90-day window.

Contractors on temporary vs. permanent government construction

Don't assume "temporary" automatically means "taxable." What matters under §§ 1115(a)(15)-(16) is whether the materials become an integral part of the exempt government entity's structure while installed and whether title passes to that entity — not whether the installation is permanent in the sense of lasting forever.

Accountants and tax professionals

This is a straightforward application of the materials-incorporated-into-exempt-organization-property exemption, extended to a temporary but functionally integral highway structure. Watch the certificate mechanics: Form ST-120.1 must reach the supplier within 90 days of purchase under § 1132(c).

Common questions

Q: Are materials for a temporary traffic-detour structure on a state highway project exempt from sales tax?
A: Yes, as long as the structure becomes an integral part of the state-owned real property while it's installed and title passes to the state agency, even though it's later removed.

Q: Does it matter that the crossover is eventually torn out and scrapped?
A: No — the exemption looks at whether the materials became an integral component of the exempt government entity's property while in place, not whether the installation is permanent forever.

Q: What paperwork does the contractor need to buy the steel materials tax-free?
A: A properly completed Contractor Exempt Purchase Certificate (Form ST-120.1), furnished to the material supplier within 90 days of the purchase date.

Q: Would this exemption apply to a similar temporary structure built for a private (non-government) customer?
A: Not under this exemption — §§ 1115(a)(15)-(16) specifically require the property to belong to (or be maintained for) an organization described in § 1116(a), such as a government agency.

Q: Can another highway contractor rely on this ruling for a different DOT project?
A: No. It's binding only on DeFoe's specific facts and can't be relied on by any other taxpayer.

Citations and references

Statutes and forms:

• Tax Law § 1115(a)(15), (16) (materials incorporated into or maintaining exempt organization's real property)
• Tax Law § 1116(a)(1) (New York State and its agencies exempt as purchaser)
• Tax Law § 1132(c) (exempt purchase certificate requirement)
• Form ST-120.1 (Contractor Exempt Purchase Certificate)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2002.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a02_18s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-02(18)S
Sales Tax
June 26, 2002

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S010126A

On January 26, 2001, the Department of Taxation and Finance received a Petition for
Advisory Opinion from DeFoe Corp., 800 South Columbus Avenue, Mt. Vernon, New York, 10550.
The issue raised by Petitioner, DeFoe Corp., is whether the purchase of materials used to
construct a temporary steel crossover for an expressway interchange is subject to sales and
compensating use tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner’s contract with the New York State Department of Transportation (NYSDOT)
provides for the rehabilitation of the interstate highway interchange between the Bruckner
Expressway and the Cross Bronx Expressway. Part of this contract includes a “traffic maintenance
plan” that requires that traffic on these roadways continues in an uninterrupted fashion during the
construction phase of the rehabilitation project. The traffic maintenance plan calls for the
construction of a steel “crossover” between a section of each of the aforementioned roadways to
divert vehicular traffic around the portion of the interchange being rehabilitated. Steel beams are
installed and a steel deck is laid down to handle the flow of traffic which would normally use the
interchange. Once in place, the crossover becomes the property of NYSDOT, as part of the
highway, and NYSDOT is responsible for routine maintenance such as snowplowing.
Once the rehabilitation of the interchange is completed, the contract with NYSDOT requires
that Petitioner remove the steel crossover, restore the interchange to its original or upgraded
configuration, and dispose of the scrap materials. The materials removed by Petitioner do not retain
more than scrap value.
Applicable Law and Regulations
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:
*

*

*

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TSB-A-02(18)S
Sales Tax
June 26, 2002

(15) Tangible personal property sold to a contractor, subcontractor or
repairman for use in (i) erecting a structure or building (A) of an organization
described in subdivision (a) of section eleven hundred sixteen . . . or (ii) adding to,
altering or improving real property, property or land (A) of such an organization . . .
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.
(16) Tangible personal property sold to a contractor, subcontractor or
repairman for use in maintaining, servicing or repairing real property, property or
land (i) of an organization described in subdivision (a) of section eleven hundred
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;
Opinion
The materials purchased by Petitioner which are incorporated into the crossover become an
integral component part of the structures to which they are attached. The crossover is functionally
a permanent part of the roadway and creates a virtually seamless “detour” for vehicular traffic. The
materials become the property of NYSDOT upon their installation and are subsequently maintained
by NYSDOT. NYSDOT is a New York State agency described in Section 1116(a)(1) of the Tax
Law, and, as such, is an entity exempt from sales tax pursuant to Section 1116 of the Tax Law.
Since the materials used to construct the crossover meet the conditions set forth in Sections
1115(a)(15) and (16) of the Tax Law, Petitioner may purchase materials which are incorporated into
and become part of the crossover without payment of sales and compensating use tax. Petitioner
should provide the supplier of the materials with a properly completed Contractor Exempt Purchase

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TSB-A-02(18)S
Sales Tax
June 26, 2002
Certificate, Form ST-120.1, within ninety days of the date of purchase. See Section 1132(c) of the
Tax Law.

DATED: June 26, 2002

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

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