Common types of credits
Many common credits are listed below, but the list is not all-inclusive. If you are claiming a credit based on a reason other than the ones listed, use the "Other" box and explain the basis for the claim in the space provided.
Tangible personal property or services you resold
If you paid sales tax on items or services that you later resold, you may be entitled to a credit if:
- you sold the item or service in its present form. You may take a credit for the tax you paid on the items against the tax you collected from your customer.
- you resold the item as part of a taxable service. The item must become part of the property being serviced, or it was transferred to the purchaser as part of the service.
- you resold the service.
Utilities that you resold
If you pay tax on utilities to your vendor, and subsequently sell the utilities to your customers, you may claim a credit for the amount of tax you paid to your utility supplier against the tax you collected from your customer on the separate, identifiable sale.
For example, a landlord cannot usually buy utilities under a resale exemption because the utilities will not be exclusively resold, (that is, the utilities are also used for common areas). When the landlord charges the tenants for their usage based on the submetered amounts, the landlord may claim a credit for the tax paid on the utilities that were resold.
Hotel occupancy resold by room remarketers
Room remarketers are required to collect sales tax on the rent paid to them by their customers and are entitled to claim a credit for the amount of sales tax paid to the hotel operator.
A business is not a room remarketer if it:
- reserves rooms on behalf of its customers, and
- does not have the right to determine the amount of rent that its customer pays for the room (i.e., the rent is fixed and determined by the hotel, and is not allowed to be marked-up by the business that reserves the room on behalf of its customer).
For more information, see:
- TSB-M-10(10)S, Amendments Affecting the Application of Sales Tax to Rent Received for Hotel Occupancy by Room Remarketers, and
TSB-M-12(8)S, 2012 Budget Legislation Affecting the Sales Tax Obligations of Hotel Room Remarketers
Contractors - materials incorporated into real property
As a contractor, you generally must pay sales tax to your suppliers when you buy materials and supplies, and you must collect sales tax on certain jobs you perform for your customers. If you are registered for sales tax purposes, you can claim credits for sales tax you paid on some of the materials you use in these jobs and apply the credits against the tax you owe on your sales tax return.
In general, you can claim a sales tax credit on your return if you:
- paid sales tax on building materials to a supplier;
- transferred those materials to your customer in a taxable repair, maintenance, or installation service; and
- charged sales tax to your customer.
Real property located outside New York State
You can claim a credit for the tax you paid on materials provided that:
- you incorporated the materials into real property located outside of this State; and
- such incorporation is pursuant to a contract.
For example: A contractor purchases a quantity of lumber in New York State to use for a construction contract in Vermont. Once 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.
The real property is located in an empire zone
You may be entitled to claim a credit for state sales tax and some local sales taxes paid on certain construction materials incorporated into a project for a Qualified Empire Zone Enterprise (QEZE) in an empire zone. The QEZE must issue to you a copy of their Certificate of Eligibility, issued by Empire State Development, as proof that they qualify as a QEZE. The credit rate depends on the date that the QEZE was certified.
For more information, see Publication 718-QZ, Qualified Empire Zone Enterprise (QEZE) Sales and Use Tax Refund Rates.
The real property is owned by an exempt organization
If you perform a job for an exempt organization or governmental entity, you should not charge sales tax on the work, whether it's a capital improvement or a repair and maintenance job. Building materials transferred to the customer in performance of the job can be purchased without the payment of sales tax using Form ST-120.1, Contractor Exempt Purchase Certificate (Box D). If you did not use the exemption certificate when you purchased the materials, you may claim a credit for sales tax paid on the purchase of materials that were used in the project. You cannot claim a credit for sales tax paid on other supplies even though they may be used in an exempt job.
The materials remained tangible personal property after installation
Occasionally, contractors make retail sales to their customers. For example, when you build a house for someone, you may arrange for the purchase and delivery of the washer and dryer for the customer. If you are registered for sales tax, you may purchase these items without paying sales tax using Form ST-120.1 (Box D). You will then have to collect sales tax from the customer on the sale of the washer and dryer.
If you pay tax on the purchase of the washer and dryer, you can claim a credit for the sales tax you paid on your purchase against the tax you collect from the customer. The same applies if you resold leftover lumber or plumbing supplies that you did not install.
The materials were transferred to your customer in a taxable repair, maintenance, or installation service
You may claim a credit for the sales tax you paid on materials when the work you perform is classified as a taxable repair, maintenance, or installation service, but not when it is classified as a capital improvement.
For more information, see Publication 862, Sales and Use Tax Classification of Capital Improvements and Repairs to Real Property.
Bad debt under Tax law Section 1132(e)
You may claim a bad debt credit if you collected and remitted tax with your sales tax returns on receipts that later became uncollectible. Don't claim the credit until the debt becomes uncollectible and is charged off for federal income tax purposes. You must electronically submit a schedule that shows how you computed the state and local taxes underlying the credit.
Certain requirements and limitations apply to the credit:
- You must claim the credit within three years from the due date of the return where the tax was payable by you to the Department. (The date you charged the bad debt off for federal purposes is irrelevant to determining which bad debts may be claimed.)
- You cannot claim a credit for a transaction that's financed by, or assigned to, a third party. It doesn't matter if the third party has recourse to you on that debt. In certain circumstances, receivables transferred to a captive finance company will not be treated as debts assigned to a third party.
- Only an amount equal to the tax remitted to the Department as tax may be claimed as a credit. To determine this amount, it may be necessary to recalculate how payments by a customer were applied to their account if the payments were not proportionally applied to reduce both the purchases made and any accompanying service charges (including interest, penalties or finance charges) on the account. It is not acceptable to apply a customer's payments first to pay these service charges with only the remaining balance of a payment being applied to the underlying purchases made on the account.
- If you later recover or collect any amount attributable to a debt you claimed as a bad debt credit you must remit the tax on this amount with your first return after the recovery or collection.
See sales tax regulations section 534.7 for additional restrictions and examples of properly calculating a bad debt credit.
Tax was remitted in a prior period and was refunded to the customer during the current period
If you collected and remitted tax on a sale during a previous period and you refunded the tax to the customer during the current period, you may claim a credit for the amount of tax you refunded to your customer.
Materials stored in bulk, or fabricated in New York, which was then shipped outside New York for use outside the state
You may claim a refund or credit of the tax you paid on materials when:
- the use of materials in New York is restricted to fabricating (including the incorporation of it into or assembling it with other tangible personal property), processing, printing, or imprinting the materials;
- the materials are shipped to a point outside New York State for use outside the State; and
- the materials are used within three years from the date the tax was payable.
Utilities used directly and exclusively in manufacturing
If you are a manufacturer, you may claim a credit for sales tax you paid on utilities (electricity, gas, propane, steam, and other fuels) consumed directly and exclusively to power your production equipment. Eligible businesses are those that produce goods for sale by manufacturing, processing, generating, assembling, refining, mining or extracting operations.
For more information, see Publication 852, Sales Tax Information For: Manufacturers, Processors, Generators, Assemblers, Refiners, Miners and Extractors, and Other Producers of Goods and Merchandise