A company doesn't own any trucks itself -- it arranges for independent truckers to haul freight for an unrelated customer, collects the freight charges through that customer, keeps a 20% brokerage cut, and passes 80% along to the independent truckers who did the actual hauling. Is this company taxed as a trucking/transportation corporation under sections 183 and 184 (Article 9), or as an ordinary business corporation under Article 9-A?

Plain-English summary

Cayuga Service, Inc. didn't own or operate a single truck. Its entire business consisted of arranging for independent truckers to haul salt for Cargill Salt Company (an unrelated business that owned and operated a salt mine in Lansing, New York) out to Cargill's customers. The financial flow worked through Cargill: customers paid Cargill for both the salt itself and the freight charges; Cargill then remitted the freight-charge portion to Cayuga Service, which kept 20% as its own brokerage fee and passed the remaining 80% along to the independent truckers who did the actual hauling.

The question was whether this pure brokerage/coordination role -- with no trucks owned, no freight physically hauled by Cayuga Service itself -- still counted as "the conduct of a transportation business" for purposes of Article 9's sections 183 and 184 (the franchise tax and additional excise tax specifically targeting transportation corporations), or whether Cayuga Service should instead be taxed as an ordinary Article 9-A business corporation.

The Department held that because Petitioner's ENTIRE activity was providing transportation (in the broad sense of arranging and coordinating hauling services, even without physically performing them), it was "principally engaged in the conduct of a transportation business" within the meaning of sections 183 and 184, citing Curran Funeral Service, Inc. v. Graves for the proposition that arranging for transportation can itself constitute conducting a transportation business. Because Cayuga Service was taxable under sections 183 and 184, Tax Law § 209.4 specifically exempted it from also being taxed under the general Article 9-A corporate franchise tax.

What this means for you

You don't need to own trucks to be classified as a "trucking business" for New York tax purposes

If your entire business model is arranging, coordinating, or brokering trucking/transportation services performed by independent contractors -- rather than owning and operating the vehicles yourself -- you may still be classified as a transportation corporation under sections 183 and 184, not an ordinary Article 9-A taxpayer.

Article 9 transportation-corporation status means Article 9-A exemption, not double taxation

If your business is properly classified under sections 183/184, Tax Law § 209.4 exempts you from also filing and paying under the general Article 9-A franchise tax -- these are alternative, not cumulative, tax regimes.

Common questions

Q: If I only broker trucking services through independent truckers and never own a truck myself, could I still owe the Article 9 trucking tax?
A: Yes -- under this ruling, arranging for transportation services performed by others can itself constitute "conducting a transportation business" if that's your entire activity, triggering sections 183 and 184.

Q: If I'm taxed under sections 183 and 184, do I also owe the Article 9-A franchise tax?
A: No -- Tax Law § 209.4 exempts corporations taxable under sections 183/184 from the Article 9-A general corporate franchise tax.

Citations and references

Statutes and guidance:

• Tax Law § 183
• Tax Law § 184
• Tax Law § 209.4
• Curran Funeral Service, Inc. v. Graves, 257 App. Div. 888 (1939)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/h81_15c.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-H-81(15)C
Corporation Tax
April 8, 1981

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. C801215B

On December 15, 1980, a Petition for Advisory Opinion was received from
Cayuga Service, Inc., Drawer C, Lansing, New York 14882.
The issue raised is whether Petitioner is subject to taxation as a
transportation corporation under Sections 183 and 184 of the Tax Law, contained
in Article 9, or as a business corporation subject to tax under Article 9-A.
Petitioner states that its business consists of arranging for trucking
services to be provided by independent truckers for Cargill Salt Company, an
unaffiliated concern which owns and operates a salt mine in Lansing, New York.
The independent truckers pick up the salt from the Cargill Salt Company and
deliver it to the customers. The customers then pay Cargill Salt Company for both
the salt and the freight charges. Cargill Salt Company then remits to Petitioner
the total amount it collected for the freight charges. Petitioner in turn retains
20% of the total freight charges and remits the remaining 80% to the independent
truckers who did the hauling.
Sections 183 and 184 of the Tax Law contained in Article 9, impose a
franchise tax on corporations principally engaged in the conduct of a
transportation business in this State.
Inasmuch as Petitioner's entire activities consist of the provision of
transportation, Petitioner is subject to the Franchise Tax on Transportation and
Transmission Corporations and Associations imposed under section 183 of the Tax
Law, as well as the additional Franchise Tax imposed on such entities under
section 184 of the Tax Law. Curran Funeral Service, Inc. v. Graves, 257 App. Div.
888(1939). Pursuant to §209.4 of the Tax Law corporations so taxable are exempt
from the Franchise Tax on Business Corporations imposed under Article 9-A of the
Tax Law.

DATED: February 17, 1981

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR