Does a company owe New York tax on parts it buys out of state, receives in New York, then uses to repair cars at out-of-state race tracks?

Plain-English summary

BRM Motorsports, Ltd. transports race cars to tracks outside New York and performs repair and maintenance on the cars at those tracks (the work must be done just before and during each race). BRM buys parts out of state, has them delivered to it in New York, and then carries them to the races because they aren't available at the tracks. It asked whether it owes New York sales or use tax on those parts.

The Department held no tax is due, because the parts are purchased for resale:

• The parts are for resale. They are actually transferred to the customers of BRM's repair service in conjunction with the service and become physical components of the customers' race cars (20 NYCRR §§ 526.6, 532.4(d)). So sales and use tax does not apply to BRM's purchases.
• If the supplier is a registered New York vendor: BRM may buy the parts tax-exempt by giving the supplier a properly completed Form ST-120 (Resale Certificate) within 90 days of taking delivery (Tax Law § 1132(c)).
• If the supplier is not registered: it cannot collect New York tax, and BRM cannot issue a resale certificate. BRM's receipt of the parts in New York is a "use" under § 526.9 — but no compensating use tax is due, because the purchase falls within the § 531.1(a) exception: BRM transfers the parts while performing repair services outside New York, so the receipts from BRM's sale of the parts and services are not subject to New York tax, and that does not create a use-tax liability.

What this means for you

If you install parts as part of a repair or service you sell: The parts you buy to transfer to your customer as part of the job are purchases for resale, not taxable purchases — even where you take delivery of them. Give registered suppliers a Form ST-120 within 90 days and don't pay tax on those parts.

Receiving goods in New York isn't automatically a taxable "use." Physically taking delivery here is a "use," but if the goods are bound for resale — including being built into a customer's property during a service performed out of state — the § 531.1(a) exception means no compensating use tax attaches.

Where the service happens matters. Because BRM's repair services (and thus its transfer of the parts) occur outside New York, the resale escapes New York sales tax without creating a New York use tax. If the parts were instead consumed by BRM itself, or the service occurred in New York, the analysis would differ.

Common questions

Q: We buy parts and install them in customers' vehicles — do we pay tax when we buy the parts?
A: No. Parts transferred to your customer as physical components of the repaired property are purchases for resale. Give a registered supplier a Form ST-120 within 90 days.

Q: We took delivery of the parts in New York but used them out of state — do we owe New York use tax?
A: No. Receiving them in New York is a "use," but the § 531.1(a) exception applies because the parts are transferred in a resale (a repair service performed outside New York), so no compensating use tax is due.

Q: What if the out-of-state supplier isn't registered in New York?
A: Then it can't collect New York tax and you can't give it a resale certificate — but you still owe no use tax here, for the reasons above.

Citations and references

Statutes and regulations:

• Tax Law § 1110 — compensating use tax
• Tax Law § 1132(c) — presumption of taxability; resale certificate taken within 90 days of delivery
• 20 NYCRR § 526.6 — retail sale and the resale exclusion
• 20 NYCRR § 526.9 — definition of "use" (includes receiving property)
• 20 NYCRR § 531.1(a) — use tax not imposed to the extent property has been or will be subject to sales tax
• 20 NYCRR § 532.4(d) — resale certificate (parts transferred in performing a taxable service)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1989.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a89_14s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-89(14)S
Sales Tax
June 7, 1989

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S890118A

On January 18, 1989, a Petition for Advisory Opinion was received from BRM
MOTORSPORTS, LTD., 30 Howard Place, Ronkonkoma, New York 11779.
The issue raised is whether sales or use tax applies to items purchased out-of-state by
Petitioner, which are delivered to Petitioner in New York State, and then transported outside New
York State by Petitioner for use in performing a repair and maintenance service outside New York
State.
Petitioner contracts to transport race cars to various race tracks, all of which are outside New
York State. Along with transporting the race cars, Petitioner also performs repair and maintenance
services on such race cars while at the various race tracks. Due to the cars being of a type which must
be prepared just prior to each race and during the course of the race, Petitioner's repair and
maintenance services are performed exclusively at the various race tracks.
Parts purchased out-of-state by Petitioner for use on the race cars are delivered to Petitioner
in New York State and then transported by Petitioner to each race. Such parts are not available at the
various race tracks.
Section 526.6 of the Sales and Use Tax Law states:
Retail Sale. [Tax Law, § 1101 (b) (4)]
(a)

(c)

The term retail sale or sale at retail means the sale of tangible
personal property to any person for any purpose,
except as specifically excluded.
*
Resale Exclusion

*

*

(1)

Where a person in the course of his business operations, purchases
tangible personal property ... which he intends to sell, either in the
form in which purchased, or as a component part of other property or
services, the property or services which he has purchased will be
considered as purchased for resale, and therefore not subject to tax
until he has transferred the property to his customer.

