If a company buys a concrete pump truck solely to lease it to an affiliate, is the purchase exempt from sales tax, and are the affiliate's lease payments taxable?

Plain-English summary

Arnan Development Corp. bought a 73,900-pound concrete pump truck with no plan to use it itself — the whole point was to lease the truck to an affiliated ready-mix concrete company. The affiliate would offer the pump truck (with an operator, for a separate hourly fee) to its own construction-site customers alongside its ready-mix concrete deliveries.

The Department split the analysis into two separate transactions:

1. Arnan's purchase of the truck is exempt from sales tax as a purchase for resale — Arnan never uses the truck itself, only leases it out, so the resale exclusion applies.
2. The affiliate's lease payments back to Arnan are a taxable sale of tangible personal property unless the affiliate is, in turn, leasing (not servicing with) the truck exclusively to its own customers for that lease period. Since the truck weighs well over 10,000 pounds, the special upfront motor-vehicle-lease tax rules for lighter vehicles don't apply — tax (if any) is due lease-period by lease-period instead.

The harder question is whether the affiliate's arrangement with its customers — providing the truck plus an operator — is a rental of equipment or the sale of a service. That turns on dominion and control: if the affiliate's operator keeps discretion over how and when the work is done (its own routes, its own judgment, no customer control), the arrangement looks like the affiliate performing a service, meaning the affiliate is "using" the truck itself rather than reselling it — which would make the affiliate's lease payments to Arnan taxable for that period. If the customer instead controls the operator's work, the arrangement looks like a true equipment rental that could qualify as a further resale, keeping Arnan's lease receipts for that period exempt.

The Department also confirmed the truck itself doesn't otherwise qualify for a standalone exemption: it isn't "machinery ... used directly and predominantly in production" of the affiliate's ready-mix concrete (it just moves already-produced concrete at the job site), and it isn't a "tractor, trailer, or semi-trailer" eligible for the heavy-vehicle-combination exemption.

What this means for you

Equipment-leasing companies (including affiliate-to-affiliate arrangements)

A purchase made solely to lease out to someone else — even a related company — is exempt as a purchase for resale, regardless of the affiliate relationship. But don't assume the exemption chain continues automatically down to your lessee's payments to you; that depends entirely on whether your lessee is itself reselling/re-renting the equipment or using it to perform services, which is where the tax often lands.

Businesses providing equipment-with-operator packages

If you supply equipment along with an operator, watch the "dominion and control" factors: who directs the work, who has hiring/firing authority over the operator, who selects routes/methods, who pays operating costs. If your operator keeps that control, you're providing a service (not renting equipment), and any equipment you leased in to do that job likely becomes a taxable use rather than an exempt resale for that period. Separately stating operator wages doesn't change this result on its own.

Construction equipment owners and lessors generally

This ruling is a reminder that resale exemptions can break down mid-chain: exempt at purchase, but potentially taxable at the next transfer, depending entirely on how the ultimate user actually deploys the equipment.

Common questions

Q: If I buy equipment purely to lease to my own affiliate, do I owe sales tax on the purchase?
A: No — that's excluded from tax as a purchase for resale, regardless of the affiliate relationship, as long as you genuinely don't use the equipment yourself.

Q: Are my affiliate's lease payments back to me automatically exempt too?
A: No. That depends on what the affiliate does with the equipment during each lease period. If the affiliate exclusively re-rents it to its own customers (without controlling the operator's work), the lease payment for that period can also be exempt as a further resale. If the affiliate uses the equipment (including via an operator it controls) to perform its own service, the affiliate owes tax on its lease payment for that period.

Q: How do I know if providing equipment-with-an-operator is a rental or a taxable service?
A: Look at dominion and control: who decides how and when the work gets done, who can hire/fire the operator, who pays for fuel/insurance/wages, and who selects the routes or methods. If the equipment owner/operator keeps that control, it's a service. If the customer effectively directs the operator, it looks like a rental.

Q: Does this ruling apply to my equipment leasing arrangement?
A: This is an Advisory Opinion binding only on Arnan Development Corp. and the exact facts presented. Equipment weight, the affiliate relationship, and the operator-control facts all mattered here — different facts can change the answer.

