N.Y. Comp. Codes R. & Regs. tit. 20 § 531.1

Current through Register Vol. 46, No. 25, June 18, 2024

Section 531.1 - Imposition of compensating use tax

Tax Law, § 1110

(a)Imposition.

The compensating use tax is imposed on every person for the use within New York State of tangible personal property and certain services described in subdivision (b) of this section, except to the extent they have been or will be subject to sales tax and except to the extent they are exempt from use tax.

Example 1:

A lumber yard in New York State purchases, for resale, a car load of lumber from a west coast supplier who is not a registered New York State vendor and who will deliver the lumber to the purchaser by rail within this State. No tax is collected by the supplier. Upon delivery of the lumber, the purchaser withdraws enough lumber to construct workbenches and shelves in its milling room. The lumber withdrawn for use by the lumber yard is subject to a compensating use tax.

(b)Property and services subject to tax.

The compensating use tax is imposed on the use within New York State of the following tangible personal property and services.

(1) Tangible personal property purchased at retail.

(2)

(i) Tangible personal property manufactured, processed or assembled by the user;

(a) if items of the same kind are offered for sale by him in the regular course of business; or

(b) if items are used as such or incorporated into a structure, building, or real property by a contractor, subcontractor or repairman in erecting structures or buildings, or building on, or otherwise adding to, altering, improving, maintaining, servicing or repairing real property, property or land, as the terms real property, property or land are defined in the real property tax law, if items of the same kind are not offered for sale as such by such contractor, subcontractor or repairman or other user in the regular course of business.

(ii) In essence, when a manufacturer, processor or assembler uses its products as such or incorporates the product into real property it has made a use of the property subject to the compensating use tax. This is so whether or not it offers items of the same kind for sale in the regular course of business and whether the product was manufactured, processed or assembled inside or outside New York State.

Example 2:

A company with manufacturing facilities located in New Jersey that manufactures lawn furniture exclusively, made office furniture for its own use in its New York City offices. The use of this office furniture is subject to tax.

Example 3:

Company C manufactures and installs custom designed, in- ground swimming pools. The pools are manufactured at Company C's plant in New Jersey and are transported to the customer's site where Company C installs the pool. Company C only sells the pools on an installed basis. When Company C installs its pool at a customer's site in New York State Company C has made a use of its manufactured product within New York State.

(iii) While the use of tangible personal property manufactured, processed or assembled by the user is subject to compensating use tax, the base on which the use tax is computed varies depending on whether the manufacturer, processor or assembler offers items of the same kind for sale in the regular course of business. (See section 531.3[b] of this Part.)

Cross-reference:

See section 528.28 of this Title regarding exemption from tax for property donated by the manufacturer, processor or assembler of the property to an exempt organization.

(3) Information services which would be subject to tax under subdivision (1) of section 1105(c) of the Tax Law.

Example 4:

A New York State firms intends to expand its market for one of its products which is similar to products of its competitors. The firm engages an Ohio survey group to provide it with market data on such products. The data provided by the survey group is obtained from its records and is an information service which is not private or individual in nature. When the report and data is sent to the New York firm no tax is collected by the survey group. Although no tax was collected, the New York firm is liable for a compensating use tax on the price paid for the information received.

(4) Services subject to tax under subdivisions (2) or (3) of section 1105(c) of the Tax Law which have been performed on tangible personal property however acquired where not acquired for resale.

Example 5:

Aircraft engines are sent by the owner to a firm outside of New York State for rebuilding. The engines are rebuilt and returned to the owner in New York State. The owner of the engines was charged for the rebuilding services and replacement parts but was not charged a sales tax. the rebuilding service and replacement parts are subject to the compensating use tax.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 531.1