Can a resort hotel skip collecting sales tax when a group shows an out-of-state or other exemption certificate instead of New York's prescribed exempt-organization form?

Plain-English summary

Tee Bar Corporation operates a resort hotel open to the public and regularly collects sales tax on its charges. Various organizations that send groups to the resort tell Tee Bar they qualify as exempt from New York State and local sales taxes, and Tee Bar's practice had been to accept an exemption certificate issued by New York, New Jersey, or Connecticut as a basis for not collecting tax. It asked whether it is relieved of collecting tax when a customer presents evidence of exemption other than a properly completed Form ST-119.1 (Exempt Organization Certification).

The Department held Tee Bar must collect tax unless it gets the specific prescribed document.

• Everything is presumed taxable. Section 1132(c) presumes all receipts for property or services under § 1105 (and rents for hotel occupancy under § 1105(e)) are taxable until the contrary is established, and the burden of proof is on the vendor or the customer.
• The vendor is relieved only with the required documentation. Section 1132(c) relieves the vendor of collecting only when the purchaser furnishes the affidavit, statement or exemption document the Tax Commission requires — an exempt-organization statement in proper form.
• The regulations name the exact document for each exempt buyer. For hotel occupancy, 20 NYCRR 527.9(d) specifies: New York State — Form AC-946 (or no certificate where the State pays directly); the United States — Form ST-129 (or no certificate where the federal government pays directly); the UN and international organizations — Form ST-119.1; diplomatic/consular representatives — Form ST-126; and § 1116(a)(4)/(5) exempt organizations — Form ST-119.1. Where an exempt organization's members pay the operator directly, there's no exemption. Similar documentation rules apply to Tee Bar's taxable sales of goods and services.
• Result: Tee Bar must collect tax on taxable transactions unless the customer furnishes the appropriate prescribed document. Out-of-state (New Jersey or Connecticut) certificates don't do the job.

What this means for you

"They said they're exempt" isn't enough — the form is the exemption. New York presumes every sale taxable. As the vendor, you're relieved of collecting only when the customer hands you the specific document the regulations require for that kind of buyer. Without it, you owe the tax.

Match the buyer to the right document. Federal government, New York State, the UN, foreign diplomats, and charitable/exempt organizations each have their own prescribed form (ST-129, AC-946, ST-119.1, ST-126, and so on) — or, for some government buyers, direct payment by the government establishes the exemption without a certificate. Don't accept a generic or wrong-type certificate.

Another state's exemption certificate doesn't count. A New Jersey or Connecticut exemption certificate does not relieve a New York vendor. The exemption must be documented with New York's prescribed proof.

When members pay directly, there's no exemption. For hotel occupancy, if the exempt organization's members pay the operator directly, the occupancy is taxable even though the organization is exempt.

Common questions

Q: A group tells me it's a tax-exempt organization. Can I stop charging tax?
A: Not on their say-so. Under § 1132(c) the sale is presumed taxable; you're relieved of collecting only if they give you the prescribed exemption document (for most charities, a properly completed Form ST-119.1).

Q: Can I accept a New Jersey or Connecticut exemption certificate?
A: No. An out-of-state certificate does not relieve a New York vendor. You need the appropriate New York-prescribed document.

Q: Which form applies to which customer?
A: For hotel occupancy (20 NYCRR 527.9(d)): New York State — Form AC-946 (or direct State payment); United States — Form ST-129 (or direct federal payment); UN/international organizations — Form ST-119.1; diplomats — Form ST-126; § 1116(a)(4)/(5) organizations — Form ST-119.1. If the organization's members pay you directly, there's no exemption.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1132(c) — receipts are presumed taxable until the contrary is established; the vendor is relieved of collecting only if the purchaser furnishes the required exemption documentation
• Tax Law § 1105(e) — imposes tax on hotel occupancy
• Tax Law § 1116 — identifies exempt organizations, including § 1116(a)(4)/(5) charitable organizations
• 20 NYCRR 527.9(d) — the specific documents (Forms AC-946, ST-129, ST-119.1, ST-126) that establish hotel-occupancy exemptions; members paying the operator directly are not exempt

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_8s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81(8)S
Sales Tax
August 13, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810406A

