New York Codes, Rules and Regulations › Title 20 - DEPARTMENT OF TAXATION AND FINANCE › Chapter IV - Sales And Use And Other Miscellaneous Taxes › Subchapter A - Sales And Use Taxes › Part 541 - Contractors › Section 541.9 - Contractor's purchase, rental, repair, and use of equipment and vehicles

Current through Register Vol. 46, No. 28, July 10, 2024
Tax Law, §§ 1105(a), (c)(3), (5); 1110; 1111(b)(1), (2);
					 1118(2), (7)
(a)
General.
The purchase, rental, lease or license to use construction
					 equipment and motor vehicles by a contractor is subject to sales and use
					 tax.
(b)
Purchase of
				  equipment and motor vehicles.
(1)
				  Contractor owned equipment.
(i) The purchase
				  of equipment, other than motor vehicles such as trucks, by a contractor is
				  subject to tax on the total purchase price at the combined State and local tax
				  rate in effect in the jurisdiction where the equipment is delivered to the
				  contractor.
(ii) Purchases of
				  equipment for both use and rental by the contractor are taxable on the total
				  purchase price. The contractor is liable for tax on the equipment purchased by
				  him and must collect tax on the equipment rented by him to others without
				  credit for any tax paid on the purchase. Only that equipment which is purchased
				  exclusively for rental purposes qualifies for the resale exclusion.
(iii) If a contractor uses equipment in a
				  jurisdiction other than where purchased, and the contractor was a resident of
				  the jurisdiction of subsequent use at the time of purchase, and such
				  jurisdiction imposes a higher tax rate than the local tax rate paid at the time
				  of purchase or the State rate is higher in the jurisdiction of subsequent use,
				  then the contractor owes an additional use tax based upon the difference
				  between the State and local tax rates paid at the time of purchase and the
				  State and local tax rates in effect in the jurisdiction where the equipment is
				  subsequently used. Thus, a contractor may owe additional local tax in each
				  jurisdiction in which the equipment is used until the maximum aggregate State
				  and local tax rate is reached. If, however, the jurisdiction in which the
				  equipment is subsequently used imposes a lower tax rate than the local tax rate
				  paid at the time of purchase, no credit or refund may be allowed for the
				  difference between the two tax rates.
(iv) Equipment delivered outside of New York
				  State to contractors who are residents of New York State on the date of
				  purchase is subject to the New York State use taxes which become due on the
				  date the equipment is first brought into New York State.
(a) The tax is based on the purchase price of
				  such equipment, unless:
(1) the equipment was
				  used outside this State by the contractor for more than six months prior to its
				  use within this State, in which case the tax may be based on the current market
				  value of such equipment (but not to exceed its cost) at the time of first use
				  within the State; or
(2) the
				  equipment is brought into New York State for use in this State and used in the
				  performance of a contract or subcontract for less than six months, in which
				  case the tax may be based, at the option of the taxpayer, on the fair rental
				  value of such equipment for the period of use within the State.
(b) The contractor may be eligible
				  for a reciprocal tax credit against the use tax due.
(v) Likewise, the local use tax becomes due
				  on the date a contractor brings equipment into a jurisdiction in which he was a
				  resident at the time of purchase.
(a) The tax
				  is based on the purchase price of the equipment, unless:
(1) the equipment was used outside such
				  jurisdiction by the contractor for more than six months prior to its use within
				  the jurisdiction, in which case the tax may be based on the current market
				  value of such equipment (but not to exceed its cost) at the time of first use
				  within the jurisdiction; or
(2) the
				  equipment is brought into the jurisdiction for use in the jurisdiction and used
				  in the performance of a contract or subcontract for less than six months, in
				  which case the tax may be based, at the option of the taxpayer, on the fair
				  rental value of such equipment for the period of use within the
				  jurisdiction.
(b) The
				  contractor may be eligible for a reciprocal tax credit against the use tax due.
Cross-reference:
For definition of use, see section
					 526.9  of this
					 Title.
Example 1:
Acme Builders, which, on April 8th, is performing contracts
					 in Area A (with a five percent combined State and local tax rate) and in Area B
					 (with a seven percent combined State and local tax rate), purchases and takes
					 delivery of a piece of construction equipment in a neighboring state and pays a
					 three percent sales tax in that state. The equipment is used out-of-state and
					 on June 19th is brought into Area A for use there. On August 28th it is brought
					 into Area B for use there and on October 11th it is last used in New York State
					 and subsequently returned to the state where purchased. The contractor, a
					 resident in Area A and B on the date of purchase, owes a use tax. The
					 contractor may base his use tax on the purchase price or on a fair rental
					 value.
If the contractor elects to base the use tax on the
					 purchase price, a five percent use tax is due in Area A. If the neighboring
					 state where the purchase was made allows a corresponding credit for taxes paid
					 to New York State, the rate of five percent may be reduced by the rate of tax
					 paid in the neighboring state (three percent). Upon use in Area B an additional
					 two percent use tax is due.
If the contractor elects to base the use tax on fair rental
					 value, the fair rental value will be subject to use tax at five percent for the
					 period of June 19th through August 27th and from August 28th through October
					 11th at seven percent. These rates may be reduced by three percent, the
					 neighboring state's sales and use tax rate, if the neighboring state where the
					 purchase was made allows a corresponding credit for taxes paid in New York
					 State.
(vi) If a
				  resident contractor purchases equipment delivered outside New York State and
				  the state in which the equipment was purchased does not have a reciprocal tax
				  credit with New York State, no credit may be allowed for the tax paid to the
				  other state against the New York State and local compensating use taxes
				  due.
(vii) If equipment purchased
				  in one jurisdiction is subsequently used in a second jurisdiction imposing a
				  lower tax rate than the tax rate paid at the time of purchase, no credit or
				  refund may be allowed for the difference between the two tax rates.