(2)

A sale for resale will be recognized only if the vendor receives a
properly completed resale certificate ....

TP-9 (9/88)

-2­
TSB-A-89(14)S
Sales Tax
June 7, 1989
(3)

Receipts from the sale of property purchased under a resale certificate
are not subject to tax at the time of purchase by the person who will
resell the property. The receipts are subject to tax at the time of the
retail sale.

Section 1132 of the Tax Law provides:
Collection of tax from customer ...
(c) For the purpose of the proper administration of this article and to prevent evasion of the
tax hereby imposed, it shall be presumed that all receipts for property or services ...
mentioned in subdivision (a)...(c)... of section eleven hundred five ... are subject to tax until
the contrary is established, and the burden of proving that any receipt ... is not taxable
hereunder shall be upon the person required to collect tax or the customer. ... unless (1) a
vendor, not later than ninety days after delivery of the property ... shall have taken from the
purchaser a certificate in such form as the tax commission may prescribe, signed by the
purchaser and setting forth his name and address, ... the number of his registration certificate,
together with such other information as said commission may require, to the effect that the
property or service was purchased for resale...
Section 532.4 (d) of the Sales and Use Tax Regulations states:
Resale Certificate
(1)

(ii)

A resale certificate is used to claim exemption from tax on purchases
of tangible personal property or services which will be resold or
transferred to a customer when the:
*
*
*
Tangible personal property is for use in performing taxable services under paragraph
... (3) ... of subdivision (c) of section 1105 of the Tax Law where such property
becomes a physical component part of the tangible personal property upon which the
services are performed or will be actually transferred to the purchaser of the service
in conjunction with the performance of the service ...
*
*
*
Example 3: An auto service station operator will give his parts supplier a
resale certificate covering the purchase of repair parts incorporated into
customers' cars.

Section 526.9 of the Sales and Use Tax Regulations states:
Use. (Tax Law, §1101 [b] [7])
(a) The word use means and includes the exercise of any right or
power over tangible personal property by the purchaser thereof, and

-3­
TSB-A-89(14)S
Sales Tax
June 7, 1989
includes, but is not limited to, the receiving ... of such property.
(b) Some of the terms used in the preceding paragraph may be defined
as follows.
(1) Receive is to obtain or gain possession of tangible personal property for any
purpose whatsoever by means of purchase.
Section 531.1 of the Sales and Use Tax Regulations states:
Imposition of compensating use tax. (Tax Law § 1110).
(a) Imposition. The compensating use tax is imposed on the use within the State of tangible
personal property and certain services, except to the extent they have been or will be subject
to sales tax.
Example 1:

A lumber yard in New York State purchases
for resale, a car load of lumber from a west
coast supplier who is not a registered New
York State vendor and who will deliver the
lumber to the purchaser by rail within this
State. No tax is collected by the supplier.
Upon delivery of the lumber, the purchaser
withdraws enough lumber to construct
workbenches and shelves in its milling room.
The lumber withdrawn for use by the lumber
yard is subject to a compensating use tax on
its cost.

In the instant case, Petitioner is deemed to be purchasing parts for resale purposes as the parts
are actually transferred to the purchasers of Petitioner's repair and maintenance service in
conjunction with the performance of such service and also actually become a physical component
of the purchasers' race cars.
Accordingly, sales and use tax does not apply to Petitioner's purchases of parts. If the out-of­
state supplier is registered as a vendor with the Department of Taxation and Finance, Petitioner may
purchase the parts tax exempt by issuing the supplier a properly completed Form ST-120, Resale
Certificate within 90 days after taking delivery of the parts as required under Section 1132 (c) of the
Tax Law.
If the out-of-state supplier is not registered as a vendor, the supplier cannot collect sales tax
from Petitioner nor can Petitioner issue a Resale Certificate to the supplier. In this instance,
Petitioner's receipt of the parts falls within the meaning of use as defined in Section 526.9 of the
Sales and Use Tax Regulations. However, Petitioner will not be liable for the compensating use tax

-4­
TSB-A-89(14)S
Sales Tax
June 7, 1989
imposed under Section 1110 of the Tax Law as Petitioner's purchase of the parts falls within the
exception to the compensating use tax provided under Section 531.1 (a) of the Sales and Use Tax
Regulations. The fact that Petitioner will transfer the parts in conjunction with repair and
maintenance services performed outside New York State, thereby causing the receipts from
Petitioner's sale of such parts and services to not be subject to New York State or Local Sales Tax,
will not create a compensating use tax liability for Petitioner.

DATED: June 7, 1989

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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