When a bank resells repossessed cars and mobile homes and buys credit reports on borrowers, which of those are subject to New York sales tax?

Plain-English summary

Central National Bank, Canajoharie asked how New York sales tax applies to three parts of its lending business: (1) selling repossessed automobiles, (2) repairing repossessed mobile homes to make them saleable, and (3) buying credit information about loan applicants.

The Department answered each separately:

• Selling repossessed cars — must collect tax. Under Tax Law § 1105(a) and TSB-M-80(11)S, a bank that sells repossessed motor vehicles "qualifies as a vendor of motor vehicles for sales and use tax purposes." As a vendor, it must collect the appropriate sales tax at the time of each sale, unless it takes a properly completed exemption document. The DMV program that collects sales tax at registration applies only to casual sales (where the seller is neither a dealer nor a registered vendor) — it does not relieve a bank or other registered vendor. The same vendor duty applies when a bank repossesses and sells tangible personal property other than motor vehicles.
• Repairing repossessed mobile homes held for resale — not taxed. Under § 1105(c)(3), charges the bank incurs to repair repossessed mobile homes that are held for resale are not subject to sales or use tax. The repairs are being done to inventory that will be sold, so they fall outside the tax on repair services to property "not held for sale."
• Credit information services — taxable unless purely oral. Under § 1105(c)(1) and Regulation § 527.3(a)(4), charges for credit information services are taxable except those transmitted solely orally. A fee for a written report is taxable; a fee for an oral report is taxable if the oral report is preliminary to a written one; and an annual subscription fee is taxable if it entitles the subscriber to free or reduced-cost reports (unless only oral reports are provided).

What this means for you

Banks and finance companies are "vendors" when they sell repossessed goods

If you routinely take back and resell financed vehicles, you are a registered vendor and must collect and remit sales tax on each sale yourself. You cannot rely on the buyer paying tax later at DMV registration — that route is only for genuine casual (one-off, non-vendor) sales. The same rule reaches repossessed non-vehicle property you sell.

Fixing up resale inventory isn't a taxable repair

Repair charges are generally taxable when you fix property you keep and use. But repairs to property you are holding for resale — like a repossessed mobile home you are getting into saleable shape — are not taxed, because the item is inventory headed for a taxable sale.

Credit reports: the medium matters

A written credit report (or an oral report that just previews the written one) is a taxable information service. A report delivered solely orally, with nothing written to follow, is not taxed. Subscription arrangements that bundle in free or discounted reports are taxable unless the subscriber only ever gets oral reports.

Accountants and tax professionals

This opinion is a clean three-part checklist: (a) repossession resales trigger vendor collection duties; (b) service to resale inventory escapes § 1105(c)(3); and (c) credit-information purchases are taxable under the § 527.3(a)(4) oral/written test. Watch the "solely orally" line — a written follow-up flips an otherwise-exempt oral report into a taxable one.

Common questions

Q: Does a bank have to collect sales tax when it sells a repossessed car?
A: Yes. The bank is a vendor of motor vehicles and must collect tax at the time of sale unless it receives a proper exemption document.

Q: Can the buyer just pay the tax at DMV instead?
A: No. The collect-at-registration program applies only to casual sales by non-vendors, not to a registered vendor like a bank.

Q: Are repairs to a repossessed mobile home taxable?
A: No, not if the mobile home is held for resale. Repairs to resale inventory aren't subject to the § 1105(c)(3) tax.

Q: Is buying a credit report on a loan applicant taxable?
A: Yes, unless it's transmitted solely orally. Written reports (and oral reports preliminary to written ones) are taxable information services.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1105(a) (tax on receipts from every retail sale of tangible personal property)
• Tax Law § 1105(c)(1) (tax on furnishing information and information services, with the personal-or-individual exclusion)
• Tax Law § 1105(c)(3) (tax on installing, maintaining, servicing, or repairing tangible personal property not held for sale)
• Sales and Use Tax Regulations § 527.3(a)(4) (credit information services; written taxable, oral-preliminary taxable, subscription rules)
• Technical Services Bureau Memorandum TSB-M-80(11)S, Sept. 30, 1980 (banks and car rental agencies selling repossessed motor vehicles are vendors)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_17s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-92 (17)S
Sales Tax
February 27, 1992

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK

COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S911211A

On December 11, 1991, a Petition for Advisory Opinion was received from Central National
Bank, Canajoharie, 24 Church Street, Canajoharie, New York 13317.
The issues raised by Petitioner, Central National Bank, Canajoharie, are:
1.

