Can a Qualified Empire Zone Enterprise construction contractor buy tool trucks, cranes, and related equipment tax-free when they spend most of their time at out-of-zone construction sites rather than in the zone yard?

Plain-English summary

JPW Riggers & Erectors, a construction contractor certified as a Qualified Empire Zone Enterprise (QEZE), based its main operation (its "yard") inside a designated New York empire zone. It owns or leases cranes and mobile equipment in three patterns: small cranes that go out and return to the yard every day; large cranes that sit in the yard for weeks until needed at a job site, staying there a few days before returning; and medium cranes mostly at job sites, with only brief yard stays. It also runs tool trucks that start and end every day in the yard, outfitted with welders, hand tools, and consumables (welding rods, grease, paint) that they shuttle between the yard and construction sites.

New York's QEZE exemption covers property a certified enterprise uses "directly and predominantly" (at least 50%) within its empire zone. For a motor vehicle specifically, that 50% threshold is measured either by exclusive use within the zone, or by activities that originate or terminate in the zone (with the enterprise's choice of measuring by mileage or hours). The Department found the tool trucks — genuine motor vehicles under the Vehicle and Traffic Law because they're driven on public highways — qualify if at least half their trips originate or end at the zone yard (e.g., a daily supply run out and back). Cranes and similar wheeled equipment are technically "motor vehicles" too when they have wheels and tires and can be driven on a highway, but the Department drew a sharper line for them: their real "activity" for exemption purposes isn't the driving between yard and job site — it's the lifting, installing, and dismantling work they actually perform, which happens at the construction site, not on the highway. So a crane qualifies only if at least half of that on-site work occurs at locations physically within the empire zone — regardless of how much time the crane spends parked in the zone yard between jobs. (An exception: a crane that travels along with a truck to load/unload materials being hauled to an out-of-zone site, as part of that hauling trip, can count that trip as zone-originating activity.) Non-vehicle tools, welders, and consumables carried on the tool trucks are judged purely by where they're actually used or consumed — at least half in the zone — regardless of the truck's own qualifying status. The contractor bears the burden of proving and documenting all of this.

What this means for you

QEZE-certified construction contractors with mobile equipment

Don't assume "based in the zone" or "parked in the zone yard most of the time" is enough to qualify equipment for the exemption. For genuine motor vehicles like tool trucks, what matters is whether trips originate/terminate in the zone; for wheeled construction equipment like cranes, what matters is where the actual construction work (lifting, installing, dismantling) happens — the zone's yard-parking time is largely irrelevant to a crane's qualification.

Contractors tracking equipment usage for tax exemption purposes

Keep records substantiating either mileage or hours of use for motor vehicles, and location-of-work records for cranes and similar equipment — the exemption's 50% threshold has to be proven by the taxpayer, and the enterprise gets to choose whether to measure motor-vehicle usage by mileage or by hours.

Contractors whose equipment splits time between in-zone and out-of-zone job sites

A crane doing more work at out-of-zone sites than in-zone sites loses the exemption entirely for that equipment, no matter how much time it otherwise spends sitting in the empire zone yard — the exemption turns on productive-use location, not storage location.

Common questions

Q: Does keeping equipment parked in our empire zone yard most of the time qualify it for the QEZE exemption?
A: Not by itself — for cranes and similar construction equipment, the exemption depends on where the actual lifting/installing/dismantling work happens (at least 50% within the zone), not on how much time the equipment spends parked in the zone yard between jobs.

Q: Are our tool trucks judged the same way as our cranes?
A: No — genuine motor vehicles like tool trucks are judged by whether at least 50% of their trips originate or terminate in the empire zone; cranes are instead judged by where their actual construction-site work happens.

Q: Do welding rods, grease, and hand tools carried on our tool trucks automatically qualify if the truck itself qualifies?
A: No — non-vehicle tools and consumables are judged independently by where they're actually used or consumed (at least 50% within the zone), regardless of whether the truck carrying them separately qualifies.

Q: Who has to prove the equipment meets the 50% usage threshold?
A: The QEZE-certified enterprise bears the burden of proof and must maintain records substantiating the qualifying use, whether measured by mileage, hours of use, or location of work performed.

Citations and references

Statutes and rules:

• Tax Law § 1115(z) (QEZE sales and use tax exemption)
• Tax Law § 1117(c) (motor vehicle definition for exemption purposes)
• Vehicle and Traffic Law § 125 (motor vehicle definition); § 156 (trailer definition)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2005.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a05_2s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

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Sales Tax
January 31, 2005

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S040308A

On March 8, 2004, the Department of Taxation and Finance received a Petition for
Advisory Opinion from JPW Riggers & Erectors, Inc., 6376 Thompson Road, Syracuse,
New York, 13206.
The issue raised by Petitioner, JPW Riggers & Erectors, Inc., is whether a Qualified
Empire Zone Enterprise (QEZE) can claim a sales tax exemption on tool trucks, cranes, other
mobile equipment, tools and consumables under the circumstances described below.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a construction contractor whose main location has been included in an
empire zone. For the purposes of this Advisory Opinion, it is assumed that Petitioner has been
certified as a Qualified Empire Zone Enterprise (QEZE) for purposes of the General Municipal
Law and Tax Law. Petitioner is the owner or lessee of cranes and mobile equipment that spend
some of the time on Petitioner’s premises (the yard) which are within the empire zone.
Petitioner’s cranes fall into one of three categories: small cranes that start the day in the yard and
end the day in the yard every day they are used; large cranes that may sit in the yard for weeks
until they are needed at a job site where they may remain for a few days before returning to the
yard; and medium sized cranes that are at job sites most of the time and are only in the yard for
short periods of time. Some of Petitioner’s cranes and similar mobile equipment are of a type
that may be operated or driven upon a public highway.
Petitioner also has tool trucks that start each day and end each day in the yard. Each tool
truck is outfitted with welders, hand tools and consumables (such as welding rods, grease, paint,
etc.) which it transports between construction sites and the yard.
Applicable law and regulations
Section 1115(z) of the Tax Law provides:
(1) Receipts from the retail sale of tangible personal property described in
subdivision (a) of section eleven hundred five of this article, receipts from every sale of
services described in subdivisions (b) and (c) of such section eleven hundred five and
consideration given or contracted to be given for, or for the use of, such tangible personal
property or services shall be exempt from the taxes imposed by this article where such
tangible personal property or services are sold to a qualified empire zone enterprise,
provided that (I) such property or property upon which such a service has been performed
or such service (other than a service described in subdivision (b) of section eleven

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hundred five) is directly and predominantly, or such a service described in clause (A) or
(D) of paragraph one of such subdivision (b) of section eleven hundred five is directly
and exclusively, used or consumed by such enterprise in an area designated as an empire
zone pursuant to article eighteen-B of the general municipal law with respect to which
such enterprise is certified pursuant to such article eighteen-B, or (ii) such a service
described in clause (B) or (C) of paragraph one of such subdivision (b) of section eleven
hundred five is delivered and billed to such enterprise at an address in such empire zone;
provided, further, that, in order for a motor vehicle, as defined in subdivision (c) of
section eleven hundred seventeen of this article, or tangible personal property related to
such a motor vehicle to be found to be used predominantly in such empire zone, at least
fifty percent of such motor vehicle’s use shall be exclusively within such empire zone or
at least fifty percent of such motor vehicle’s use shall be in activities originating or
terminating in such empire zone, or both; and either or both such usages shall be
computed either on the basis of mileage or hours of use, at the discretion of such
enterprise. For purposes of this subdivision, tangible personal property related to such a
motor vehicle shall include a battery, diesel motor fuel, an engine, engine components,
motor fuel, a muffler, tires and similar tangible personal property used in or on such a
motor vehicle.
(2) Receipts from the retail sale of, and consideration given or contracted to be
given for, or for the use of, tangible personal property sold to a contractor, subcontractor
or repairman for use in (i) erecting a structure or building of a qualified empire zone
enterprise, (ii) adding to, altering or improving real property, property or land of such an
enterprise or (iii) maintaining, servicing or repairing real property, property or land of
such an enterprise, as the terms real property, property or land are defined in the real
property tax law, shall be exempt from the taxes imposed by this article; 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, real
property, property or land located in an area designated as an empire zone pursuant to
article eighteen-B of the general municipal law in, and with respect to which such
enterprise is certified pursuant to such article eighteen-B.
(3) Except as otherwise provided by law, the exemptions provided in this
subdivision shall not apply to taxes imposed by section eleven hundred seven of this
article or to taxes imposed pursuant to the authority of article twenty-nine of this chapter.
Section 1117(c) of the Tax Law provides, in part:
For purposes of this section, the term :
(1) "Motor vehicle" shall include a motor vehicle as defined in section one
hundred twenty-five of the vehicle and traffic law and a trailer as defined in section one
hundred fifty-six of the vehicle and traffic law.

