N.Y. Comp. Codes R. & Regs. tit. 20 § 534.3

Current through Register Vol. 46, No. 16, April 17, 2024

Section 534.3 - Refunds and credits based on certain uses

Tax Law, § 1119(a)

(a)Authorization.

Where a sales or compensating use tax has been correctly, legally, and constitutionally imposed and paid on the purchase of tangible personal property, a refund or credit of State and local taxes paid pursuant to subdivision (a) of section 1105 or section 1110 of the Tax Law on the sale or use will be allowed to the purchaser or user when, to the satisfaction of the Department of Taxation and Finance, the purchaser shows that such tangible personal property was used in one of the following manners:

(1) the tangible personal property was used in the performance of a contract, and pursuant to such contract, was incorporated into real property, as described in section 527.7 of this Title, located outside of New York State (see subdivision [b] of this section);

(2) the tangible personal property was purchased in bulk, or any portion thereof, stored in New York State and not otherwise used in New York State by the purchaser or user, but was reshipped to a point outside New York by such purchaser or user for use outside of New York State (see subdivision [c] of this section);

(3) the tangible personal property was sold to or used by a contractor or subcontractor solely in the performance of a pre-existing lump sum or unit price construction contract (see subdivision [d] of this section);

(4) the tangible personal property was not purchased for resale, but its use in this State was restricted to fabricating (including incorporating it into or assembling it with other tangible personal property), processing, printing, or imprinting such property, and such property was shipped outside of this State for use outside of this State (see subdivision [e] of this section);

(5) drugs or medicine sold to or used by a veterinarian if such drugs or medicine were:

(i) used by the veterinarian in rendering services, exempt pursuant to section 1115(f) of the Tax Law, to livestock or poultry used in the production of tangible personal property by farming; or

(ii) sold to a person entitled to claim the farmer's exemption under section 1115(a)(6) of the Tax Law for use by such person on production livestock or poultry. (For farming exemption, see section 528.7 of this Title);

(6) for purposes of paragraphs (1), (2), and (4) of this subdivision, movement of the property from one taxing locality in New York to another may also give rise to a refund or credit of the local sales or use tax paid on the original transaction. However, such movement may be subject to a use tax, depending upon the nature of the subsequent use in the second locality.

(b)Property incorporated into realty outside of New York State.

(1) A purchaser or user who has paid the tax on tangible personal property may claim a refund or credit for such tax provided:

(i) he incorporates the property into real property located outside of this State; and

(ii) such incorporation is pursuant to a contract.

Example:

A contractor purchases a quantity of lumber in New York State to use for a construction contract in Vermont. At the time the contractor purchases the lumber and accepts delivery in New York State he is liable for sales tax. To the extent the lumber is incorporated into real property in Vermont, a refund or credit of the sales tax paid by the contractor on such lumber is allowable.

(iii) If the tangible personal property is moved from New York County A to County B, and it meets the conditions outlined in subparagraphs (i) and (ii) of this paragraph, any County A local tax paid on the tangible personal property may be claimed by the contractor as a refund or credit. However, any local compensating use tax imposed by County B is due on the material.

(c)Property purchased in bulk and reshipped.

(1) A refund or credit is allowable for tangible personal property, or any portion thereof:

(i) which is purchased in bulk;

(ii) which is stored and not used by the purchaser or a user in New York State;

(iii) which is later reshipped by such purchaser or user outside of New York State for use outside New York State; and

(iv) provided the property is reshipped as required within three years after the date the tax was payable to the Department of Taxation and Finance and that application is made within three years from the date the tax was payable to the Department of Taxation and Finance.

(2)

(i) For the purpose of this subdivision only, the phrase purchased in bulk means a single purchase from a single vendor of items of the same kind of tangible personal property, of such quantity that it would require storage of some part for future use.

(ii) For the purpose of this subdivision, the phrase stored and not used means the placement of property in storage for later withdrawal for shipment outside of the State or use outside of the State.

