Is water sold through a filtering vending machine at a supermarket exempt as 'water delivered through mains or pipes,' or is it taxable?

Plain-English summary

Crystal Clear Water, Ltd. places water vending units at major supermarkets. Each unit is connected to the store's plumbing, filters and sterilizes the water, and vends one gallon per transaction; customers buy their own empty containers from the supermarket. The company asked whether these sales of water are subject to State and local sales tax.

The Department held the vended water is taxable — the "mains or pipes" exemption does not apply.

• Water sales are taxable unless a specific exemption applies. Section § 1105(a) imposes sales tax on receipts from retail sales of tangible personal property. Section § 1115(a)(2) exempts receipts from the sale of "water, when delivered to the consumer through mains or pipes."
• Vending-machine water isn't "delivered through mains or pipes." That exemption is aimed at — and in practice applied to — public utilities and the like that bring water from a distant location to a customer's home or business through mains or pipes. A supermarket vending unit is not that situation.
• Exemptions are read narrowly. A tax statute is interpreted the way an ordinary person would read it, and exemption statutes are strictly construed (Wein v. Murphy, 289 N.Y.S.2d 303; McKinney's Statutes § 294). Stretching "mains or pipes" to cover a vending machine would reject the words' normal meaning.
• Result: collect the tax. The operator must collect State and local sales tax on its vended-water sales.

What this means for you

Selling bottled or vended water is a taxable retail sale. The narrow exemption for water "delivered through mains or pipes" is essentially the utility-service exemption — piped water to your home or business. If you sell water any other way (vending machines, jugs, bottles), expect it to be taxable unless a different exemption applies.

Connecting a machine to plumbing doesn't create the exemption. The vending unit here tapped the store's water line, yet that did not make the sale "delivery through mains or pipes." What mattered was the ordinary meaning of the phrase — utility-style delivery from a distant source — not the mechanics of how the machine got its water.

Exemption language is construed strictly. When you're relying on a sales-tax exemption, the words are read narrowly and as an ordinary reader would understand them. If your situation isn't clearly within the exemption's terms, the safer assumption is that tax applies.

Common questions

Q: I sell filtered water from a vending machine. Is it taxable?
A: Yes. The Department held that vending-machine water sales are taxable retail sales and do not qualify for the exemption for water delivered through mains or pipes.

Q: The machine is hooked up to the building's water line — doesn't that count as "mains or pipes"?
A: No. The exemption targets utility-style delivery of water from a distant source to a home or business. A vending unit tapping a store's plumbing is not that, so its sales are taxable.

Q: When is a sale of water exempt?
A: Under § 1115(a)(2), when the water is delivered to the consumer through mains or pipes — the classic public-utility water service. The exemption is construed strictly.

Citations and references

Statutes:

• Tax Law § 1105(a) — sales tax on receipts from retail sales of tangible personal property
• Tax Law § 1115(a)(2) — exemption for water delivered to the consumer through mains or pipes

Authorities cited:

• Wein v. Murphy, 289 N.Y.S.2d 303 — a tax statute is interpreted as an ordinary person would read it
• McKinney's Statutes § 294 — tax exemption statutes are strictly construed

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_28s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-83(28)S
Sales Tax
June 24, 1983

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S820915A

On September 15, 1982 a Petition for Advisory Opinion was received from Crystal Clear
Water, Ltd., 303 Bewley Building, Lockport, New York 14094.
The issue raised is whether sales of water through vending machines are subject to State and
local sales taxes.
Petitioner's vending units are placed at major supermarkets. The units are connected to the
supermarkets' plumbing systems. Each vending unit filters and sterilizes the water before vending
it to the customer. Each unit vends one gallon of water per transaction. Petitioner does not provide
containers for the water. Rather, the customers purchase empty containers from the supermarkets.
Section 1105(a) of the Tax Law imposes the State sales tax on receipts from the retail sale
of tangible personal property. Section 1115(a)(2) of the Tax Law exempts from such tax receipts
from the sale of "water, when delivered to the consumer through mains or pipes." Similar provisions
apply with respect to locally imposed sales taxes.
In applying section 1115(a)(2) to the present matter, it is to be recalled that "a tax statute
should be interpreted as the ordinary person reading it would interpret it," and that where common
words are used "they are to be given their commonly understood meanings unless another meaning
is obviously intended." Wein v. Murphy, 289 N.Y.S. 2d 303. Coupling those strictures with the
generally accepted precept that tax exemption statutes are to be strictly construed (McKinney's
Statutes § 294), it must be concluded that the sales at issue herein do not qualify for the exemption
provided for in section 1115(a)(2) of the Tax Law. To construe the sale of water through the vending
machines to constitute delivery to the consumer through mains or pipes would strain the meaning
of the terms employed in the statute, and constitute a rejection of their normal acceptation. Thus, the
exempt provision is generally aimed at, and has in practice been applied to, the sale of water by
public-utilities and the like where the water is brought from a distant location to the customer's home
or place of business by mains or pipes. While the exemption could properly be extended to situations
sufficiently similar to that just described, Petitioner does not present such a situation. Accordingly,
Petitioner is required to collect sales tax on its sales of water through vending machines in the
manner described above.

DATED: June 8, 1983

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

s/FRANK J. PUCCIA
Director
Technical Services Bureau
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR