A New York appellate court affirmed the Division of Tax Appeals (DTA) denial of a telecommunications company’s refund request on sales tax paid on its purchases of electricity. The telecommunications company argued that its electricity purchases were exempt from sales tax under one of two alternative grounds. First, the company argued that its purchase of electricity was an exempt sale for resale N.Y. Tax Law § 1105(a) because the electricity was resold to its customers “as a component part of the telecommunication services that it provides.” Alternatively, the company argued that, as a public utility, its purchases qualified for the exemption under N.Y. Tax Law § 1105(b) for purchases of electricity by a utility for resale as such – i.e., buying electricity to resell as electricity.
The court affirmed the DTA’s conclusion that the company did not meet its burden of proving that it purchased electricity for resale under either resale exemption theory. N.Y. Tax Law § 1105(a) requires that, in order to qualify for the resale sales tax exclusion, items purchased and resold must be tangible personal property. The court not only concluded that the electricity, in this context, was not tangible personal property within § 1105(a)’s sale for resale exemption, but cited a previous decision involving the company’s predecessor reaching the same conclusion. Matter of XO N.Y., Inc. v Comm’r of Taxation & Fin., 51 A.D.3d 1154 (N.Y. App. Div. 2008). The court also concluded that the exemption in N.Y. Tax Law § 1105(b) was not met because the company did not purchase electricity to resell as electricity. Instead, finding that the electricity was purchased to provide company’s telecommunications services.