Are sales of aerosol sprays that detect drugs or explosives taxable, and does it matter whether the buyer is a government agency, a business, or an individual?

Plain-English summary

Sher Test Corporation planned to sell sets of aerosol sprays used to detect the presence of substances such as marijuana, cocaine, and explosives. Expected buyers ranged widely: law-enforcement and government agencies (like the U.S. Coast Guard or Customs Service), industrial employers wanting a drug-free workplace, coaches and counselors in schools and rehab centers, and individual parents testing for drugs at home. The company asked whether these sales are subject to sales tax.

The Department's answer turns entirely on who the buyer is.

• The sprays are tangible personal property under § 1101(a)(6).
• Selling them to a buyer for that buyer's own use — an industrial employer, a parent — is a retail sale under § 1101(a)(4)(i), so the sale is taxable under § 1105(a).
• Sales to the United States or its agencies and instrumentalities (such as the Coast Guard or Customs Service) are exempt under § 1116(a)(2).
• Sales to New York State or its agencies, public corporations, or political subdivisions (such as the State Police, local police forces, or school districts) are exempt under § 1116(a)(1).

What this means for you

The product's purpose doesn't exempt it — the buyer's identity can

A public-safety product like a drug- or explosive-detection spray isn't tax-free just because of what it does. It's ordinary tangible personal property, taxable when sold to a private business or an individual. What flips the switch to exempt is a government buyer, not the product's security function.

Know which government exemption applies

Two separate exemptions are in play, and they cover different buyers:

• § 1116(a)(2) covers the federal government and its agencies — the Coast Guard, Customs, and the like.
• § 1116(a)(1) covers New York State and its subdivisions — the State Police, county and municipal police departments, and school districts.
  As with any exempt government sale, keep the proper documentation (a governmental purchase order or exemption document) to support not charging tax.

Sell the same item to a parent and you must collect tax

The identical spray sold to a parent for home use, or to a private employer, is a taxable retail sale. A seller with a mix of government and private customers has to track the buyer on each order and collect tax on the non-government sales.

Common questions

Q: Are drug-detection sprays taxable in New York?
A: Yes, when sold to a private business or an individual for their own use. They are tangible personal property and the sale is a taxable retail sale under § 1105(a).

Q: Are sales to the federal government taxable?
A: No. Sales to the United States and its agencies or instrumentalities (such as the Coast Guard or Customs Service) are exempt under § 1116(a)(2).

Q: What about sales to state or local police, or to school districts?
A: Those are exempt under § 1116(a)(1), which covers New York State, its agencies and public corporations, and its political subdivisions.

Q: A parent wants to buy a set to test at home. Do I charge tax?
A: Yes. A sale to an individual for personal use is a taxable retail sale.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(a)(4)(i) — definition of "retail sale"
• Tax Law § 1101(a)(6) — definition of "tangible personal property"
• Tax Law § 1116(a)(1) — exemption for New York State, its agencies, public corporations, and political subdivisions
• Tax Law § 1116(a)(2) — exemption for the United States and its agencies and instrumentalities

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a90_41s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-90(41)S
Sales Tax
August 14, 1990

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S900713A

On July 13, 1990, a Petition for Advisory Opinion was received from Sher Test Corporation,
93 Belvedere Drive, Yonkers, New York 10705.
The issue raised by Petitioner, Sher Test Corporation, is whether the sales of aerosol sprays
that are used to detect the presence of substances such as marijuana, cocaine and explosives are
subject to sales tax.
Petitioner is planning to embark on sales of sets of aerosol sprays that are used to detect the
presence of substances such as marijuana and cocaine.
Typical customers will be law enforcement agencies and other government agencies such as
the United States Coast Guard or the United States Customs Service. Other customers might be
industrial organizations, interested in a drug-free workplace, and coaches and counselors in schools
or rehabilitation centers. Also, Petitioner plans to sell to individuals, typically parents, for use in
detecting drugs at home.
Eventually, Petitioner plans also to sell sprays to detect the presence of explosives. It
anticipates these sprays will be sold only to law enforcement and other governmental agencies.
Section 1105(a) of the Tax Law imposes a sales tax upon "the receipts from every retail sale
of tangible personal property, except as otherwise provided in this article".
Section 1101(a)(4)(i) of the Tax Law defines retail sale in part as:
(i) A sale of tangible personal property to any person for any purpose, other than (A)
for resale as such or as a physical component part of tangible personal property, or
(B) for use by that person in performing the services subject to tax under paragraphs
(1), (2), (3) and (5) of subdivision (c) of section eleven hundred five where the
property so sold becomes a physical component part of the property upon which the
services are performed or where the property so sold is later actually transferred to
the purchaser of the service in conjunction with the performance of the service
subject to tax. . . .
Section 1101(a)(6) of the Tax Law defines tangible personal property as:
Corporeal personal property of any nature. However, except for purposes of the tax
imposed by subdivision (b) of section eleven hundred five, such term shall not
include gas, electricity, refrigeration and steam.
Section 1116(a) of the Sales Tax Law provides in part:
TP-9 (9/88)

-2­
TSB-A-90(41)S
Sales Tax
August 14, 1990

Except as otherwise provided in this section, any sale. . .to any of the following. . .
shall not be subject to the sales and compensating use taxes imposed under this
article:
(1) The state of New York, or any of its agencies, instrumentalities, public
corporations (including a public corporation created pursuant to agreement or
compact with another state or Canada) or political subdivisions where it is the
purchaser, user or consumer,. . .
(2) The United States of America, and any of its agencies and instrumentalities,
insofar as it is immune from taxation where it is the purchaser, user or consumer,. .
.
Sets of aerosol sprays that detect the presence of substances such as marijuana, cocaine and
explosives constitute tangible personal property in accordance with the meaning and intent of
Section 1101(a)(6) of the Tax Law. The sales of such items to customers such as industrial
organizations and parents for their own use constitute retail sales in accordance with the meaning
and intent of Section 1101(a)(4)(i) of the Tax Law and therefore sales tax is imposed on such sales
by section 1105(a) of the Tax Law.
However sales of aerosol sprays to detect such substances to the United States of America
or its agencies or instrumentalities such as the Coast Guard or the Customs Service would be exempt
from sales tax pursuant to Section 1116(a)(2) of the Tax Law.
Furthermore sales of such sprays to New York State or any of its agencies, instrumentalities,
public corporations or political subdivisions such as the State Police, local municipal police forces
or school districts would be exempt from sales tax pursuant to Section 1116(a)(1) of the Tax Law.

DATED: August 14, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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