Citations and references

• Tax Law § 1101(b)(4) (retail sale; resale exclusion)
• Tax Law § 1101(b)(5) (sale, including rental, lease, license to use)
• Tax Law § 1105(a) (imposition of sales tax)
• Tax Law § 1111(i)(A) (motor vehicle lease provisions; inapplicable to heavy vehicles)
• Tax Law § 1115(a)(12) (production machinery/equipment exemption)
• Tax Law § 1115(a)(26) (tractor/trailer combination exemption)
• 20 NYCRR § 541.2(p) (rental, lease and license to use; dominion and control test)
• 20 NYCRR § 541.9(c)(1) (rentals/leases of equipment to contractors)
• Micheli Contracting Corp. v. New York State Tax Commn., 109 A.D.2d 957
• Brendan P. McCafferty, Esq., CPA, Adv Op Comm T&F, Dec. 31, 2003, TSB-A-03(47)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a08_27s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-08(27)S
Sales Tax
June 9, 2008

Office of Tax Policy Analysis
Taxpayer Guidance Division

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S070601A

On June 1, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Arnan Development Corp., 6459 State Highway 23, Oneonta, NY
13820. Petitioner, Arnan Development Corp., provided additional information pertaining to the
Petition on June 26, 2007, and July 3, 2007.
The issues raised by Petitioner are:

1. Whether Petitioner’s purchase of a concrete pump truck is subject to sales tax.
2. Whether Petitioner’s receipts from the lease of the concrete pump truck are
   subject to sales tax.
   Petitioner submitted the following facts as the basis for this Advisory Opinion.
   Petitioner purchased a concrete pump truck to lease to an affiliated company (Affiliate).
   Petitioner will not use the concrete pump truck itself and will only lease the truck to Affiliate.
   Affiliate is a manufacturer of ready-mix concrete that transports its ready-mix concrete to
   construction sites in a concrete mixer truck and, upon request, provides the concrete pump truck
   and operator.
   The concrete pump truck is used at a construction site to move concrete to its final
   position and pump it as needed to construct a floor, wall, foundation, driveway, parking lot, etc.
   The pump is mounted on the truck, which is used in transporting the pump around a construction
   site and from one construction site to another. The concrete pump truck is not used in over-the­
   road concrete transportation. Its only function with respect to the concrete is to pump the
   concrete at the construction site. The concrete pump truck weighs approximately 73,900 pounds
   and is not a tractor-trailer.
   Upon a customer’s request, Affiliate provides the concrete pump truck for an hourly
   charge. An operator is also provided for a separate hourly charge. Affiliate provides contractors
   with separate billings for the concrete pump truck and operator, but never combines the billing
   for the use of the pump truck and operator with the billing for the sale of ready-mix concrete.
   Applicable law and regulations
   Section 1101(b) of the Tax Law provides, in part:

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When used in this article for the purposes of the taxes imposed by subdivisions
(a), (b), (c) and (d) of section eleven hundred five and by section eleven hundred ten, the
following terms shall mean:
*

*

*

(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such or as a physical component part of tangible
personal property, . . .
*

*

*

(5) Sale, selling or purchase. Any transfer of title or possession or both, exchange
or barter, rental, lease or license to use or consume . . . conditional or otherwise, in any
manner or by any means whatsoever for a consideration, or any agreement therefor,
including the rendering of any service, taxable under this article, for a consideration or
any agreement therefor.
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax. On and after June first, nineteen hundred seventy-one,
there is hereby imposed and there shall be paid a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
Section 1111(i)(A) of the Tax Law provides, in part:
Notwithstanding any contrary provisions of this article or other law, with respect
to any lease for a term of one year or more of (1) a motor vehicle, as defined in section
one hundred twenty-five of the vehicle and traffic law, with a gross vehicle weight of ten
thousand pounds or less. . . or an option to renew such a lease or a similar contractual
provision, all receipts due or consideration given or contracted to be given for such
property under and for the entire period of such lease, option to renew or similar
provision, or combination of them, shall be deemed to have been paid or given and shall
be subject to tax, and any such tax due shall be collected, as of the date of first payment
under such lease, option to renew or similar provision, or combination of them, or as of
the date of registration of such property with the commissioner of motor vehicles,
whichever is earlier….
Section 1115(a) of the Tax Law provides, in part:

