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April 1, 2014

New Procedures for Documenting Sales and Use Tax Exemptions Granted by Industrial Development Agencies

The New York State Department of Taxation and Finance ("Tax & Finance") recently issued Technical Memorandum TSB-M-14(1.1)S outlining its new policy regarding the manner in which exemptions from sales and use taxation granted by an industrial development agency (an "IDA") are documented and reported.

Form ST-123

As part of its new policy, Tax & Finance introduced a new form to be used by IDA agents when making tax-exempt purchases for an IDA project. Beginning June 1, 2014, an IDA agent must provide vendors with a completed Form ST-123 (IDA Agent or Project Operator Exempt Purchase Certificate) for all purchases intended to be exempt from State and local sales and use taxation. This form replaces the sales tax exemption letter or agency exemption letter currently issued by IDAs (an "Exemption Letter") evidencing the appointment of the project operator or developer as the agent of the IDA. Prior to this new policy, in order to avail itself of the IDA sales and use tax exemption, an IDA agent presented the Exemption Letter to vendors at the time of purchase.

Form ST-123 must be completed by the IDA agent and include the name of the IDA, the project name and address, and the start and end dates of the IDA agent's appointment.

Commencing June 1, 2014, all IDA agents must complete and provide Form ST-123 for purchases even if they had previously used an Exemption Letter to evidence an IDA sales and use tax exemption. The failure to furnish a completed Form ST-123 with each purchase will result in loss of the exemption for that purchase.

We recommend that IDAs contact IDA agents of existing projects who are currently using an Exemption Letter and provide them with a copy of Form ST-123 and instructions regarding its mandatory use. In addition, even though an Exemption Letter is no longer sufficient to evidence the IDA sales and use tax exemption, we recommend that IDAs continue to provide an Exemption Letter for new projects and include in the Exemption Letter instructions on the use of Form ST-123.

Contractors and Subcontractors

Each contractor and subcontractor must be appointed as an IDA agent in order to use the IDA sales and use tax exemption. To facilitate this appointment, we recommend an IDA specifically authorize the project operator or developer to appoint contractors and subcontractors as sub-agents of the IDA. Such sub-agent appointments should be effective only upon submission to the IDA of: (1) an executed sub-agent appointment agreement (in a form approved by the IDA) and (2) a completed Form ST-60 to be submitted by the IDA to Tax & Finance. Upon such appointment, the sub-agent must use Form ST-123 as outlined above.

Contractors and subcontractors who have not been appointed as IDA agents or subagents should continue to use Form ST 120.1 for construction material purchases. However, a contractor or subcontractor must be appointed as an agent of the IDA in order to avail itself of the IDA sales and use tax exemption for purchases or rentals of construction equipment, tools and supplies that do not become part of the finished project.

Amendment, Revocation or Cancellation of Appointment

If an IDA amends, revokes or cancels its appointment of an agent, or if an agent's appointment becomes invalid for any reason, the IDA must, within 30 calendar days, send a letter to the address listed on Form ST-60. The letter should indicate that the agent's appointment has been amended, revoked or canceled, or is no longer valid, and include the effective date of the change. A copy of the original Form ST-60 must be attached to the letter.


The agent directly appointed by the IDA (generally, the project operator or developer) must continue to complete annually Form ST-340, which shows the total value of all State and local sales and use taxes exempted during the calendar year related to the IDA project. The total value should include the exemptions taken by the agent directly appointed by the IDA, as well as its contractors, subcontractors, consultants, and others, whether or not appointed as agents of the IDA.

If you have any questions with respect to the use of Form ST-123 or appointment of sub-agents or would like assistance in implementing the new Tax & Finance policy, please feel free to contact Connie Cahill at (518) 429-4296 or, Garrett DeGraff at (518) 429-4235 or, Jean Everett at (202) 756-1954 or, Susan Katzoff at (315) 425-2880 or or Thomas O'Mara at (607) 398-3710 or


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