Submission Date:
Question:
The library is chartered as a school district public library and thus exempt from NYS sales tax. Due to a mold issue we ended up having our HVAC contractor rent two humidifiers for us, the contractor made the arrangements and we paid for the rental via the contractor. The contractor told the renting business that we were tax exempt. The renting business refuses to remove the sales tax. They claim that the sales tax exemption only applies to purchases and not rentals. I have not been able to find anything that verifies the claim of the renting agency.
Answer:
Short answer: You can't find anything to verify that claim because what is claimed is wrong.
Long answer: The rental business may be wrong, but I can't blame them the way I can blame someone for parking in a "No Parking" zone.[1]
That's because if they are basing their answer on a plain reading of the relevant regulations (N.Y. Comp. Codes R. & Regs. Tit. 20 § 529.7), the exemption applies only to "sales."
Here's the language from the regulations:
(h) Sales to exempt organizations.
(1) Any sale or amusement charge to or any use or occupancy by an exempt organization to which an exempt organization certificate has been issued is exempt from sales and use tax.
So, a literal reading of the regs suggests that the exemption applies only to sales (and amusement charges[2]); there is no reference to renting or leasing or borrowing equipment.[3]
However, a quick check of advisory opinions[4] from the New York Department of Tax & Finance confirms that rental fees are considered exempt, too. Here is an excerpt that confirms this:
When Petitioner, within 90 days of the transaction, accepts in good faith from its customer an appropriate and properly completed exemption document showing that the purchase is exempt from sales tax, Petitioner is relieved of its burden of proving that the transaction is exempt and need not collect tax on sales or rentals to that customer. See section 1132(c) of the Tax Law.
...
When its customer is a building owner that is an organization exempt from sales tax, Petitioner’s rental or sale of equipment will be exempt from tax.
...
The organization claiming exemption from the tax must be the purchaser of record on Petitioner’s bill or invoice and must be the payer of record. See section 529.7(h) of the Sales and Use Tax Regulations. [emphasis added]
So, there you have it: rentals to tax-exempt organizations are exempt just like sales.
I am sorry you are having to put up not only with mold but also with overly literal HVAC vendors. I hope you can show them the opinion I've linked to and reach a good resolution. If not, I suggest you have them call their accountant or the helpful folks at the New York State Tax & Finance Information Center: https://www.tax.ny.gov/help/contact/
[1] Or smoking in a "No Smoking" area. Or allowing your dog off the leash in a sensitive area reserved for birds and kicking off a massive social media firestorm....
[2] I resisted the urge to look up the regulatory definition of "amusement charges" so I can let my imagination run wild on the fun stuff that can be taxed.
[3] I reviewed this answer with my husband, a CPA, who pointed out that the regulation says "use" which can be construed as "rental." So, he wasn't as inclined to be tolerant of the rental company as I was. But I have a soft spot for HVAC.
[4] Specifically, this advisory opinion: TSB-A-03(31) from July 17, 2003, found as of July 26, 2023 at https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_31s.pdf.
