New York: To Avoid the Doghouse, Taxpayer Required to Collect Sales Tax

The New York Department of Taxation and Finance ruled that per minute charges and annual membership fees for access to secure climate-controlled doghouses were subject to New York sales tax. The taxpayer rented doghouses to business owners at various locations throughout Brooklyn. This allowed dog owners to take their dogs on errands without having to enter the store with the dog or otherwise tie the dog up outside.  Dog owners who paid an annual membership fee had access to the doghouses and were then charged a per minute fee for the time a dog was housed in the unit. Under New York law, sales tax is imposed on storage services, which is defined as the “storing of tangible personal property not held for sale in the regular course of business and the rental of safe deposit boxes or similar spaces.” The Department concluded that the per minute charge was taxable because a dog owner was storing his/her dog, which is tangible personal property, in the doghouse unit.  Citing to the Costco case, the Department further determined that the membership fee was taxable because it was effectively a prepayment made for access to taxable storage services. The rental fees paid by business owners were also taxable as the doghouses constituted rentals of tangible personal property. For more information on TSB-A-20(29)S, please contact Judy Cheng at 212-872-3530.