Does a one-person repair business owe sales tax on parts and labor when it repairs and refurbishes farm mixers that its customer received as trade-ins and will resell to farmers, and does the repairman need to register with the Department?

Plain-English summary

Daniel A. Short has a single-customer business repairing and refurbishing farm mixers -- equipment used solely on farms to mix cattle feed. His customer takes the mixers in as trade-ins, has Short repair and refurbish them, and then sells the refurbished mixers to farmers. Short asked three questions: whether the parts he buys are taxable, whether his repair services are taxable, and whether he needs to register with the Department at all.

Each question got a different piece of the same resale-chain logic. The parts Short buys to fix the mixers qualify for the resale exclusion, because those parts become a physical component of property that's later transferred to his customer as part of a taxable repair service -- so Short pays no tax at purchase, as long as he gives his own supplier a properly completed Resale Certificate (Form ST-120) within 90 days. His repair service itself is likewise exempt, but for a different reason: repair services aren't taxable when performed on property the customer holds for sale in the regular course of business, and since his customer buys mixers as trade-ins specifically to resell to farmers, that condition is met -- but only if the customer gives Short its own timely Resale Certificate covering the repair charge.

The ruling flags an important boundary on that exemption: it applies only because Short's actual customer resells the mixers. If Short ever repaired a mixer directly for a farmer who intends to keep and use it (not resell it), that job would be taxable under the ordinary repair-services rule, unless the farmer separately qualifies for the farming exemption (used directly and predominantly to produce goods for sale) and furnishes a timely Farmer's Exemption Certificate (Form ST-125). Finally, even though Short's actual repair work and materials wash out to zero net tax under these certificates, he's still required to register with the Department under Article 28, since he's both selling a taxable-category service and buying tangible personal property for resale -- though because he isn't actually collecting or remitting any tax himself, he only has to file an annual return rather than the usual periodic filings.

What this means for you

Repair technicians and refurbishers working for resale-focused customers

Both your parts purchases and your labor charge can be fully tax-exempt when your customer is genuinely reselling the repaired item -- but that protection depends entirely on paperwork: get a timely Resale Certificate from your supplier for the parts, and get one from your own customer for the labor charge, within 90 days each time.

Businesses that sometimes sell direct to end users and sometimes to resellers

The same repair work can be taxable or exempt depending purely on who your customer is and what they do with the item -- selling/repairing for a reseller is exempt with proper certificates, while the identical work for an end user who keeps the item is taxable (absent some other exemption like the farm-use exemption).

Accountants and tax professionals advising small repair or refurbishing businesses

Don't assume a business with net-zero tax collection is exempt from registering -- Article 28 registration is triggered by selling taxable-category services or buying for resale, independent of whether any tax actually changes hands; the annual-return provision (20 NYCRR § 533.3(d)) is the relief valve for exactly this situation.

Common questions

Q: Does Petitioner ever have to collect sales tax under these facts?
A: Not under the facts described -- since his one customer resells every mixer, both the parts and the labor stay exempt with proper Resale Certificates. Selling directly to end-use farmers would change the analysis.

Q: What certificate does a farmer need to give if buying a repaired mixer for their own use?
A: A Farmer's Exemption Certificate (Form ST-125), and only if the mixer is used directly and predominantly to produce goods for sale by farming.

Q: If no tax is ever actually collected, does Petitioner still need to register with the state?
A: Yes -- registration is required because he's selling a taxable-category service and purchasing for resale, even though he ends up filing only an annual return rather than collecting tax regularly.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4) (retail sale)
• Tax Law § 1105(c)(3) (tax on repair services; resale and farming exceptions)
• Tax Law § 1105(c)(3)(vi) (farming exemption for repair services)
• Tax Law § 1132(c) (resale/exemption certificate timing)
• Tax Law § 1134(a)(1) (vendor registration requirement)
• 20 NYCRR § 526.6(c) (resale exclusion)
• 20 NYCRR § 527.5(b) (repair services exempt when performed for resale or on property held for sale)
• 20 NYCRR § 533.3(d) (annual return for resale-only registrants)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a99_43s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-99(43)S
Sales Tax
November 4, 1999

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S990803A

On August 3, 1999, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Daniel A. Short, RR4, E. Genesee St. Rd., Auburn, NY 13021.
The issues raised by Petitioner, Daniel A. Short, are:
1.

Whether parts purchased by Petitioner to repair and refurbish farm
mixers are subject to State and local sales and compensating use
taxes.

2.

Whether the services performed by Petitioner are subject to State and
local sales and compensating use taxes.

3.

Whether Petitioner must register with the Department of Taxation and
Finance under Article 28 of the Tax Law.

Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner has contracted with a customer to repair and refurbish farm mixers. The customer
has received these mixers as trade-ins, has them repaired and refurbished by Petitioner, and sells
them as equipment to farmers. These mixers are used solely on farms to mix feed for cows.
Petitioner does not conduct any other business.
Applicable Laws and Regulations
Section 1101(b) of the Tax Law provides, in part:
(b) When used in this article for the purposes of the taxes imposed by
subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section eleven
hundred ten, the following terms shall mean:
*

*

*

(4) Retail sale. (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), (5), (7) and (8) of subdivision (c) of section eleven
hundred five where the property so sold becomes a physical component part of the

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Sales Tax
November 4, 1999
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 1105 of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby
imposed and there shall be paid a tax of four percent upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
*

*

*

(3) Installing tangible personal property . . . or maintaining, servicing or
repairing tangible personal property . . . not held for sale in the regular course of
business... except:
*

*

*

(vi) such services rendered on or after September first, nineteen hundred
eighty-two with respect to tangible personal property for use or consumption directly
and predominantly in the production for sale of tangible personal property by
farming, as such tangible personal property is specified in paragraph six of
subdivision (a) of section eleven hundred fifteen of this article. The exemption
provided by this subparagraph (vi) shall not apply to the taxes imposed pursuant to
section eleven hundred seven of this article.
Section 1134(a)(1) of the Tax Law provides, in part:
(i) Every person required to collect any tax imposed by this article ...(ii) every
person purchasing or selling tangible personal property for resale commencing
business or opening a new business . . . shall file with the commissioner a certificate
of registration, in a form prescribed by the commissioner, at least twenty days prior
to commencing business or opening a new place of business . . . .
Section 526.6(c) of the New York State Sales and Use Tax Regulations provides, in part:

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Sales Tax
November 4, 1999
Resale exclusion. (1) Where a person, in the course of 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 purchased will be considered as purchased for resale
and therefore not subject to tax until he has transferred the property to his customer.
*

*

*

(6) Tangible personal property purchased for use in performing services
which are taxable under section 1105(c)(1), (2), (3) and (5) of the Tax Law is
purchased for resale and not subject to tax at the time of purchase, where the property
so sold (i) becomes a physical component part of the property upon which the
services are performed, or (ii) is later actually transferred to the purchaser of the
service in conjunction with the performance of the service subject to tax.
Example 6: A watch repairman purchases a new stem and places it in a watch
that he is repairing for a customer. The purchase of the stem by the watch repairman
is a purchase for resale not subject to tax at the time of its purchase as it will become
a physical component part of property upon which services were performed.
Section 527.5(b) of the Sales and Use Tax Regulations provides, in part:
Exemptions. (1) The services of installing, maintaining, servicing or repairing
tangible personal property are not taxable if the services were performed for
resale. . . .
(2) Maintaining, servicing or repairing tangible personal property is not
taxable if the property maintained, serviced or repaired is held for sale in the regular
course of business.
Example 1: A repair shop charges a boat dealer for reconditioning boat
motors which the dealer will resell. The reconditioning of the motors is not taxable
because the motors are for resale.
Opinion
With respect to issue 1, pursuant to Section 1101(b)(4) of the Tax Law and Section 526.6 of
the Sales and Use Tax Regulations, the purchase of tangible personal property for use by the
purchaser in performing services subject to tax under Section 1105(c)(3) of the Tax Law where such
property purchased becomes a physical component part of the property upon which the services are
performed or where such property purchased will actually be transferred to the customer in
conjunction with the performance of the repair subject to tax, is not subject to sales and

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Sales Tax
November 4, 1999
compensating use taxes. Therefore, the parts purchased by Petitioner to repair and refurbish farm
mixers for his customer are not subject to sales and compensating use taxes. It is noted, however,
that Petitioner must furnish his supplier with a properly completed Resale Certificate (Form ST-120)
within 90 days from the date of purchase of the parts. See Section 1132(c) of the Tax Law and
Section 532.4 of the Sales and Use Tax Regulations.
As for issue 2, pursuant to Section 1105(c)(3) of the Tax Law, the service of repairing and
refurbishing of farm mixers which will be held for sale by Petitioner’s customer in the regular course
of its business is not subject to sales and compensating use taxes. Since Petitioner’s customer
receives the mixers as trade-ins and sells them to farmers after they are refurbished, it holds the
mixers for sale in the regular course of business. Petitioner’s customer, however, must furnish
Petitioner with a properly completed Resale Certificate (Form ST-120) within 90 days after the
performance of the service.
The above analysis applies only to sales of services to Petitioner’s customer as described in
the facts presented. It should be noted that the resale exemption does not apply if petitioner performs
repair services for farmers or other individuals who do not hold the farm mixers for sale in the
regular course of business but use the mixers themselves. Petitioner would be required to collect tax
on its services in such case, unless the mixers are for use or consumption directly and predominantly
in the production for sale of tangible personal property by farming, and Petitioner’s customer
furnishes Petitioner with a properly completed Farmer’s Exemption Certificate (Form ST-125)
within 90 days after the performance of the service. See Section 1105(c)(3)(vi) of the Tax Law.
Concerning issue 3, pursuant to Section 1134 of the Tax Law, Petitioner is selling services
subject to tax and buying tangible personal property for resale. Therefore, Petitioner must register
with the Department of Taxation and Finance for purposes of sales and use tax. It is noted that under
Section 533.3(d) of the Sales and Use Tax Regulations, a person required to register with the
Department of Taxation and Finance only because he or she is purchasing or selling tangible
personal property for resale, and who is not required to collect any tax or pay any tax directly to the
Department of Taxation and Finance, must file a return annually.

DATED: November 4, 1999

NOTE:

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

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