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Section 125 of the Vehicle and Traffic Law provides:
Motor vehicles Every vehicle operated or driven upon a public highway which
is propelled by any power other than muscular power, except (a) electrically-driven
mobility assistance devices operated or driven by a person with a disability, (b) vehicles
which run only upon rails or tracks, (c) snowmobiles as defined in article forty-seven of
this chapter, and (d) all terrain vehicles as defined in article forty-eight-B of this chapter.
For the purposes of title four, the term motor vehicle shall exclude fire and police
vehicles other than ambulances. For the purposes of titles four and five the term motor
vehicles shall exclude farm type tractors and all terrain type vehicles used exclusively for
agricultural purposes, or for snow plowing, other than for hire, farm equipment, including
self-propelled machines used exclusively in growing, harvesting or handling farm
produce, and self-propelled caterpillar or crawler-type equipment while being operated
on the contract site.
Section 156 of the Vehicle and Traffic Law provides:
Trailer Any vehicle not propelled by its own power drawn on the public
highways by a motor vehicle as defined in section one hundred twenty-five operated
thereon, except motorcycle side cars, vehicles being towed by a non-rigid support and
vehicles designed and primarily used for other purposes and only occasionally drawn by
such a motor vehicle.
Opinion
Section 1115(z) of the Tax Law provides an exemption from sales and use tax for
purchases and uses of tangible personal property by a QEZE which the QEZE uses directly and
predominantly within the empire zone in which such QEZE is certified. Section 1115(z) further
provides that in order for a motor vehicle or property related to a motor vehicle to qualify for this
exemption, at least 50% of the vehicle’s use shall be exclusively within such empire zone, or at
least 50% of its use shall be in activities originating or terminating in such empire zone, or both.
Usages shall be computed either on the basis of mileage or hours of use, at the discretion of the
QEZE. Property related to a motor vehicle includes the vehicle’s engine, engine components,
battery, muffler, tires, fuel and similar property used in or on the vehicle.
Section 1115(z)(1) of the Tax Law provides that, for purposes of the QEZE exemption, a
motor vehicle is defined as in section1117(c) of the Tax Law. Section 1117(c) of the Tax Law
provides that a motor vehicle is defined as in section 125 (or section 156 pertaining to trailers) of
the Vehicle and Traffic Law (VTL). Section 125 of the VTL broadly defines the term motor
vehicles to mean every vehicle operated or driven upon a public highway which is propelled by
any power other than muscular power, with a number of exceptions not here relevant.
Accordingly, Petitioner’s construction equipment which has wheels and tires and is operated or
driven upon a public highway is a motor vehicle for purposes of section 1115(z) of the Tax Law.
Petitioner’s tool trucks are also motor vehicles for purposes of section 1115(z). Petitioner’s