(3) The purchaser of tangible personal property who has paid sales or use tax thereon, and who placed such property in storage to await reshipment outside of the State for use outside of the State, is allowed a refund or credit of the tax paid on the portion of the property so reshipped and used. If the tangible personal property is stored in a locality that imposes a local sales tax and it is later shipped to another point in New York State for use, the purchaser is entitled to a refund or credit of the local tax, in the same manner as outlined in this subdivision for the statewide sales tax. However, if the tangible personal property is used by the purchaser or used in a New York State locality imposing sales tax on the receipts from the sale of tangible personal property, a tax for that locality is due.

Cross-reference:

Compensating Use Tax, see Part 531 of this Subchapter.

Example 1:

A multi-location firm purchases a truckload of office forms and stationery and stores it in a New York State warehouse. Applicable State and local sales tax is paid by the purchaser. A portion of the forms and stationery is later shipped to several of the firm's locations outside of New York State. A credit or refund is allowable for the tax paid on that portion of the forms and stationery shipped outside of New York State for use outside of New York State.

Example 2:

A corporation purchases 150 desks from vendor A, and 60 typewriters from vendor B, and accepts delivery of all of these items in New York State. Applicable sales tax is paid by the purchaser. It stores the items in its warehouse, then ships 100 desks and 50 typewriters to a new office located out-of-state for use there. The balance of the desks and typewriters are used in New York locations. The corporation is entitled to a refund or credit of tax paid on 100 desks and 50 typewriters after shipment outside the State.

(d) Property used in pre-existing lump sum or unit price construction contracts.

(1) The phrase pre-existing lump sum or unit price construction contract as used in this subdivision means a contract for the construction of improvements to real property under which the amount payable to the contractor or subcontractor is fixed without regard to costs incurred by him in the performance thereof, and which:

(i) was irrevocably entered into prior to the date of the enactment of article 28 of the Tax Law or the enactment of a law increasing the rate of tax imposed under article 28 of the Tax Law or the imposition of a tax or an increased rate authorized by article 29 of the Tax Law; or

(ii) resulted from the acceptance by a governmental agency of a bid accompanied by a bond or other performance guaranty which was irrevocably submitted prior to the date of enactment of a law imposing a tax or increasing the rate of tax imposed under article 28 or authorized by article 29 of the Tax Law.

(2)

(i) A contractor or subcontractor who has paid sales tax on the purchase of tangible personal property used solely in the performance of a pre-existing lump sum or unit price construction contract may claim a refund or credit which will be allowable within the following limitations:

(a) the refund or credit is limited to any tax paid by the contractor or subcontractor which exceeds the tax which would have been due at the time the contract was entered into or the bid submitted had not article 28 been enacted or a tax authorized by article 29 been imposed;

(b) where a tax rate, State or local, is increased by the enactment of a law, local law, ordinance or resolution the refund or credit is limited to any tax paid by the contractor or subcontractor resulting from the increase in the tax rate, provided the statute increasing the tax rate was enacted after the contract was entered into or the bid submitted; or

(c) to qualify for a credit or refund, the tangible personal property must be used in a contract as described above within three years after the date the tax was payable to the Department of Taxation and Finance, and application for the credit or refund must be filed within three years after the date the tax was payable to the Department of Taxation and Finance.

(ii) Tangible personal property eligible for a credit or refund because it was used solely in the performance of a pre-existing lump sum or unit price contract is not limited to materials incorporated into the project, supplies consumed in construction and equipment rentals are also included as long as their sole use involved the eligible contract.

Taxes on telephone, electric, and other services are not eligible for a credit or refund under this subdivision, therefore, the rate in effect at the time of purchase is due without a right to a refund or credit of tax paid.

Example:

On March 1, 1972 a contractor irrevocably enters into a lump sum contract. On July 1, 1972 the locality in which the construction site is located enacts a tax effective September 1, 1972. After September 1, 1972 the contractor pays the increased rate of tax on his purchases of materials, rentals of equipment, storage of material, and electricity. The contractor is eligible for a refund of the increase in tax on the purchase of materials and the rental of equipment; but not the increased tax on the storage charge or the electric service.

(e)Property, the use of which is restricted to fabricating, processing, printing, or imprinting.