On April 6, 1981 a Petition for Advisory Opinion was received from Tee Bar Corporation,
Rte. 44-55, Highland, N.Y. 12528.
The issue raised is whether Petitioner (a vendor) is relieved of its obligation to collect sales
tax from organizations which present evidences of exemption from New York State and local sales
taxes other than a properly completed Form ST-119.1, Exempt Organization Certification.
Petitioner operates a resort hotel which provides its facilities to the public and regularly
collects sales tax on its charges. Various organizations which send groups to Petitioner's resort for
the use of its facilities advise Petitioner that they qualify for exempt organization status with respect
to New York State and local sales taxes. Petitioner's policy has been to accept an exemption
certificate issued by New York, New Jersey, or Connecticut, as a basis for refraining from the
collection of tax.
Section 1132(c) of the Tax Law provides, in relevant part, as follows: ". . . it shall be
presumed that all receipts for property or services of any type mentioned in subdivisions (a), (b), (c)
and (d) of section eleven hundred five, all rents for occupancy of the type mentioned in subdivision
(e) of said section . . . are subject to tax until the contrary is established, and the burden of proving
that any receipt, amusement charge or rent is not taxable hereunder shall be upon the person required
to collect tax or the customer. Unless . . . (2) the purchaser prior to taking delivery, furnishes to the
vendor: any affidavit, statement or additional evidence, documentary or otherwise, which the tax
commission may require demonstrating that the purchaser is an exempt organization described in
section eleven hundred sixteen, the sale shall be deemed a taxable sale at retail . . . . The vendor shall
not be required to collect tax from purchasers who furnish . . . an exempt organization statement in
proper form . . . . "(Emphasis added).
The Tax Commission has provided, in its Sales and Use Tax Regulations, for the type of
documentation required of organizations asserting exemptions with respect to the tax imposed, by
Section 1105(e) of the Tax Law, on rents for hotel occupancy, as follows:
"(d) Exemptions from tax on occupancy. The following are exempt from the State and local
sales tax imposed on hotel occupancy: (1) New York State and its agencies and instrumentalities.
(i) Where payment is made by a representative or employee of the State or its political
subdivisions while on official business, the exemption is established by furnishing the operator with
a properly completed Tax Exemption Certificate (Form AC-946).
(ii) Where direct payment is made by the State for occupancy by a representative or employee
of the State or its political subdivisions while on official business no certificate is required to
establish the exemption.
JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-81(8)S
Sales Tax
August 13, 1981
(2) The United States of America and its agencies and instrumentalities.
(i) Where payment is made by a Federal employee while on official business the exemption
is established by furnishing the operator with a properly completed Exemption Certificate, Tax on
Occupancy of Hotel Rooms (Form ST-129).
(ii) Where direct payment is made by the United States for occupancy by an employee of the
Federal Government while on official business no certificate is required to establish the exemption.
(3) The United Nations, any international organization [of] which the United States is a
member, and ambassadors, ministers or other diplomatic representatives of foreign governments.
(i) Where payment is made by United Nations employees or employees of any international
organization of which the United States is a member while on official business, the exemption is
established by furnishing the operator with a properly completed Exempt Organization Certification
(Form ST-119.1).
(ii) Where payment is made by diplomatic or consular representatives and members of their
families the exemption is established by furnishing the operator with a properly completed
Certificate of Diplomatic and Consular Exemption (Form ST-126).
(4) Organizations determined to be exempt under Section 1116(a)(4) and Section 1116(a)(5)
of the Tax Law.
(i) Where payment is made by an exempt organization for occupancy of rooms for its own
use or for use by its officers and employees in the conduct of the organization's activities the
exemption is established by furnishing the operator with a properly completed Exempt Organization
Certificate (Form ST-119.1).
(ii) Where the exempt organization purchases rooms for resale to its members it is not liable
for tax if a properly completed Exempt Organization Certificate (Form ST-119.1) is submitted to the
operator, and the exempt organization is not required to collect tax on the charge for occupancy to
its members because it is not the operator of a hotel.
(iii) Where payment is made by members of an exempt organization directly to the operator,
there is no exemption from the tax on occupancy." 20 NYCRR 527.9(d).
Similar requirements apply with respect to sales of tangible personal property or taxable
services by Petitioner to its customers.
Accordingly, Petitioner is required by the Tax Law to collect sales tax on taxable transactions
unless its customer furnishes it with the appropriate document described in the provision of the Sales
and Use Tax Regulations set forth above.
DATED: July 29, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau