NY TSB-H-80(239)S Sales Tax 1980-12-05

Is the rental of a crane taxable when the rental company supplies the operator but the customer supervises and directs the crane's use?

Short answer: It's taxable — because the customer directs and controls how the crane is used, renting the crane (even with the rental company's operator) is a taxable lease of tangible personal property. Enercon Systems, Inc. rented a crane to hoist heating and air-conditioning units onto the roofs of newly constructed buildings; the lessor supplied an operator, but Enercon's own employee at the job site supervised and directed the crane work. Under Tax Law § 1105(a) and 20 NYCRR 526.7(a)(1)-(2), a 'sale' includes any rental or lease of tangible personal property. Under 20 NYCRR 526.7(e)(3), possession is transferred when the customer gets the right to use, or to control or direct the use of, the property. Under 20 NYCRR 526.7(e)(5), when an equipment lease includes an operator, possession is deemed transferred where the lessee has the right to direct and control the equipment's use — and the operator's separately stated wages are excludible from the taxable receipt if they reflect prevailing wage rates. Because Enercon had the right to direct and control the crane's use, the rental is a taxable sale of tangible personal property under § 1105(a).

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This page answers the general question as of 1980. Ezel answers yours, under current New York tax law, with citations.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion, issued by the Technical Services Bureau (identified with the earlier 'TSB-H' numbering prefix used alongside 'TSB-A' in 1980) at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

Enercon Systems, Inc. (Bohemia, New York) rented a crane to hoist heating and air-conditioning units onto the roofs of newly constructed buildings. The rental company supplied an operator to run the crane, but Enercon kept its own employee at the job site to supervise and direct the crane's operation. Enercon asked whether sales tax is due on the rental charges.

The answer: yes — this is a taxable lease of tangible personal property.

§ 1105(a) taxes receipts from retail sales of tangible personal property, and 20 NYCRR 526.7(a)(1)-(2) treats a rental or lease as a "sale."
Under 20 NYCRR 526.7(e)(3), "transfer of possession" happens when the customer gets one of the attributes of ownership — including the right to use, or to control or direct the use of, the property.
Under 20 NYCRR 526.7(e)(5), when an equipment lease includes an operator, possession is deemed transferred where the lessee has the right to direct and control the equipment's use. (The regulation's Example II describes exactly this: a leased crane with operator, where the customer's foreman gives instructions and sets hours and locations — a taxable lease.) The operator's wages, when separately stated and reflecting prevailing wage rates, are excludible from the taxable receipt.
Because Enercon had the right to direct and control the crane's use through its on-site employee, the rental is a taxable sale of tangible personal property under § 1105(a).

What this means for you

Who controls the equipment decides the tax. An operator coming with the machine doesn't automatically make the charge a nontaxable service. If you direct and control how the equipment is used, you've taken possession of it — and the rental is a taxable lease.

Separately stated operator wages can come out of the tax base. When the lease bundles an operator, you may exclude the operator's wages from the taxable receipt if they're separately stated and reflect prevailing wage rates. Bury them in a lump-sum charge and you lose that exclusion.

Contrast: an operator who runs the job themselves. If the equipment owner keeps control — its operator decides how the work is done — the arrangement can look more like a nontaxable service than a lease. The line is control.

Common questions

Q: The rental company sent the operator — why is this still a taxable rental?
A: Because your employee directed and controlled the crane's use. Under 20 NYCRR 526.7(e)(5), that means possession transferred to you, making it a taxable lease of the equipment.

Q: Can I avoid tax on the operator's pay?
A: You can exclude the operator's wages from the taxable receipt if they are separately stated and reflect prevailing wage rates. The rest of the rental charge remains taxable.

Q: What if the operator, not my crew, controlled the crane?
A: This opinion turns on the customer's right to direct and control the equipment. Where control stays with the equipment owner and its operator, the analysis can differ — the key fact is who controls the use.

Citations and references

Statutes, regulations and authority:

Tax Law § 1105(a) — imposes sales tax on receipts from retail sales of tangible personal property, including rentals and leases
20 NYCRR 526.7(a)(1)-(2) — defines "sale" to include rentals, leases, and licenses to use tangible personal property
20 NYCRR 526.7(e)(3) — "transfer of possession" includes the right to use, or to control or direct the use of, the property
20 NYCRR 526.7(e)(5) — for operator-included leases, possession is transferred where the lessee has the right to direct and control the equipment; separately stated operator wages reflecting prevailing rates are excludible (Example II: leased crane with operator directed by the customer's foreman)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1980.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h80_239s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-H-80(239)S
Sales Tax
December 5, 1980

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S800611A

On June 11, 1980, a Petition for Advisory Opinion was received from Enercon
Systems, Inc., 170 Wilbur Place, Bohemia, New York 11716.
The issue raised in the Petition is whether sales tax is due on charges for
the rental of a crane. It is intended that the crane will be used to hoist
heating and air conditioning units to the roofs of newly constructed buildings.
The lessor of the crane provides the services of an individual to operate the
crane. The lessee has an employee at the job site to supervise and direct the
crane operation.
Section 1105(a) of the Tax Law imposes a tax on the receipts from retail
sales of tangible personal property. The Sales and Use Tax Regulations define the
term "sale" to mean "...any transaction in which there is a transfer of title or
possession or both of tangible personal property for consideration." 20 NYCRR
526.7(a)(1) Such transactions are stated to include "...rentals, leases or
licenses to use or consume tangible personal property." 20 NYCRR 526.7(a)(2) In
the case of a rental, lease or license to use the term transfer of possession
"...means that one of the following attributes of property ownership has been
transferred...(iii) the right to use, or control or direct the use of tangible
personal property." 20 NYCRR 526.7(e)(3). The Regulations further provide that
"...When a lease of equipment includes the services of an operator, possession
is deemed to be transferred where the lessee has the right to direct and control
the use of the equipment. The operator's wages, when separately stated, are
excludible from the receipt of the lease provided they reflect prevailing wage
rates.
Example II:

A company enters into an agreement to lease a crane,
together with the services of the operator of the crane.
The operator will take instructions from the company's
foreman, and the company determines the working hours
and locations. The operator's wages are separately
stated. This transaction is within the definition of
sale, and the transfer of possession has occurred by
reason of the company's right to direct and control the
use of the equipment by the operator.
The taxable
receipt excludes the operator's wages," 20 NYCRR
526.7(e)(5).

Accordingly, inasmuch as Petitioner rents a crane, as the services of an
operator are included in the equipment lease, and as Petitioner has the right to
direct and control the use of the equipment by such operator, the transaction in
question constitutes a sale of tangible personal property the receipts of which
are subject to tax under section 1105(a) of the Tax Law.
DATED: November 18,1980

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

JAMES H. TULLY, JR., COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

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