(1) A purchaser who has paid the tax on the tangible personal property may claim a refund or credit for such tax provided:

(i) the use of the tangible personal property in New York is restricted to fabricating such property (including the incorporation of it into or assembling it with other tangible personal property), processing, printing, or imprinting such property;

(ii) such property is then shipped to a point outside New York State for use outside the State; and

(iii) such property is so used within three years from the date the tax was payable to the Department of Taxation and Finance, and application for the credit or refund is filed within three years after the date the tax was payable to the Department of Taxation and Finance.

(2) The fabricator, assembler, processor, printer, or imprinter may be either the purchaser or a user distinct from the purchaser.

Example 1:

An Ohio corporation purchases a special paper and ink for its corporate checks from a New York State vendor. The New York State vendor delivers the paper and ink to a New York State printer who will print the checks. When the paper and ink is delivered to the New York State printer the Ohio corporation is deemed to have taken delivery of the property in New York State and is liable for the sales tax on the paper and ink. When the checks are shipped by the printer to Ohio, a refund or credit for the tax paid on the paper and ink will be allowable.

Example 2:

A multi-location firm purchases equipment and has it delivered to its New York State location. In New York State the firm's employees assemble the equipment and ship the finished product to New Jersey for installation. As delivery of the equipment occurs in New York State, the firm is liable for New York State sales tax. When the finished product is shipped to New Jersey, a refund or credit for the tax paid will be allowable even though the purchaser of the tangible personal property in this instance is both the assembler and ultimate user.

Example 3:

A company purchases 20,000 advertising circulars which are delivered by the printer to a firm in New York State that will address and mail them. The printer charges and collects the New York State sales tax. A refund or credit will be allowed on that portion of the circulars which are mailed to addresses outside of New York State.

Cross-reference:

Also see Administrative Provisions, section 534.2 of this Part for the method of applying for a refund or credit.

(f)Drugs or medicine used by veterinarians in rendering certain services to livestock and poultry used in production, or sold to farmers for such use.

A veterinarian may apply for a credit or refund of sales tax paid on his purchase of drugs and medicines:

(1) used in the practice of veterinary medicine on livestock or poultry, exempt pursuant to section 1115(f) of the Tax Law, used in the production of tangible personal property for sale, by farming;

(2) sold to a person entitled to the farming exemption provided by section 1115(a)(6) of the Tax Law for his use on livestock or poultry used in the production of tangible personal property for sale, by farming; or

(3) provided the drugs and medicine are used by the veterinarian as described above within three years after the date such tax was payable to the Department of Taxation and Finance and that an application for a credit or refund is filed within three years after the date such tax was payable to the Department of Taxation and Finance.

Cross-reference:

Veterinarian and practice of veterinary medicine, see section 528.24 of this Title. Farming, see section 528.7 of this Title.

Example 1:

A veterinarian treats several cows in a dairy herd for mastitis. The veterinarian may apply for a credit or refund of the sales tax paid at the time of purchase on the drugs and medicine he uses to treat the affected cows. Additionally, he may claim a credit or refund of sales tax paid on drugs or medicine he sells the farmer to treat the herd.

Example 2:

A veterinarian treats an injured racehorse and sells the trainer drugs and medicine to continue treatment. Since the racehorse is not used in the production of tangible personal property for sale, by farming, the veterinarian may not file a claim for credit or refund of the tax paid on such drugs and medicine since a refund or credit is not allowable.

Example 3:

A veterinarian renders veterinary services to puppies raised for resale by a kennel. The puppies, although held for resale, are not livestock or poultry and, therefore, the veterinarian may not file a claim for a credit or refund of tax paid on such drugs and medicine used in conjunction with the services since a refund or credit is not allowable.

Example 4:

An operator of a fur farm purchases drugs and medicine from a veterinarian to treat animals he is raising for fur. Although the operator is engaged in farming, fur bearing animals are not livestock or poultry. Therefore, the veterinarian may not file a claim for a credit or refund of tax paid on his purchase of the drugs and medicine since a refund or credit is not allowable.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 534.3