My family-owned ferry company runs the only vehicle ferry between two New York towns, is regulated by the county, and serves as an emergency evacuation route -- can we get a refund or credit of the sales and use tax we've paid on our ferry boats?

Plain-English summary

South Ferry Inc. is a private, family-owned vehicle passenger ferry company that has run boats across Shelter Island Sound between Shelter Island and North Haven, New York since the late 1700s. It carries roughly 1.25 million passengers and 730,000 vehicles a year over a fixed, chartered route authorized by a renewable Suffolk County franchise, and its route physically connects two segments of New York State Route 114 — without South Ferry, the highway would simply dead-end at the water. The company gets no government subsidies or grants, receives no reimbursement for maintaining a quarter-mile of state highway, and serves as a critical link in county/state emergency-evacuation planning (used during the 1990s Westhampton wildfires, for firefighting mutual aid, and to transport expectant mothers to the hospital). Its rates are regulated by the state under Highway Law §131-g, and its vessels are Coast-Guard-inspected and Homeland-Security-documented. It operates five ferry boats.

South Ferry asked whether it could get a refund or credit of sales and use taxes on its vessels under Tax Law §1119(b), which lets certain local-transit vessel operators recover such tax.

On the pre-existing §1119(b) refund, the answer is no. That provision requires the vessel operator to hold a certificate of public convenience and necessity from the state (or federal) Commissioner of Transportation, or to operate under a contract/franchise with a city of more than one million people (effectively, only New York City). South Ferry has neither — its Suffolk County rate regulation, Homeland Security vessel documentation, and Coast Guard inspections don't substitute for that specific certificate or big-city franchise requirement. So even assuming (without deciding) that its ferries count as the kind of "vessel used for transportation of passengers for hire" the provision covers, South Ferry still doesn't meet the operator-status requirement.

The opinion also confirmed South Ferry doesn't qualify for the older commercial-vessel exemption in Tax Law §1115(a)(8), which only covers vessels "primarily engaged in interstate or foreign commerce" — since South Ferry's route runs entirely between two New York points (crossing only New York waters), it fails that test, just as an earlier Department ruling found for the Circle Line's Statue of Liberty ferry (which crossed into New Jersey waters but wasn't "primarily" interstate).

But there's good news: a brand-new 2008 law change directly targets South Ferry's situation. Effective September 1, 2008, Tax Law §1115(a)(43) exempts ferry boats used directly and predominantly to carry vehicles and passengers within a county (or counties), where the ferry company's rates are county-regulated under Highway Law §131-g — squarely matching South Ferry's facts. That exemption covers not just the ferry boats themselves but also fuel, provisions, supplies, maintenance, and repairs used for them (though fuel tax must still be paid up front, with a refund available afterward). And a transition rule in the same 2008 law lets South Ferry apply for a refund of sales/use tax already paid on a ferry boat purchase or first use between January 1 and August 31, 2008 — as long as that boat would have qualified for the new exemption if bought after September 1. That refund application must be filed by December 31, 2009.

What this means for you

County-regulated ferry, vehicle-transport, or similar local marine transit operators

If your rates are regulated by a county under Highway Law §131-g and you predominantly serve intra-county (or inter-county) vehicle and passenger traffic, check the newer 2008 exemption at Tax Law §1115(a)(43) rather than the older §1119(b) refund provision — the newer exemption may fit your situation even where the older refund doesn't, because it doesn't require a state/federal transportation certificate or a big-city franchise.

Businesses that recently bought equipment right before a new exemption's effective date

If you purchased qualifying property in the months just before a new tax exemption took effect, check whether the enacting legislation included a transitional refund window (as it did here, covering January-August 2008 purchases) — these transition rules often have a hard filing deadline that's easy to miss.

Accountants and tax professionals

This opinion is a clean illustration of how a taxpayer can fail an older, narrower exemption/refund provision (§1119(b), requiring a formal transportation certificate) while qualifying under a newer, more targeted one enacted specifically to reach a gap the old law missed (§1115(a)(43)) — always check for recent legislative amendments before concluding an exemption doesn't apply.

Common questions

Q: Does my ferry or local transit vessel qualify for New York's sales/use tax refund under Tax Law section 1119(b)?
A: Only if you hold a certificate of public convenience and necessity from the state or federal transportation authority, or operate under a franchise/contract with a city of over one million people. County rate-regulation, Coast Guard inspection, or federal vessel documentation alone don't satisfy this requirement.

Q: Is there a different exemption for county-regulated ferries that don't meet the section 1119(b) test?
A: Yes — Tax Law section 1115(a)(43), effective September 1, 2008, exempts ferry boats (and their fuel, supplies, maintenance, and repairs) used directly and predominantly for vehicle/passenger ferry service within a county whose rates are regulated under Highway Law section 131-g.

Q: I bought a qualifying ferry boat in early 2008, before the new exemption's effective date — can I still get a refund?
A: Possibly. Chapter 580 of the Laws of 2008 allows a refund/credit application for tax paid on a ferry boat purchase or first use between January 1 and August 31, 2008, if the boat would have qualified for the new exemption had it been bought later. The application deadline was December 31, 2009.

Q: Does this ruling apply to my ferry or marine transit business?
A: Not automatically. This is an Advisory Opinion binding only on South Ferry Inc. and only as to the facts it described. Your certification status, route, and rate regulation may differ in ways that change the analysis.

Citations and references

Statutes and regulations:

• Tax Law §1101(b)(16) (definition of "commercial vessel")
• Tax Law §1115(a)(8) (exemption for commercial vessels primarily in interstate/foreign commerce)
• Tax Law §1115(a)(43) (2008-enacted exemption for county-regulated ferry boats)
• Tax Law §1119(b) (refund/credit for qualifying omnibus carriers and local-transit vessel operators)
• Chapter 580, Laws of 2008, §3 (transitional refund for ferry boats bought Jan. 1-Aug. 31, 2008)
• Sales and Use Tax Regulations §528.9 (commercial vessel definitions)
• Sales and Use Tax Regulations §534.10(a)(1) (vessel operator definition)

Prior opinions referenced:

• Circle Line - Statue of Liberty Ferry, Inc., TSB-H-80(164)S (interstate-commerce test for ferries)

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_50s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Taxpayer Guidance Division

TSB-A-08(50)S
Sales Tax
November 6, 2008

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S080317B

On March 17, 2008, the Department of Taxation and Finance received a Petition for
Advisory Opinion from South Ferry Inc., P.O. Box 2024, 135 S. Ferry Rd., Shelter Island,
New York 11964.
The issue raised by Petitioner, South Ferry Inc., is whether Petitioner qualifies for a
refund or credit of sales and use taxes relating to vessels used in local transit service pursuant to
section 1119(b) of the Tax Law.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a private, family-owned and operated vehicle passenger ferry boat company
on Eastern Long Island. Annually, it transports more than one million passengers and over
725,000 vehicles between the town of Shelter Island and North Haven (Southampton Township).
It has been operated by the same family since the late 1700s.
The route over the waters of the Shelter Island Sound is a fixed and charted route
authorized under a 5-year, renewable franchise from the Suffolk County Legislature, pursuant to
Article 8 of the Navigation Law and section 71 of the Transportation Corporations Law.
The route is unique in that it physically connects two portions of New York State Route

114. New York State has a right-of-way through Petitioner’s property on both sides of the
     channel. Petitioner maintains more than a quarter mile of the New York State highway system
     but gets no financial assistance from town, county, State, or federal funds. Without Petitioner,
     Route 114 from East Hampton would end at North Haven.
     Petitioner operates solely as a public service, providing a vital service to Shelter Island
     and the east end of Long Island. It offers the only direct route on and off Shelter Island for
     workers, students, shoppers, and tourists who need to get to Long Island’s South Fork. In 2007
     alone, Petitioner provided local transit service to approximately 730,000 cars, trucks, or buses
     and 1.25 million passengers. Petitioner operates 5 ferry boats ranging from 65-feet to 101-feet in
     length, with passenger capacities from 97 to 150, depending on the vessel. It employs 37
     individuals year round with additional staff during the summer months.
     Petitioner’s rate structure is regulated by New York State Highway Law, section 131-g.
     Its vessels are documented by the Department of Homeland Security, and are inspected for safety
     annually by the United States Coast Guard. Petitioner is a private company that currently
     receives no public funding for any aspect of its operation. It depends solely on revenues from

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rate payers for all dock, vessel, and facility construction/upkeep, all fuel costs, all payroll and
benefits, and all dredging necessary to keep Route 114 open 365 days a year. Petitioner is subject
to county, State, and federal taxes. It receives neither tax subsidies nor government grants of any
kind for maintaining a quarter-mile of New York State Route 114.
Petitioner is an integral part of the Suffolk County and Shelter Island Emergency
Evacuation Routes. Both levels of government rely on Petitioner as an essential piece of all
evacuation plans, be it a nuclear leak from the Millstone Power Plant in Connecticut, a deadly
hurricane, or a fire. During the Westhampton fires in the 1990s, Petitioner was asked to remain
open all night to transport local firefighters and support teams to and from Westhampton. More
routinely, when the local fire department is engaged in fighting a fire, Petitioner is often called to
bring over Sag Harbor equipment and firemen to back them. Petitioner is also the only means of
transportation for expectant mothers from Shelter Island to Southampton Hospital, and must
transport expectant mothers about to give birth off Shelter Island at any time – often after the
normal hours of operation.
Applicable law and regulations
Section 1101(b)(16) of the Tax Law defines the term commercial vessel for purposes of
Article 28, and provides:
Commercial vessel. A vessel used primarily (i) to transport persons or property,
for hire, (ii) by the purchaser of the vessel to transport such person’s tangible personal
property in the conduct of such person’s business, or (iii) for both such purposes.
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:
*

*

*

(8) Commercial vessels primarily engaged in interstate or foreign commerce and
property used by or purchased for the use of such vessels for fuel, provisions, supplies,
maintenance and repairs (other than articles purchased for the original equipping of a new
ship).
*

*

*

(43) Ferry boats used directly and predominantly to provide ferry service for
vehicles and passengers within a county or counties by a ferry company whose rates for

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that ferry service are regulated by the county or counties in which that service is provided
under section one hundred thirty-one-g of the highway law and property used by or
purchased for the use of those exempt ferry boats for fuel, provisions, supplies,
maintenance and repairs.
[Paragraph (43) was enacted by Chapter 580 of the Laws of 2008, effective
September 1, 2008.]
Section 1119(b) of the Tax Law provides, in part:
a refund or credit shall be allowed for a tax paid pursuant to subdivision (a) and
paragraph three of subdivision (c) of section eleven hundred five, or section eleven
hundred ten of this article and any tax imposed pursuant to the authority of article twenty­
nine of this chapter on the sale to or use by an omnibus carrier described in this
subdivision of any omnibus, and of parts, equipment, lubricants, motor fuel, diesel motor
fuel, maintenance, servicing or repair purchased and used in the operation of any such
omnibus by such carrier or on the sale to or use by a vessel operator described in this
subdivision of a vessel with a seating capacity of more than twenty passengers used for
the transportation on water of passengers for hire, and of parts, equipment, lubricants,
diesel motor fuel, maintenance, servicing or repair purchased and used in the operation of
any such vessel by such operator. Any such omnibus carrier or vessel operator must
provide local transit service in this state and operate pursuant to a certificate of public
convenience and necessity issued by the commissioner of transportation of this state or
by a like officer or agency of the United States or pursuant to the contract, franchise or
consent between such carrier or operator and a city having a population of more than one
million inhabitants, or any agency of such city… .
Section 3 of Chapter 580 of the Laws of 2008 provides, in part:
a person who or which paid sales or compensating use tax imposed by or pursuant
to the authority of article 28 or 29 of the tax law on the purchase made or first use
occurring during the period January 1, 2008, through August 31, 2008, of a ferry boat
used directly and predominantly to provide ferry service for vehicles and passengers
within a county or counties by a ferry company whose rates for the service are regulated
by the county or counties in which the service is provided under section 131-g of the
highway law shall be authorized to apply for a refund or credit of the amount of the sales
or compensating use tax paid on receipts from the sale or first use of that ferry boat . . .
An application for refund or credit under this section shall be made by December 31,
2009, and shall apply only to tax paid on the purchase or use of the ferry boat and not on
the purchase or use of any other property.
Section 528.9 of the Sales and Use Tax Regulations provides, in part:

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(a) Definitions. The definitions in this section shall apply only for the purpose of
the exclusions and the exemptions provided by Tax Law, sections 1105(c)(3)(iv) and
1115(a)(8) with respect to commercial vessels.
*

