Sales, Use and International Tax Articles

Sales, Use and International Tax Activity Update - June 2010

New York Ensures Demarcation between Rental Protection and Insurance

Optional amounts a taxpayer pays to a leasing company for rental protection from theft of and damage to leased tangible personal property are not subject to New York sales tax.

The optional charge for the rental protection plan providing a waiver and limitation on damages for theft and equipment damage, though similar in substance to insurance, is not paid by customers under an insurance policy with a licensed insurance carrier, and in fact is not insurance.

This rental protection plan is not a warranty or service plan providing for taxable maintenance and repair services. Similarly, the charge to the customer for the rental protection plan is not an expense of the equipment lessor being passed through in the cost of the lease to the taxpayer.

The charge for the rental protection plan is not a charge for the purchase of tangible personal property and is not a charge for any of the enumerated services subject to tax pursuant to Tax Law §1105, and therefore is not subject to state and local sales and use taxes. Provided the charges for the property protection plan are separately stated when billed to the customer, there is no sales tax due on the charges.

TSB-A-10(18)S, New York Commissioner of Taxation and Finance, April 27, 2010.

The TSB-A-10(18)S can be viewed on the New York State Department of Taxation and Finance Web site.

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