New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter I - Franchise and Certain Business Taxes
Subchapter F - Tax On The Furnishing Of Utility Services
Part 45 - Gross Income
Section 45.9 - Sales for resale

Universal Citation: 20 NY Comp Codes Rules and Regs ยง 45.9

Current through Register Vol. 46, No. 12, March 20, 2024

(a) Receipts from sales or services for ultimate consumption or use by the purchaser in this State are taxable, but receipts from sales for resale, as distinguished from sales for consumption, are not taxable.

Question 37:

The A gas company in New York sells and delivers to the B gas company in New York two million cubic feet of gas, which the B company resells to consumers. Are the receipts from the sale of A to B taxable? Answer: No.

(b) The determination of whether a sale or service is for consumption or use, or for resale, is often difficult. The problem arises most frequently in the case of sales to owners or lessees of loft buildings, office buildings, apartment houses, hotels, etc., where the seller does not know if the product is all to be resold, or whether some of it is to be resold and some used by the purchaser, and if so, how much. The following method of handling such situations is suggested:

(1) The original seller shall include in its gross income all receipts from such sales but may take a deduction for the amount resold by the purchaser at its (the vendor's) sales price. If the original seller has not, at the time the report for a given period is being rendered, received information from his purchaser of the number of units resold, the deduction may be claimed in a succeeding period when the information is received.

(2) In case the product is sold by the original seller at graduated rates, based upon the quantity sold, the average sale price shall be used as the basis for claiming credit on account of resales by the vendee.

(3) If a utility does not wish to use the foregoing method, it may submit to the State Tax Commission, for approval, the plan it desires to use.

Question 38:

A utility sells 15,000 kilowatt hours of electricity to an office building during the month of July, 1950, which is billed as follows:

Demand charge ....... $100
10,000 K.W.H. at four cents ....... 400
5,000 K.W.H at two cents ....... 100
$600

The average price per K.W.H. is, therefore, four cents. The office building uses 7,000 K.W.H. and resells 8,000 K.W.H. to its tenants. How should the utility determine its tax? Answer: The utility will include $600 in its gross income for the month of July, 1950, and will, claim a deduction of $320 from its gross income on account of the 8,000 K.W.H. resold by the office building.

The same method will apply in the case of sales of gas, steam, water or refrigeration.

(c) Where a hotel or apartment house furnishes telephone service to its guests or tenants and provides such service through facilities of a telephone company, the hotel or apartment house is considered as the consumer or user of all service, whether used by the hotel or apartment house or by its guests or tenants, and the entire receipts of the telephone company from telephone service furnished to such hotel or apartment house, will be included in its gross income. Local or toll messages furnished to guests or tenants are not considered resales by the hotel or apartment house, but are sales by the telephone company direct to the guests or tenants, through the medium of the hotel or apartment house. To the extent that a hotel or apartment house supplements the facilities and services rendered its guests or tenants, by making available to them the facilities and services of the telephone company, the hotel or apartment house is considered as being engaged in the business of selling telephone service and shall include in its gross operating income its entire receipts from such supplemental service. (See sections under Part 46-Gross Operating Income.) Thus, the telephone company will pay a tax upon the amount which it receives from the sale of telephone service and the hotel on the amount which it receives from the sale of supplemental telephone service.

Question 39:

A telephone company furnishes service to a hotel, which uses part of such service in the operation of the hotel. Guest calls, both local and toll, are also included in the service. The telephone company charges the hotel rental for facilities and specified rates for local and toll messages. Are such charges to be included in gross income by the telephone company? Answer: Yes.

(d) Utilities, which manufacture the products they sell, frequently have residuals or by- products, resulting from the manufacturing process, which are sold. Receipts from such sales are taxable if the sales are for ultimate consumption or use by the purchaser in this State.

Question 40:

A gas company, as a by-product from the manufacture of gas, obtains tar, which it sells to a manufacturer of roofing supplies, who processes the tar and resells it. Are the receipts of the gas company from the sale of this by-product taxable? Answer: No. The above sale is not a sale for ultimate consumption, but is a sale for resale.

Question 41:

A gas company, as a result of the manufacture of gas, has a by- product of coke which it sells to householders for heating purposes. Are the receipts from such sales taxable? Answer: Yes.

Question 42:

If the gas company referred to in the preceding question sells the coke to a coal dealer, who in turn sells it to householders, are the receipts of the gas company from such sales taxable? Answer: No.

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