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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 . . . for sale, by manufacturing, processing,
generating, assembling, refining, mining or extracting, but not including parts with a
useful life of one year or less or tools or supplies used in connection with such machinery
or equipment. . . .
*

*

*

(26) Tractors, trailers or semi-trailers, as such terms are defined in article one of
the vehicle and traffic law, and property installed on such vehicles for their equipping,
maintenance or repair, provided such vehicle is used in combination where the gross
vehicle weight of such combination exceeds twenty-six thousand pounds.
Section 532.1(a) of the Sales and Use Tax Regulations provides, in part:
Time of collection. (1) Every person required to collect the tax shall collect the
tax from the customer when collecting the price, amusement charge or rent to which it
applies.
Section 541.2 of the Sales and Use Tax Regulations provides, in part:
Definitions. The words, terms and phrases used in this Part have the following
definitions except when the context clearly indicates a different meaning:
*

*

*

(p) Rental, lease and license to use. (1) The terms rental, lease and license to use
refer to all transactions in which there is a transfer of possession of tangible personal
property without a transfer of title to the property.
(2) For the purposes of this Part, when a rental, lease or license to use a vehicle or
equipment includes the services of a driver or operator, such transaction is presumptively
the sale of a service, rather than the rental of tangible personal property, where dominion
and control over the vehicle or equipment remain with the owner or lessor of the vehicle

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or equipment. Dominion and control remain with the owner or lessor of the vehicle or
equipment when pursuant to an agreement or contract the lessor:
(i) does not transfer possession, control and/or use of the equipment or vehicle to
the lessee during the term of the agreement or contract;
(ii) maintains the right to hire and fire the drivers and operators;
(iii) uses his own discretion in performing the work (even though the lessee may
designate the area where material is to be picked up and delivered) and generally selects
his own routes;
(iv) retains responsibility for the operation of the equipment or vehicle; and
(v) directs the work, pays all operating expenses, including drivers' and/or
operators' wages, insurance, tolls and fuels.
Whether a transaction is a sale (license to use, rental or lease) of a vehicle or
equipment or is the sale of a service, such as a transportation service, must be determined
in accordance with the facts and circumstances of the particular transaction and
provisions of the agreement between the contractor and his customer.
Example 6: A company enters into an agreement to lease a crane, together with
the services of the operator of the crane. The operator will take instructions from the
company's foreman, and the company determines the working hours and locations. The
operator's wages are separately stated. This transaction is within the definition of sale, as
the transfer of possession has occurred by reason of the company foreman's right to direct
and control the operator's use of the equipment. The separately stated operator's wages
are excludable from the taxable receipts.
Section 541.9(c)(1) of the Sales and Use Tax Regulations provides, in part:
Rentals and leases of equipment to contractors.
(i) Where a contractor leases equipment, the contractor is liable for the combined
State and local sales and use tax on the total charges at the highest rate in effect in any
jurisdiction in which the equipment is used during the lease payment period, (e.g., daily,
weekly, monthly, depending on the frequency of payment).

