Does someone owe sales tax when a corporation gives them a car for free, with no money or other consideration changing hands?

Plain-English summary

Richard W. Scott asked whether he would owe sales tax on a 1984 Chevrolet Suburban that his son and daughter-in-law wanted to give him. The vehicle is registered to their corporation, and it would be transferred to him for no consideration whatsoever. He is not an officer, employee, or stockholder of the corporation, and the corporation is not in debt to him.

The Department held that this is a gift, not a taxable sale.

• A "sale" requires consideration. Sales tax under § 1105(a) applies to the receipts from a retail sale. A "retail sale" (§ 1101(b)(4)) is a "sale" of tangible personal property, and a "sale" (§ 1101(b)(5)) is a transfer of title or possession for a consideration. "Receipts" (§ 1101(b)(3)) is the sale price valued in money.
• A free transfer is a gift. Because the Suburban is transferred for no consideration at all, it is a gift and not a retail sale — so no sales tax is imposed under § 1105(a). The Department relied on Matter of Alice A. Greenblatt (TSB-H-85(229)S).
• You still have to prove it's a gift. The donor must complete an "Affidavit — Gift of Motor Vehicle" (Form ST-170.9) as evidence that the transfer is exempt.

What this means for you

A true no-consideration gift of a vehicle isn't subject to New York sales tax. The determining factor is whether anything of value changes hands — money, forgiveness of a debt, or other consideration. If nothing does, the transfer is a gift, even when a corporation is the donor.

Watch for hidden consideration. The Department stressed that the recipient was not an officer, employee, or stockholder and that the corporation owed him nothing. If a transfer is actually compensation, a settlement of a debt, or otherwise given in exchange for something, it can be a taxable sale rather than a gift.

Document the gift with Form ST-170.9. New York does not simply take your word for it. The donor completes the gift affidavit so the recipient can register the vehicle without paying sales tax.

Common questions

Q: A family member's company wants to give me a car for free. Do I owe sales tax?
A: No, if it is a genuine gift with no consideration of any kind. The Department treats a no-consideration transfer as a gift, not a retail sale, so § 1105(a) sales tax does not apply.

Q: What paperwork do I need?
A: The donor must complete an "Affidavit — Gift of Motor Vehicle" (Form ST-170.9) as proof that the transfer is an exempt gift.

Q: Does it matter that a corporation, not a person, owns the car?
A: Not by itself. What matters is that the transfer is for no consideration and the recipient isn't receiving it in exchange for anything (e.g., as an officer, employee, stockholder, or creditor of the company).

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) — taxes the receipts from every retail sale of tangible personal property
• Tax Law § 1101(b)(3) — defines "receipts" as the sale price valued in money
• Tax Law § 1101(b)(4) — defines "retail sale" (a sale other than for resale)
• Tax Law § 1101(b)(5) — defines "sale" as a transfer for a consideration

Determination cited:

• Matter of Alice A. Greenblatt, Decision of the State Tax Commission, Oct. 3, 1985 (TSB-H-85(229)S)

Form referenced:

• Form ST-170.9 — "Affidavit — Gift of Motor Vehicle"

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a87_10s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-87(10)S
Sales Tax
February 6, 1987

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

PETITION NO. S861027A

On October 27, 1986, a Petition for Advisory Opinion was received from Richard W. Scott,
6656 Old Thompson Road, Syracuse, New York 13211.
The issue raised is whether the transfer of a motor vehicle by a corporation to an individual
under circumstances described below is subject to the sales tax imposed by 1105(a) of the Tax Law.
Petitioner states that his son and daughter-in-law, owners of a corporation, wish to give him
a 1984 Chevrolet Suburban which is currently registered in the name of the corporation. Petitioner
also states that he is not an officer employee, or a stockholder of the corporation and that the
corporation is not in debt to Petitioner. The motor vehicle in question will be transferred to
Petitioner for no consideration whatsoever.
Section 1105(a) imposes a tax on "[t]he receipts from every retail sale of tangible personal
property...". Section 1101(b)(3) defines "receipts" as "[t]he amount of the sale price of any property
and the charge for any service taxable under this article, valued in money, whether received in money
or otherwise...". Section 1101(b)(4) defines "retail sale" as "[a] sale of tangible personal property
to any person for any purpose, other than for resale as such...". Section 1101(b)(5) defines "sale" as
"[a]ny transfer of title or possession or both, exchange or barter, rental, lease or license to use or
consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration,
or any agreement therefor, including the rendering of any service, taxable under this article, for a
consideration or any agreement therefor".
The transfer of the motor vehicle to Petitioner as described above is a gift and is not a retail
sale as defined in section 1101(b)(4) of the Tax Law. Accordingly, Petitioner is not subject to the
tax imposed by section 1105(a) of the Tax Law on such a transfer. In the Matter of Alice A.
Greenblatt, Decision of the State Tax Commission, October 3, 1985. TSB-H-85(229)S. However,
Petitioner is required to submit an "Affidavit - Gift of Motor Vehicle" (Form ST-170.9) properly
completed by the donor as evidence of the exempt nature of the transfer.

DATED:

February 6, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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

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