New York – TSB Recommends Rejection Of ST 120.1 Exemption Certificate (Good Faith)

On June 5, 2018, New York released TSB-A-18(2)S detailing their reasoning behind the recommended rejection of a Contractor Exempt Purchase Certificate (ST 120.1) provided by a customer attempting to rent a truck with no sales tax. The customer was doing work for an exempt entity however, box A indicated that the items purchased pursuant to the certificate would “become an integral component part” of the Exempt Organizations property. The rental truck did not do that. Good Faith was questioned and bad tax result ensued. Caveat Venditor.

The TSB goes on to address the reasoning for the rejection. A good discussion on Good Faith…

A certificate is “accepted in good faith” when, upon the exercise of reasonable ordinary due care, a vendor has no knowledge that it is false or fraudulently presented. See 20 NYCRR 532.4(b)(2)(i). In this instance, the Form ST-120.1 that was given to Petitioner indicates that the TPP being purchased would, among other things, become an integral component part of a structure, building or real property owned by an exempt organization. Although the truck is TPP, there is no basis for Petitioner to conclude that the truck would have (or did) become a component part of an Exempt Organization’s building, structure, or real property. Thus, Petitioner could not have accepted the Form ST-120.1 for the truck rental in this case in good faith. Therefore, Petitioner should collect tax from the customer on this purchase.

See TSB-A-18(2)S here:

TSB-A-18(2)S

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