Whether Petitioner must collect sales tax on the sale of repossessed automobiles.

2.

Whether repairs on repossessed mobile homes to put them in salable condition are
subject to sales tax.

3.

Whether credit information requested concerning loan applicants is subject to sales
tax.

Petitioner, on occasion, repossesses and sells financed automobiles to individuals. In
addition, Petitioner repossesses and sells mobile homes. On some of the mobile homes, repairs must
be done to put them in a salable condition. Further, Petitioner requests credit data on loan applicants.
This data is the same type of credit data requested by attorneys who do loan closings.
Section 1105(a) of the Tax Law imposes sales tax on the receipts from every retail sale of
tangible personal property, with certain exceptions.
Technical Services Bureau Memorandum TSB-M-80(11)S, September 30, 1980, provides,
in part, that:
Banks and car rental agencies which sell repossessed motor vehicles qualify
as vendors of motor vehicles for sales and use tax purposes. Any "vendor" must
collect the appropriate tax at the time a sale takes place, unless he accepts a properly
completed exemption document.
*

*

*

The program instituted by the Department of Motor Vehicles to insure that
proper tax is remitted on motor vehicle transactions (that is, to collect the sales tax
at the time of registration) does not apply to vendors. This program applies only to
casual sales where the seller is neither an automobile dealer nor a vendor registered
for any other purpose. Banks, or any other registered vendor, dealing in repossessed
motor vehicles must collect tax on every transaction which is not exempted by proper
documentation.

-2­
TSB-A-92 (17)S
Sales Tax
February 27, 1992
Note: The same vendor responsibilities apply when banks repossess tangible
personal property other than motor vehicles.
Section 1105(c) of the Tax Law imposes sales tax on:
(c)
services:

The receipts from every sale, except for resale, of the following

(1)
The furnishing of information by printed, mimeographed or
multigraphed matter or by duplicating written or printed matter in any other manner,
including the services of collecting, compiling or analyzing information of any kind
or nature and furnishing reports thereof to other persons, but excluding the furnishing
of information which is personal or individual in nature and which is not or may not
be substantially incorporated in reports furnished to other persons, and excluding the
services of advertising or other agents, or other persons acting in a representative
capacity, and information services used by newspapers, radio broadcasters and
television broadcasters in the collection and dissemination of news.
*

*

*

(3)
Installing tangible personal property, excluding a mobile home, or
maintaining, servicing or repairing tangible personal property, including a mobile
home, not held for sale in the regular course of business, whether or not the services
are performed directly or by means of coin-operated equipment or by any other
means, and whether or not any tangible personal property is transferred in
conjunction therewith, except:. . .(emphasis added)
Section 527.3(a)(4) of the Sales and Use Tax Regulations provides that:
(4)
Charges for credit information services, other than those that are
transmitted orally, are subject to tax. The following rules shall apply in determining
taxability of services that include both oral and written reports.
(i)

Any fee for a written report is taxable.

(ii)
Any fee for an oral report is taxable if the oral report is preliminary
to the written report.
(iii) An annual fee for subscribing to a service is taxable if it entitles the
subscriber to a certain number of free reports, or to reduced charges on reports, unless
the subscriber is entitled only to oral reports.
Accordingly, as to issue "1", pursuant to Section 1105(a) of the Tax Law and TSB-M­
80(11)S, supra, Petitioner qualifies as a vendor of motor vehicles for sales tax purposes and must
collect the appropriate sales tax at the time a sale takes place, unless it receives a properly completed
exemption document.

-3­
TSB-A-92 (17)S
Sales Tax
February 27, 1992

Concerning issue "2", pursuant to Section 1105(c)(3) of the Tax Law charges incurred by
Petitioner for the repair of repossessed mobile homes that are held for resale are not subject to sales
and use taxes.
With respect to issue "3", pursuant to Section 1105(c)(l) of the Tax Law and Section
527.3(a)(4) of the Sales and Use Tax Regulations charges incurred by Petitioner for credit
information services, other than such services that are transmitted solely orally, are subject to sales
and use taxes.

DATED: February 27, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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