Is renting a self-service storage unit a taxable storage service or a tax-exempt lease of real property?

Plain-English summary

The Storage Shed plans to lease specific numbered, enclosed spaces (for example, 10' x 10') in a self-service facility. The building is open to tenants 24 hours a day, year-round; each tenant supplies its own lock, comes and goes without signing in, bears all risk of loss (the operator insures the building but not the contents), and may install its own racks and cabinets. The lease bars the operator from entering a unit except for emergencies or to inspect and repair. It asked whether this is a taxable storage service or an exempt lease of real property.

The Department held it can be an exempt real-property lease, not a taxable storage service.

• The tax reaches storage service, not real-property leases. Section 1105(c)(4) taxes the service of storing tangible personal property (and renting safe deposit boxes or similar space), but the tax does not reach a lease of real property for storage.
• Three lease features (20 NYCRR 527.6(b)(2)) — all met. A lease is marked by (1) a certain amount of footage in a specific location (numbered, separately enclosed units ✓), (2) the tenant's unlimited control of access (24/7 access, tenant's own lock, operator barred except for emergencies/repairs; TSB-M-86(3)S) ✓, and (3) the tenant's right to supply its own racks, cabinets and facilities ✓.
• And it must not be a storage service. Beyond the three tests, a lease is exempt only if it isn't a storage service — the "essence" of which is the owner relinquishing possession and control of the goods to the operator (receiving, handling, storing or forwarding them). Because the operator provides no such service, it isn't rendering a taxable storage service.
• Result: meeting the three lease tests and providing no storage service, the operator need not collect sales tax on the unit rentals.

What this means for you

Self-storage sits right on the line between a lease and a service. New York taxes storage service but not a lease of real property. What tips a self-storage rental onto the exempt side is control: the tenant gets a specific, identifiable space, holds the only key, comes and goes at will, and can outfit the unit — while you stay out except for emergencies and repairs.

Handling the goods is what makes it taxable. The moment you take possession and control of a customer's property — receiving it, moving it, forwarding it — you're providing a storage service, and the charge becomes taxable. A hands-off, tenant-controlled unit avoids that; a full-service warehouse doesn't.

Document the control features. Numbered enclosed units, tenant-supplied locks, unrestricted access, a no-entry clause, and the tenant's right to add racks are the facts that support exempt treatment. Build them into your leases and operations so the exemption holds up.

Common questions

Q: Do I charge sales tax on my self-storage unit rentals?
A: Not if the arrangement is a real-property lease — a specific numbered space the tenant controls (own lock, free access, right to add racks) and where you don't handle the stored goods. Then it's exempt, not a taxable storage service.

Q: What would make it taxable?
A: Providing a storage service — taking possession and control of the customer's goods by receiving, handling, storing or forwarding them. That's the essence of taxable storage under § 1105(c)(4).

Q: Does it matter that I insure the building or set the rules on what can be stored?
A: The key factors are the three lease features and the absence of a storage service. Insuring the building (while the tenant bears risk on the contents) and reserving emergency/repair entry were consistent with an exempt lease here.

Citations and references

Statute and regulation:

• Tax Law § 1105(c)(4) — taxes the service of storing tangible personal property and the rental of safe deposit boxes or similar space
• 20 NYCRR 527.6(b)(2) — distinguishes an exempt real-property lease (specific footage/location, unlimited tenant access, tenant-supplied racks) from a taxable storage-space service

Guidance cited:

• Technical Services Bureau Memorandum TSB-M-86(3)S — when a tenant has "unlimited control of access"

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1986.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a86_10s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-86(10)S
Sales Tax
March 7, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S850611A

On June 11, 1985, a Petition for Advisory Opinion was received from the Storage Shed, 36
Smith Bridge Road, Saratoga Springs, New York 12866.
The issue raised is whether the rental of a self-service storage unit is the rental of real
property and therefore exempt from the tax imposed on storage under Section 1105(c)(4) of the Tax
Law.
Petitioner states that it is his intention to lease specific spaces (e.g., 10' x 10' areas) to tenants.
The tenants may provide in the space leased, any storage racks, cabinets or other physical facilities
required.
Additionally, Petitioner states that:
1.

The building in which the storage areas are located is open to tenants 24
hours a day, 7 days a week, 52 weeks a year; the building is locked but the
tenants have keys to enter the building and may come and go as they please.
Each storage area is identified by number.

2.

The tenants' storage areas are enclosed and can be locked. Each tenant
supplies his own lock. The lease specifically prohibits entry of a storage area
by Petitioner except in emergencies or to inspect and repair the premises.

3.

The tenants are not required to sign in or out whenever they enter or leave.

4.

The tenants are not required to give any notice that they are accessing the
storage area.

5.

The building is insured by Petitioner, however, the contents of storage areas
are not insured by Petitioner. The tenants bear all risk of loss of contents of
storage areas.

6.

The tenant may not store any flammable materials, explosives, perishable
food stuffs, contraband, live animals, or materials or goods which emit odor.

7.

Petitioner has a minimum rental period of one month. The rental continues
thereafter on a month to month basis.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

-2­
TSB-A-86(10)S
Sales Tax
March 7, 1986

Section 1105(c)(4) of the Tax Law imposes a tax on receipts from the service of "[s]toring
all tangible personal property not held for sale in the regular course of business and the rental of safe
deposit boxes or similar space."
The sales and use tax regulations further explain this provision as follows:
While the tax is imposed on the service of providing storage space, it is not imposed
on the lease of real property for storage. A lease can be distinguished from the
provision of storage space, in that under a lease, the tenant contracts for a certain
amount of footage in a specific location, the tenant has unlimited control of access
to the space, and may supply his own racks, cabinets and other physical facilities. 2O
NYCRR 527.6(b)(2).
Thus, the rental of a self-service storage room is exempt from sales tax if it constitutes the
rental of real property for storage but taxable if it is the service of providing storage space.
As long as each storage area leased by Petitioner consists of a specific storage unit identified
by number and separately enclosed, it meets the requirement of the regulation that the contract be
for a certain amount of footage in a specific location.
Furthermore, the tenant will be considered to have unlimited control of access to the space
if Petitioner relinquishes all control of the space rented. In the instant case, the tenant is considered
to have unlimited control since the tenant has access to his storage space around the clock, since he
places his own lock on the storage space and since the lease specifically prohibits entry by the
Petitioner into the storage areas except in emergencies or to inspect and repair the premises. (See:
Technical Services Bureau Memorandum TSB-M-86(3)S).
Additionally, since the tenants may provide their own storage racks, cabinets or other
physical facilities, the third requirement of the regulations
is met.
In addition to the three tests stated above, the lease of storage space will be exempt only if
it does not consist of a storage service. The essence of a storage service is the relinquishment of
possession and control of the stored goods by their owner to the proprietor of the property in which
they are stored. Examples of this would be receiving, handling, storing or forwarding of the lessee's
personal property by the lessor. If the Petitioner does not provide any such service or any other
service which would require the owner of the goods to relinquish to the lessor possession and control
of the goods, and if the Petitioner meets the three requirements of regulation section 527.6(b)(2),

-3­
TSB-A-86(10)S
Sales Tax
March 7, 1986

then the Petitioner will not be considered to be providing a taxable storage service and will not be
required to collect sales tax on receipts from the rental of its storage units.

DATED: March 7, 1986

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.