Did renting hearses, limousines, and flower cars (with a driver) to funeral homes stop being taxable once New York's June 2009 livery-transportation tax took effect?

Plain-English summary

A company that rents hearses, limousines, and flower cars — each with a driver — to funeral homes had been collecting sales tax on those charges. When New York added a new sales tax on livery transportation services (§ 1105(c)(10)) on June 1, 2009, the company asked whether its vehicle rentals were now something different and no longer taxable the old way.

The answer: nothing changed — the rentals are still taxable.

• Renting a vehicle to a funeral director is a taxable rental of tangible personal property under § 1105(a), not a transportation service — provided the funeral procession is under the funeral director's direction and control and possession of the vehicle passes to the funeral home (20 NYCRR 528.8(b)(3)).
• The new § 1105(c)(10) tax hit transportation services (livery, limousines with a driver, etc.). But transportation connected with funerals is specifically carved out of "transportation service" (§ 1101(b)(34)), and taxing transportation services separately does not change whether a vehicle rental is taxable.
• Funeral directors don't buy for resale. Under § 1115(a)(7), a funeral director's purchases of tangible personal property are consumed, not resold — so the rental to them is a taxable retail transaction.
• Driver wages can come out of the taxable base. When the driver's wages are separately stated and reflect prevailing wage rates, they're excludible from the taxable rental receipt (20 NYCRR 526.7(e)(6)).

What this means for you

If you rent vehicles to funeral homes, keep charging sales tax on the rental. The 2009 livery-service tax didn't turn your rental into a tax-free transportation service. The dividing line is control and possession: if the funeral home directs the procession and takes possession of the vehicle, you're renting property (taxable under § 1105(a)), not selling a ride.

Watch the vehicle type for the extra passenger-car taxes. Renting a limousine (a passenger car) also triggers the 6% statewide rental tax (§ 1160) and, in the Metropolitan Commuter Transportation District, an additional 5% supplemental tax (§ 1166-a) — on top of ordinary sales tax. Hearses and flower cars are not passenger cars, so those two extra taxes don't apply to them.

Break out the driver's pay on the invoice. Separately stating the driver's wages (at prevailing rates) keeps that portion out of the taxable rental amount.

Common questions

Q: Did New York's 2009 tax on livery/limousine transportation make funeral-car rentals tax-free?
A: No. That tax applies to transportation services, and funeral transportation is excluded from the definition anyway. A rental of the vehicle itself remains taxable under § 1105(a).

Q: Are the extra passenger-car rental taxes the same for a hearse as for a limousine?
A: No. A limousine is a passenger car, so its rental also carries the 6% statewide and 5% MCTD supplemental taxes. Hearses and flower cars are not passenger cars and aren't subject to those two taxes.

Q: Can the driver's wages be excluded from tax?
A: Yes, if they're separately stated on the bill and reflect prevailing wage rates.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) — taxes the sale or rental of tangible personal property (the funeral-car rentals)
• Tax Law § 1105(c)(10) — 2009 sales tax on livery transportation services (limousines and other vehicles with a driver)
• Tax Law § 1101(b)(34) — "transportation service" excludes transportation of persons in connection with funerals
• Tax Law § 1101(b)(5) — defines "sale" to include a rental or lease
• Tax Law § 1115(a)(7) — funeral directors' purchases are not purchases for resale
• Tax Law § 1160 / § 1166-a — 6% statewide and 5% MCTD supplemental taxes on passenger-car rentals
• 20 NYCRR 528.8(b)(3); 526.7(e)(4), (6) — vehicle rental with a driver; separately stated driver wages

Related Department guidance cited in the opinion: TSB-A-97(65)S (David E. Dufresne); TSB-M-09(2)S and TSB-M-09(7)S (sales tax on certain transportation services); N-90-26 and TSB-M-09(1)S (special passenger-car rental tax); TSB-M-09(6)S (MCTD supplemental tax).

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2010.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a10_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(1)S
Sales Tax
January 19, 2010

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S091123A

Petitioner name and address redacted asks whether its rental of funeral cars to funeral homes is
subject to sales tax after Tax Law §1105(c)(10) took effect on June 1, 2009.
We conclude that, if Petitioner is renting funeral cars to funeral homes, Petitioner’s rentals of the
cars continue to be subject to sales tax after Tax Law §1105(c)(10) took effect on June 1, 2009.
Facts
Petitioner rents hearses, limousines, and flower cars, with a driver, for a charge, to funeral homes.
Petitioner has collected sales tax on those charges.
Analysis
The rental of vehicles to funeral directors is a taxable rental of tangible personal property under
Tax Law §1105(a), rather than a transportation service. See 20 NYCRR 528.8(b)(3). This will be true
even in the case where a driver is provided with the vehicle, if the funeral procession is under the
direction and control of the funeral director and a transfer of possession of the vehicle takes place. See
David E. Dufresne, Adv Op Comm T&F, November 4, 1997, TSB-A-97(65)S, Tax Law §1101(b)(5), 20
NYCRR 526.7(e)(4) and (6).
On June 1, 2009 Tax Law §1105(c)(10) took effect which imposes sales tax on transportation
services provided in New York by livery service, including limousines, black cars, and certain other
motor vehicles, (e.g., community cars or vans) with a driver. Transportation service does not include
transportation of persons in connection with funerals. See Tax Law §1101(b)(34). The imposition of tax
on transportation services by section 1105(c)(10) does not affect the taxable status of rentals of vehicles
used to provide transportation services. Rentals of vehicles are subject to sales tax under Tax Law
§1105(a). See Additional Guidance Relating to the Sales Tax on Certain Transportation Services,
TSB-M-09(7)S, and Sales Tax Imposed on Certain Transportation Services, TSB-M-09(2)S.
Accordingly, Petitioner’s rentals of hearses, limousines, and flower cars to funeral homes are
subject to sales tax. See Tax Law §1115(a)(7) which provides that purchases of tangible personal
property by funeral directors are not purchases for resale and are subject to tax. The taxable status of
Petitioner’s rentals of vehicles is not changed by the imposition of tax on transportation services by Tax
Law §1105(c)(10), which took effect on June 1, 2009. The driver’s wages, when separately stated, are
excludible from the taxable receipts from the vehicle rental, provided the separately stated wages reflect
prevailing wage rates. See 20 NYCRR 526.7(e)(6).
It should be noted that rentals of passenger cars (e.g., limousines) in New York are subject to a
6% statewide tax under Tax Law §1160, in addition to the sales tax imposed by section 1105(a). Rentals
of passenger cars in the Metropolitan Commuter Transportation District are also subject to a special

-2-

TSB-A-10(1)S
Sales Tax
January 19, 2010

supplemental 5% tax under Tax Law §1166-a. See Special Tax on the Rental of Passenger Cars,
N-90-26; Increase in the Special Tax on the Rental of Passenger Cars, TSB-M-09(1)S; Special
Supplemental Tax on the Rental of Passenger Cars Within the Metropolitan Commuter Transportation
District, TSB-M-09(6)S. Hearses and flower cars are not passenger cars and their rentals are not subject
to these additional taxes. See David E. Dufresne, TSB-A-97(65)S.

DATED: January 19, 2010

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

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.