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construction equipment which does not have wheels or tires is not a motor vehicle when operated
on construction sites.
Tool trucks transport equipment and supplies from Petitioner’s yard to its construction
sites and back to its yard located in the empire zone. If the tool trucks are used to transport
supplies to the construction site and return to the empire zone to replenish those supplies
consumed during the day, the tool trucks are considered to be used in activities that originate and
terminate within the empire zone. If the transportation activities performed by a tool truck either
originate or terminate, or both, in the empire zone in which Petitioner is certified as a QEZE
under Article 18-B of the General Municipal Law, and at least 50% of the truck’s use is in such
activities, the tool truck, property related to such truck, and repair parts and services used to
repair or maintain such truck, would qualify for exemption from sales and use tax.
Tools, machinery and construction supplies with which the tool trucks are equipped, such
as welders, hand tools, welding rods, grease, paint, etc., are not tangible personal property related
to a motor vehicle for purposes of section 1115(z) of the Tax Law. The use of such tools,
machinery, and construction supplies does not occur until the supplies are used or consumed in
the performance of a contract. Thus, such tools, machinery and construction supplies would be
exempt from the sales tax only if such property is directly and predominantly (at least 50%) used
or consumed by Petitioner in the empire zone in which Petitioner is certified.
Petitioner’s cranes and similar mobile equipment that have wheels and tires and which
may be operated or driven upon a public highway are motor vehicles under section 125 of the
Vehicle and Traffic Law. Such wheeled equipment is, therefore, a motor vehicle for purposes of
section 1115(z) of the Tax Law. However, regardless of whether the cranes and similar mobile
equipment have wheels and tires and are defined as motor vehicles, they are principally used as
construction equipment. For purposes of section 1115(z)(1) of the Tax Law, the activity in
which the cranes and other equipment are used is not the operation as motor vehicles on and over
the public highways, whether in the transportation of goods from Petitioner’s yard to the
construction site or otherwise, as discussed below. Rather, the cranes’ and other equipment’s
activities generally consist of the lifting, installing and dismantling of property, performed at a
particular construction site and not on the public highways. The activities of lifting, installing
and dismantling are activities which originate and terminate at the construction (or other) site at
which they are performed by the cranes. The movement of the cranes and similar mobile
equipment to and from Petitioner’s yard and a construction site, whether or not under their own
power, does not constitute an activity of such equipment as contemplated by section 1115(z)(1)
of the Tax Law, except as discussed below. Therefore, if at least 50% of the use of the cranes
and similar mobile equipment occurs at construction sites located within the boundaries of the
empire zone in which Petitioner is certified, the equipment will be used predominantly within
such empire zone and the exemption under section 1115(z)(1) will apply. If, however, the use of
the cranes and similar mobile equipment at construction sites located outside the empire zone in
which Petitioner is certified exceeds the use of such equipment at construction sites located in
such empire zone, such equipment will not qualify for exemption under section 1115(z)(1). This
is true regardless of whether the cranes and similar mobile equipment return to Petitioner’s yard

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from the construction site each day, sit in Petitioner’s yard for weeks at a time, or are at job sites
most of the time.
It is possible that over the road cranes may be used in other activities that would qualify
them for the exemption in section 1115(z)(1) of the Tax Law. A crane qualifying as a motor
vehicle which is used to load materials or prefabricated structures at a location within the empire
zone in which a taxpayer is certified, onto a truck or tractor-trailer combination in order to
transport the materials or structures to a job site outside the empire zone, and which travels along
with the truck or tractor-trailer to off-load the materials at the job site outside the empire zone, is
engaged in activities originating or terminating within an empire zone. Such a crane used at least
50% of the time in activities at construction sites within the empire zone and transportation
activities beginning or ending within the empire zone as described in this paragraph would
qualify for exemption under section 1115(z) of the Tax Law. The exemption would also apply to
purchases of repairs and services to the exempt crane.
The burden is on Petitioner to prove that the equipment, tools and consumables described
in this Advisory Opinion are used or consumed by Petitioner directly and predominantly in the
empire zone in which Petitioner is certified. With respect to motor vehicles, the burden is on
Petitioner to show that at least 50% of the use of any motor vehicle is exclusively within such
empire zone or at least 50% of its use is in activities originating or terminating in such empire
zone, or both. Petitioner may determine either or both such usages of motor vehicles by
computing either on the basis of mileage or hours of use, at Petitioner’s discretion. Petitioner
must maintain records substantiating that a qualifying exempt use occurred.

DATED: January 31, 2005

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.