New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter IV - Sales And Use And Other Miscellaneous Taxes
Subchapter A - Sales And Use Taxes
Part 531 - Compensating Use Tax
Section 531.3 - Basis of tax
Current through Register Vol. 46, No. 12, March 20, 2024
(a) Tangible personal property purchased at retail.
Example 1:
A resident of New York purchases clothing in another state. When he brings the clothing into the State, or when it is delivered by mail or common carrier to an address within the State, he is subject to tax.
Example 2:
A retail store purchased a dozen desks at $75 each for sale to its customers at $125 each. It subsequently withdrew one of the desks from inventory to be used in its office. A compensating use tax is due for the desk withdrawn from inventory. The tax is computed on the $75 the store paid.
Example 3:
A machine shop which produces machine tools for sale withdraws from its production line a drill press for use in its building maintenance shop. The drill press was originally purchased exempt from tax for use in production. The use of the drill press in the building maintenance shop is a use subject to compensation use tax, at cost or fair market value, whichever is lower.
(b) Tangible personal property manufactured, processed or assembled by the user.
Example 1:
Company A, located in Suffolk County, manufactures and sells its own brand of garage doors. Approximately 80 percent of the doors are installed by Company A; the balance of the doors are installed by the purchaser.
Company A pays sales tax to its New York State suppliers of wood and glass that become part of the doors. When determining the amount of use tax it owes Company A may take credit for the New York State and local sales taxes paid on these materials.
Example 2:
Windows are items of the same kind when they are a standard size and materials whether or not they are sold from inventory or produced to order from a catalog description. A manufacturer of windows produces from a catalog description square, round and hexagon shaped windows from various materials. The windows regardless of shape, size or materials are considered to be items of the same kind.
When items which are not standard or cataloged are made to the specifications of a particular job, these will not be considered items of the same kind with catalog or inventory sales.
Items made to the specifications of a particular job will not be considered items of the same kind as items made to the specifications of another particular job.
Example 3:
An asphalt conpany produces various types of hot asphalt mixes known as paving compounds and cold asphalt mixes known as patching compounds. The hot asphalt mixes are used by the asphalt company for permanent paving, cannot be packaged and must be used on the day of production. The cold asphalt mixes are used for temporary patchwork, can be packaged and have a shelf life of considerable duration. Because of these distinctions, the hot mixes are not considered to be items of the same kind as the cold mixes.
Example 4:
A manufacturer produces standard type pre-cast steps (all of which are installed by the manufacturer), concrete block and various ornamental pre-cast items.
For purposes of identifying items of the same kind sold by this manufacturer, the three distinct types of products must be considered separately. Therefore, the steps, the blocks and the ornamentals are each items of the same kind.
Tot. amt. sold minus amt. sold to exempt organizations
_____________________
Tot. amt. sold and used minus (amt. sold to plus amt. used for ex. organ.)
Example 5:
An asphalt company produces paving compounds for its own use and sells production overruns to the public by the ton. The total amount used and sold in a reporting period is 100,000 tons broken down as follows:
| 65,000 | tons used in non-exempt contracts |
| 20,000 | tons used in exempt contracts |
| 12,000 | tons sold to non-exempt customers |
| 3,000 | tons sold to exempt organizations |
| 100,000 | tons |
Using the formula set forth above to determine whether or not the producer is offering paving compounds for sale in the regular course of business yields this equation:
15,000 3,000/100,000 (20,000 + 3,000) = 12,000/77,000 = 15.6%
Since the result is more than 10 percent, the producer is regularly engaged in selling paving compounds.
Example 6:
A manufacturer of pre-stressed concrete beams uses them in the erection of buildings. It uses and sells 100,000 square feet of the beams during a reporting period. The following information needed to determine whether it is selling in the regular course of business is extracted from its records.
| Use in non-exempt contracts | 80,000 sq. ft. |
| Used in exempt contracts | 15,000 sq. ft. |
| Sold to non-exempt customers | 5,000 sq. ft. |
| Sold to exempt customers | -0- |
| Total used and sold | 100,000 sq. ft. |
A percentage is computed from this fraction:
5,000 0/100,000 15,000 = 5,000/85,000 = 5.9%
Since the percent arrived at is less than 10 percent, the manufacturer is not engaged in selling pre-stressed concrete beams in the regular course of business.
