Can a rental company buy storage containers and trailers tax-free for resale when it only rents them out and delivers/picks them up?

Plain-English summary

Gibney Leasing Corp. of Florida rents storage containers and storage trailers. It delivers the units to customers' locations in New York and picks them up when the rental ends, billing a separate charge for delivery and pickup. It asked whether its purchases of the containers and trailers for resale (i.e., to rent them) are subject to sales tax.

The Department held they are not, applying the resale rule:

• Renting is a "sale." Under § 526.7, "sale" includes rentals, leases, or licenses to use tangible personal property for a consideration.
• A purchase for resale isn't taxed at purchase. Under § 1101(b)(4), a "retail sale" excludes a sale for resale, and under § 526.6(c)(1), property bought to be resold is not taxed at the time of purchase — tax is collected when the property is transferred (here, rented) to the customer.
• Rental = resale, so the purchase is exempt. Because renting the containers is a form of resale, buying them for that purpose is exempt from sales tax under § 1101(b)(4) and §§ 526.6(c)(1) and 526.7(a)(1) (citing U-Need-A-Roll Off Corp. v. New York State Tax Commission, 111 AD2d 457).
• Condition — rental only, plus delivery/pickup. If Gibney buys the units exclusively to rent them and provides no other services beyond delivering and picking them up, its purchases of the containers and trailers are not subject to sales tax.

What this means for you

Buying inventory to rent out is a tax-free purchase for resale

In New York, a rental is treated as a sale, so a rental business buys its rental fleet for resale — no sales tax at the time of purchase. Instead, you register and collect sales tax on the rental charges you bill customers. Use a resale certificate when buying the equipment.

Keep the arrangement "rental only" to stay in the resale lane

The exemption depends on the containers being bought exclusively for rental, with no services layered on beyond delivery and pickup. If you start bundling other services with the property, the pure resale characterization can change — so keep rental and any add-on services clearly separated.

Out-of-state ownership doesn't defeat the resale treatment

Gibney is a Florida company renting into New York; what mattered was that it rents (resells) the property, not where it's based. The resale exemption on the purchase turns on the use of the property, not the owner's home state.

Common questions

Q: Do I pay sales tax when I buy equipment I'm going to rent out?
A: No. Renting is a resale in New York, so buying equipment to rent it is a purchase for resale, exempt at the time of purchase (§ 1101(b)(4); § 526.6(c)(1)). You collect tax on the rental charges instead.

Q: Does providing delivery and pickup change that?
A: No, as long as those are the only services. The Department allowed the resale treatment where the company rents the units and provides no services other than delivery and pickup.

Q: What if I also provide other services with the containers?
A: The opinion's exemption is conditioned on renting the units exclusively with no other services beyond delivery/pickup; adding other services could change the analysis.

Citations and references

Statutes, regulations, and case:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(b)(4) — "retail sale" excludes a sale for resale
• 20 NYCRR § 526.7 — rentals, leases, and licenses are "sales"
• 20 NYCRR § 526.6(c)(1) — property purchased for resale is not taxed until transferred to the customer
• U-Need-A-Roll Off Corp. v. New York State Tax Commission, 111 AD2d 457

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_40s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91 (40)S
Sales Tax
May 9, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S901204B

On December 4, 1990 a Petition for Advisory Opinion was received from Gibney Leasing
Corp. of Florida, 440 NW Market Place, Port St. Lucie, Florida 34986.
The issue raised by Petitioner, Gibney Leasing Corp. of Florida, is whether its purchases of
storage containers and storage trailers for resale are subject to the imposition of sales tax.
Petitioner rents storage containers and storage trailers. The storage units are delivered by
Petitioner to its customer's location in New York and picked up at the termination of the rental
period. A separate charge is billed for delivery and pick up.
Section 1105(a) imposes a tax upon "[T]he receipts from every sale of tangible personal
property. . ."
Section 1101(b)(4)(i) defines, in part, a retail sale as "A sale of tangible personal property
to any person for any purpose, other than (A) for resale as such,. . ."
Section 526.7 of the Sales and Use Tax Regulations provides in part that:
(1) The words sale, selling or purchase mean any transaction in which there
is a transfer of title or possession, or both, of tangible personal property for a
consideration.
(2) Among the transactions included in the words sale, selling or purchase are
exchanges, barters, rentals, leases or licenses to use or consume tangible personal
property. (Emphasis supplied)
Section 526.6(c)(1) of the Sales and Use Tax Regulations provides that:
Where a person, in the course of his business operations, purchases tangible personal
property or services 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.
Section 1105(a) of the Tax Law imposes a sales tax on "receipts from every retail sale of
tangible personal property". However, where a purchaser acquires such property for the purposes of
resale, which includes rental of the property, the purchase is exempt from sales tax in accordance
with Section 1101(b)(4) of the Tax Law and Sections 526.6(c)(1) and 526.7(a)(1) of the Sales and
Use Tax Regulations; See U-Need-A-Roll Off Corporation v New York State Tax Commission, 111
AD2d 457.

-2­
TSB-A-91 (40)S
Sales Tax
May 9, 1991

Accordingly in the instant case if the Petitioner is purchasing the storage containers and
storage trailers exclusively for the purpose of renting them to its customers and provides no other
services to its customers other than the delivery and pick up of the containers, then its purchases of
said containers are not subject to the imposition of sales tax.

DATED: May 9, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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