Opinion
July 14, 1988
Appeal from the Supreme Court, Albany County.
Petitioner operates several car wash facilities which are located in Erie, Monroe and Niagara Counties. Vehicles travel through the facilities on conveyor systems while various washing and waxing services are performed by equipment inside the facilities. During that audit period, petitioner purchased various equipment and machinery which, inter alia, it used to dilute, heat, mix, pressurize and combine chemicals for use in its washing service. The State Tax Commission ultimately determined that these purchases of machinery, equipment and supplies were subject to taxation and assessed petitioner accordingly. Petitioner commenced this CPLR article 78 proceeding which was transferred to us for resolution.
Petitioner contends that its machinery, equipment and supplies are exempt from taxation. Receipts from every retail sale of tangible personal property are subject to tax unless otherwise excluded, excepted or exempted (Tax Law § 1105 [a]). An exemption exists for sales of "[m]achinery or equipment for use or consumption directly and predominately in the production of tangible personal property * * * for sale" (Tax Law § 1115 [a] [12]). Statutes creating exemptions are interpreted narrowly (Dental Socy. v. New York State Tax Commn., 110 A.D.2d 988, 989, affd 66 N.Y.2d 939), and the burden of showing that an exemption applies is on the taxpayer (Matter of Grace v. New York State Tax Commn., 37 N.Y.2d 193, 195).
Here, petitioner's facilities provide a taxable service to vehicles (see, 20 NYCRR 527.5 [a] [3] [Example 5]; see also, Tax Law § 1105 [c] [3]). As part of this service, tangible personal property in the form of water, foam and wax are applied to customers' vehicles by the machinery and equipment at issue. Petitioner does not separately charge customers for the tangible personal property apart from the charge for the services provided, nor are the items of tangible personal property offered for sale directly to consumers. Under these circumstances, it was reasonable for the Tax Commission to find that "[p]etitioner did not offer for sale to its customers any of the chemical mixtures, foam, water or waxes which were mixed, treated or dispensed by its machinery and equipment". In the absence of a showing that the products produced by the machinery and equipment were sold to customers, petitioner has not established that it is entitled to an exemption under Tax Law § 1115 (a) (12) (see, Matter of Shanty Hollow Corp. v. New York State Tax Commn., 111 A.D.2d 968, lv denied 66 N.Y.2d 603).
Determination confirmed, and petition dismissed, without costs. Mahoney, P.J., Kane, Mikoll, Yesawich, Jr., and Harvey, JJ., concur.