Example 7:
A desk manufacturer withdraws desks from its inventory for use in its executive office. In the reguar course of business it sells the desk fo $150. It pays a compensating use tax on $150, the price at which it sells such desks.
Example 8:
The asphalt company in Example 5 will be required to pay a compensating use tax on 65,000 tons of production on the basis of the price at which it sold such compounds to other people in the regular course of business and at the tax rate in effect at the job location in New York State where the asphalt is installed.
It will also be required to collect the sales tax on the 12,000 tons of production sold to corporations, unless such corporations provide direct payment permits or properly completed exemption certificates. As 20,000 tons were used for incorporation into real property of exempt organizations, the asphalt company need not pay a tax on that portion of the production. As 3,000 tons of the production were sold to exempt organizations, the company need not collect a tax on those sales.
Example 9:
A steel company manufactures beams for sale to others and for use itself in contracting jobs. It sells over 50 percent of its production to nonexempt persons, and is required to pay a use tax on the steel it uses. Its catalog lists 12-foot steel beams of a certain size at $35. It uses 100 of these beams in erecting a new building for a corporation in New York State. It pays a tax at the rate in effect where the 100 beams are installed on the basis of $35 per beam.
Example 10:
An asphalt company, in the regular course of business sells its products to others. It has no price list or catalog. It sells the following to others in a reporting period:
| Type "A" 700 tons at $5 | $3,500 |
| Type "A" 400 tons at $6 | 2,400 |
| Total 1,100 tons | $5,900 |
| Type "B" 700 tons at $6 | $4,200 |
| Type "B" 200 tons at $7 | 1,400 |
| Type "B" 500 tons at $5 | 2,500 |
| Total 1,400 tons | $8,100 |
The average price per ton in the case of Type A asphalt is $5.36 and the average price per ton for Type B asphalt is $5.79. These are the prices at which the company pays a compensating use tax on any Type A and Type B asphalt which it uses for construction work it performs for nonexempt persons.
Example 11:
An asphalt company, located in Ohio, produces paving compounds for its own use in performing capital improvement contracts and repairs for others. It sells none of its product to others. It purchased aggregate and petroleum base materials in Ohio from other vendors. It will be required to pay a use tax on the cost of those materials to the extent not used on exempt organization jobs. The tax rate applicable is the rate in effect in New York State where the asphalt is installed.
Example 12:
Company A produces factory manufactured homes at its plant in Vermont. The components are manufactured in Vermont and the homes are shipped in sections to customer prepared sites where Company A erects the home. Company A only sells its product on an installed basis. It does not sell the individual components.
Company A owes use tax on the individual building components manufactured at its plant in Vermont which were used in erecting homes of customers in New York. The use tax is based on the cost to Company A of the raw materials it used to manufacture the building components. The tax due is computed by multiplying the cost of the raw materials by the tax rate in effect at the site in New York where the home is erected.
Example 13:
Assume the manufacturer in Example 9 takes a standard beam and fabricates it to the specifications of a particular project. Upon use of the fabricated beam it pays a compensating use tax on the price at which it sells similar unfabricated beams to others.
Example 14:
Assume the manufacturer in Example 12 performs fabrication services on a section of the home of one of its New York customers. The use tax is still based on the cost to Company A of the raw materials used to manufacture the building components. The value added by the fabrication service performed by Company A is not subject to tax.
Example 15:
A contractor, located in Pennsylvania, purchases a steel beam from a manufacturer in Pennsylvania. The contractor fabricates the beam to the specifications of a job in Buffalo, New York. Upon installation of the fabricated beam the contractor will owe use tax on the amount paid for the beam. However, the value added by the fabrication services performed by the contractor is not subject to tax.
Example 16:
A contractor, located in Pennsylvania, purchases a steel beam from a manufacturer in Pennsylvania. The contractor arranges for a fabricator in Pennsylvania to fabricate the beam to the specifications of a job in Buffalo, New York. Upon installation of the beam by the contractor in New York, the contractor will owe use tax on the amount paid for the beam. The contractor will also owe use tax on the amount paid for the fabrication service because the fabrication service was purchased by the contractor from a provider of such service.
(c) Services and tangible personal property upon which services were performed.
Example:
A firm purchases preprinted sales contracts for use in its business. It then sends the contracts to a printer, located outside of New York State, so the firm's name and address may be imprinted on the contracts. The printer does not collect the New York sales tax on his printing charge. The printing charges are subject to the use tax when the contracts are returned to this State.