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Opinion
Petitioner purchased a concrete pump truck that Petitioner does not intend to use itself.
Rather, the pump truck was purchased for the sole purpose of leasing the truck to Affiliate. In
this case, Petitioner’s purchase is excluded from sales tax as a purchase for resale. See section
1101(b)(4) of the Tax Law.
Petitioner’s lease of the concrete pump truck to Affiliate is a sale, as defined in section
1101(b)(5) of the Tax Law, of tangible personal property that, unless otherwise exempt, is
subject to sales tax under section 1105(a) of the Tax Law. As the concrete pump truck has a
gross vehicle weight that is more than 10,000 pounds, the lease payments are not subject to the
motor vehicle lease provisions of section 1111(i) of the Tax Law. Thus, any tax due will be
imposed upon the payments due for each lease period (weekly, monthly, quarterly, etc.) over the
term of the lease. See section 541.9(c)(1)(i) of the Sales and Use Tax Regulations. Sales tax is
to be reported on the sales tax returns covering the lease periods, regardless of when payment is
received. See section 532.1(a) of the Sales and Use Tax Regulations.
Petitioner’s lease of the concrete pump truck to Affiliate will not be subject to sales tax if
the truck is leased by Affiliate exclusively for resale or re-rental to its customers. If Affiliate
uses the concrete pump truck to perform services for its customers, then the lease of the truck to
Affiliate will be a retail sale subject to sales tax under section 1105(a) of the Tax Law, unless
otherwise exempt. See section 1101(b)(4)(i) of the Tax Law. Whether the transaction where
Affiliate furnishes the concrete pump truck with an operator to its customer constitutes a rental
of tangible personal property or the sale of a service is a question of fact that can only be
determined after review of all the facts and circumstances of the transaction. See section
541.2(p)(2) of the Sales and Use Tax Regulations. See also Brendan P. McCafferty, Esq., CPA,
Adv Op Comm T&F, December 31, 2003, TSB-A-03(47)S. Such a determination is not possible
given the facts provided; therefore, this Opinion discusses some of the relevant factors in making
this determination.
An important consideration is whether Affiliate had contracted with its customer to make
a foundation, create walls and floors, build parking lots, pave highways, etc. If, pursuant to its
contract, Affiliate is responsible for the construction of such buildings and structures, then
Affiliate would be considered to be using the concrete pump truck in its performance of such
services, notwithstanding separate statements to the customer of charges for Affiliate’s use of the
truck and charges for the services of the operator.
Another important factor in determining whether Affiliate leases the concrete pump truck
to its customers or uses the truck in performing services is the degree of dominion and control
maintained by Affiliate’s operator over the truck. Affiliate’s operator will be considered to have
dominion and control over the concrete pump truck if the operator has discretion as to the

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manner in which the work is performed and the timing of the work. However, while the
operator may be responsible for driving or operating the concrete pump truck, if the operator has
no discretion as to the manner in which the truck is used in performing the work, the transaction
appears to be a rental of the truck with an operator supplied. See section 541.2(p), Example 6, of
the Sales and Use Tax Regulations.
If it can be determined that Affiliate has relinquished dominion and control of the
concrete pump truck to the customer, the transaction would be the rental of tangible personal
property. If Affiliate used the concrete pump truck solely for rentals to its customers during a
given lease period with Petitioner, the lease payment to Petitioner for this lease period would be
excluded from sales tax as a purchase for resale. Affiliate should provide Petitioner with a
properly completed Resale Certificate (Form ST-120) for a period in which Affiliate will not
use the concrete pump truck itself but will exclusively use the truck for resale. However, if
Affiliate engages in the rental of the truck, it must collect and remit any sales tax due on such
transaction.
If Affiliate, rather than its customer, maintains dominion and control over the concrete
pump truck, then Affiliate is considered to be using the truck in performing a service. If, during
a single lease period, Affiliate uses the truck to provide a service or otherwise uses the truck
itself in addition to leasing the concrete pump truck to customers, then, during such period,
Affiliate is not exclusively using the truck for resale and will owe sales tax on its lease payment
to Petitioner unless otherwise exempt. See Micheli Contracting Corp. v New York State Tax
Commn, 109 AD 2d 957.
Machinery or equipment used directly and predominantly in the production of tangible
personal property for sale is exempt from sales and use tax under section 1115(a)(12) of the Tax
Law. Affiliate is engaged in the sale of ready-mix concrete. However, Affiliate uses concrete
mixer trucks to deliver the concrete to a construction site. The concrete pump truck is only
provided for use at a construction site if requested by the customer. Thus, the pump truck is not
used by Affiliate in the production of the concrete it sells. The concrete pump truck, not being a
part of Affiliate’s process of producing ready-mix concrete for sale, does not qualify for
exemption under section 1115(a)(12).
Tractors, trailers, or semi-trailers, as such terms are defined in Article 1 of the Vehicle
and Traffic Law, are exempt from sales and use tax under section 1115(a)(26) of the Tax Law,
provided such vehicles are used in combination where the gross vehicle weight of such
combination exceeds 26,000 pounds. Since the concrete pump truck in this case is not a tractor,
trailer, or semi-trailer, the truck is not exempt under section 1115(a)(26).

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Since the concrete pump truck leased to Affiliate is not exempt from tax under section
1115 of the Tax Law, Affiliate’s lease payments to Petitioner for lease periods in which the truck
is not used exclusively for resale will be subject to sales tax.

DATED: June 9, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the
person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.