*

*

(3) Commercial vessel. A Commercial vessel is any vessel used or engaged in the
transportation for hire of persons or property on water. Any vessel used or engaged for
other purposes on more than an occasional basis is not a commercial vessel.
(4) Commercial vessel primarily engaged in interstate or foreign commerce. A
commercial vessel is primarily engaged in interstate or foreign commerce when 50
percent or more of the receipts from the vessel’s activities are derived from interstate or
foreign commerce.
(5) Interstate or foreign commerce. Interstate or foreign commerce means the
transportation of persons or property between states or countries.
Section 534.10(a)(1) of the Sales and Use Tax Regulations provides:
Vessel operator. For purposes of this section, a vessel operator is a person that
operates a vessel used to provide local transit service in this State and that operates
pursuant to a certificate of public convenience and necessity issued by the Commissioner
of Transportation of this State or by a like officer or agency of the United States or
pursuant to a contract, franchise, or consent between such a person and a city in this State
having a population of more than one million inhabitants, or any agency of such city.
Opinion
Petitioner operates a vehicle passenger ferry boat service between North Haven, New
York and Shelter Island, New York. The ferry boat service travels over Shelter Island Sound
under a renewable franchise from the Suffolk County Legislature pursuant to Article 8 of the
Navigation Law and section 71 of the Transportation Corporations Law.
The refund provisions under section 1119(b) of the Tax Law apply to passenger vessels
engaged in local transit, as well as parts, supplies, maintenance, and repair services purchased
and used in the operation of such vessels. It will be presumed for purposes of this Opinion that
Petitioner’s ferry boats constitute vessels used for the transportation of passengers for hire in
local transit service as intended by section 1119(b) of the Tax Law without making a
determination as to whether Petitioner’s ferry boats actually constitute such vessels. Regardless,
section 1119(b) provides that such passenger vessels must be operated pursuant to a certificate of
public convenience and necessity issued by the Commissioner of Transportation of this State or

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by a like officer or agency of the United States, or pursuant to a contract, franchise, or consent
between the vessel operator and a city in this State having a population of more than one million
inhabitants, or any agency of such city, in order to qualify for a refund or credit of tax under
section 1119(b). Petitioner does not possess, or operate pursuant to, a certificate of public
convenience and necessity issued by the New York State Department of Transportation or by a
similar agency of the United States. Nor does Petitioner possess, or operate pursuant to, a
contract, franchise, or consent with a city in the State having a population of more than one
million inhabitants. Neither Suffolk County's approval of Petitioner's rate structure under the
County Law, the documentation of Petitioner’s vessels by the U.S. Department of Homeland
Security, nor annual Coast Guard inspections of its vessels satisfy the requirements of section
1119(b). Thus, even if the vessels used by Petitioner are passenger vessels for purposes of
section 1119(b), Petitioner does not meet the qualifications for a vessel operator described in
section 1119(b) to qualify for a refund or credit of any sales or use taxes paid relating to the
vessels, supplies, and services used in local transit services in this State.
It should be noted that section 1115(a)(8) of the Tax Law provides for an exemption from
sales tax on the purchase of a commercial vessel primarily used in interstate or foreign
commerce, and property used by or purchased for the use of such vehicle. Interstate or foreign
commerce is defined as the transportation of persons or property between states or countries. See
section 528.9 of the Sales and Use Tax Regulations.
In the matter of Circle Line – Statue of Liberty Ferry, Inc., State Tax Commission,
August 21, 1980, TSB-H-80(164)S, the ferry was engaged in providing ferry service from
Battery Park, New York to Liberty Island and back. It was determined that the ferry was not
engaged in interstate or foreign commerce as the journey of the vessel began and ended in
New York. In that case, though the vessel crossed state lines into New Jersey waterways, the
vessel was not primarily engaged in interstate commerce as required by section 1115(a)(8) of the
Tax Law. Since Petitioner's vessels are used to cross Shelter Island Sound between two locations
in New York State, these vessels do not qualify for the exemption provided under section
1115(a)(8) as they do not meet the definition of a commercial vessel used in interstate
commerce.
Chapter 580 of the Laws of 2008, effective September 1, 2008, enacted section
1115(a)(43) of the Tax Law, which provides an exemption for ferry boats used directly and
predominantly to provide ferry service for vehicles and passengers within a county or counties
by a ferry company whose rates for that ferry service are regulated by the county or counties in
which that service is provided under section 131-g of the Highway Law. It appears, based on the
facts in this Opinion, that ferry boats purchased by Petitioner on and after September 1, 2008, for
use directly and predominantly in its ferry service qualify for the newly enacted exemption.
Section 1115(a)(43) applies not only to State and local sales and use taxes imposed on the
purchase of ferry boats but also to property used in conjunction with an exempt ferry boat for
fuel, provisions, supplies, maintenance and repairs. Sales tax must be paid at the time of

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purchase on fuel used to operate an exempt ferry boat. However, the ferry boat company may
apply for a refund of sales tax paid on purchases of fuel made on and after September 1, 2008, if
the fuel is used to operate an exempt ferry boat. See sections 1115(j) and 1120 of the Tax Law.
In addition, as provided in section 3 of chapter 580 of the Laws of 2008, Petitioner may
be eligible for a refund of sales and use tax imposed on the purchase or first use, occurring on or
after January 1, 2008, and before September 1, 2008, of a ferry boat that would have qualified
for exemption under section 1115(a)(43) of the Tax Law if purchased on or after September 1,
2008. The application for refund or credit must be made by December 31, 2009.

DATED: November 6, 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.