Who has to collect New York sales tax on towing charges and vehicle auction sales when a New York City Marshal tows away cars for unpaid parking tickets -- the Marshal or the independent towing company?

Plain-English summary

Under New York City's Parking Violations Bureau program, City Marshals are authorized to tow away vehicles whose registered owners owe delinquent parking tickets. The actual towing is done by an independent towing company hired by the Marshal. To get the car back, the owner must pay the Marshal the outstanding tickets, statutory Marshal's fees, a $150 towing charge, and sales tax on that towing charge, all within 30 days -- after which the car is auctioned off (with an auctioneer's help), and sales tax is collected on the auction sale price instead. The petitioner asked who actually has the legal duty to collect and remit that sales tax: the Marshal or the towing company.

The Department's answer: the Marshal is the one who must collect and remit sales tax, in both scenarios. Towing charges are taxable services (per an older Department publication specifically addressing motor vehicle/towing taxability), and since it's the Marshal who collects the towing fee from the vehicle owner when the car is redeemed, the Marshal -- not the towing company -- is the vendor responsible for that tax (at New York City's combined rate of 8¼%). The towing company's own sale of its towing service to the Marshal is not itself taxed, because the Marshal is buying that service for resale to the vehicle owner; the Marshal should give the towing company a resale certificate (Form ST-120) to document this. Similarly, at auction, it's the Marshal -- not the towing company or the auctioneer -- who is making the retail sale of the vehicle and must collect tax on the full selling price, even in cases where the sale price ends up less than the towing bill itself. Because the Marshal is making taxable sales, the Marshal must register as a vendor under Tax Law § 1134.

What this means for you

Towing companies working with government agencies (Marshals, sheriffs, municipalities)

If you're hired by a government agency to tow and store vehicles that the agency then bills back to the vehicle owner, your sale of the towing service to that agency is generally a nontaxable resale transaction -- get a resale certificate from the agency to document it, rather than collecting tax yourself on that leg of the transaction.

Marshals and similar government vendors handling seized/towed vehicles

You are the party responsible for collecting and remitting sales tax both on the towing charge paid by a redeeming owner and on the sale price of any vehicle later sold at auction -- register as a vendor and don't assume the towing company or auctioneer bears that duty.

Accountants and tax professionals

This ruling is a clean example of the resale-certificate mechanic applied to a government/private-contractor towing arrangement -- the same reasoning is echoed in the companion ruling TSB-A-97(10)S, issued about three weeks later on essentially the identical fact pattern from a different petitioner (a Marshal's Bureau employee), confirming towing charges deducted directly from auction proceeds are likewise untaxed as a resale purchase by the Marshal.

Common questions

Q: Does the towing company ever have to collect sales tax in this arrangement?
A: No -- the towing company's sale of its service to the Marshal is a nontaxable resale purchase; the Marshal is the one who collects tax from the vehicle owner.

Q: What if the auction sale price is less than the towing charge owed?
A: Tax is still based on the vehicle's actual selling price at auction, regardless of whether that price covers the towing charge.

Q: Can another towing company or government agency rely on this ruling?
A: No. This advisory opinion binds the Department only as to the specific petitioner and the Parking Violations Bureau towing/auction program described.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c)(3), (4) (installing/servicing/repairing and storing tangible personal property)
• Tax Law § 1134 (vendor registration requirement)
• 20 NYCRR § 526.11 (persons required to collect tax)
• New York State and Local Sales Tax Information Booklet No. 5, Questions and Answers on Motor Vehicles, Garages and Service Stations, ST-215 (9/73)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_08s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(8)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S950918A

On September 18, 1995 the Department of Taxation and Finance received a
Petition for Advisory Opinion from Henry Daley, 1 Cross Island Plaza, Rosedale,
New York 11422.
The issues raised by Petitioner, Henry Daley, are:

1. Whether the New York City Marshal or an independent towing company is
   required to collect and remit sales tax on receipts from the sale of certain
   towing services performed in connection with the Parking Violations Bureau
   program in New York City.
2. Whether the New York City Marshal is required to collect and remit sales
   tax on auction sales of vehicles which have been towed.
   Petitioner submits the following facts as the basis for this Advisory
   Opinion.
   New York City Marshals (hereinafter "Marshals") in the Parking Violations
   Bureau program are authorized to tow away vehicles where the registrant of such
   vehicle owes New York City delinquent parking tickets. The towing is done by an
   independent towing company.
   The vehicle registrant is then required to pay to the Marshal the
   outstanding amount of parking tickets, statutory Marshal's fees, towing expense
   of $150.00, and sales tax on the towing charge. These requirements must be met
   in 30 days, or the car will then be auctioned off by the Marshal, with the
   assistance of an independent auctioneer. The Marshal remits sales tax on the
   towing charges to New York State.
   When the vehicle is sold at auction, sales tax is collected by the Marshal
   on the sales price. The proceeds of the auction sale (net of sales tax) are used
   to pay for the outstanding parking tickets, reimbursement of $150.00 to the
   towing company and fees to the Marshal. The Marshal remits the sales tax on the
   sale price of the vehicle. The towing company does not collect or remit any
   sales tax to New York State. In some cases the selling price of a vehicle at
   auction is less than the towing charges ($150.00).
   Applicable Law and Regulations
   Section 1105(a) of the Tax Law imposes a tax upon "[t]he receipts from the
   sale of tangible personal property, except as otherwise provided in this
   article."

-2­
TSB-A-97(8)S
Sales Tax

Section 1105(c) of the Tax Law imposes tax on receipts from the sale,
except for resale, of certain enumerated services, including under paragraph (3)
the service of "[i]nstalling tangible personal property, ... or maintaining,
servicing or repairing tangible personal property, ... not held for sale in the
regular course of business" and under paragraph (4) the service of "[s]toring all
tangible personal property not held for sale in the regular course of business."
Section 526.11 of the Sales and Use Tax Regulations provides in part:
Persons required to collect tax. [Tax Law, §1131(1)] (a) General.
Persons required to collect tax includes: (1) Every person who makes
sales of tangible personal property as a vendor. See section 526.10
of this Part.
Opinion
Charges for the towing services are subject to sales tax. See New York
State and Local Sales Tax Information Booklet No. 5, Questions and Answers on
Motor Vehicles, Garages and Service Stations, ST-215 (9/73).
Marshals are
required to collect and remit sales tax on receipts from the sale of these towing
services from the vehicle owner when the owner claims the vehicle from the
Marshal. The applicable rate of sales tax in New York City is 8 1/4 percent.
The sale of the towing service by an independent towing company to a
Marshal is not subject to tax, since the service is purchased by the Marshal for
resale to the vehicle owner. The Marshal should provide the towing company with
a properly completed resale certificate (Form ST-120) to evidence the
transaction. The resale certificate is then retained by the towing company as
proof of a non-taxable sale. Non-taxable sales are reflected on a vendor's sales
tax return as the difference between gross and taxable sales.
Since the Marshal, and not the towing company, is making a retail sale of
tangible personal property at auctions for the sale of motor vehicles, the
Marshal is the person required to collect State and local sales taxes on the sale
of the vehicles. The tax to be collected is based on the retail selling price
of the vehicle, whether or not the selling price exceeds the amount owed for
towing. As vendors of tangible personal property making sales in this State,
Marshals are required to register under Section 1134 of the Tax Law and to file
returns and remit tax required to be collected.

DATED: February 24, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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