Vehicle Fleet Company Wins New York Sales Tax Dispute

Gelco Corp. prevails in long-running case over sales tax credits for lease adjustments.

Published on Feb. 26, 2026

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The New York Appellate Division ruled that Gelco Corporation, a vehicle fleet management company, properly took credits on its sales tax returns for sales taxes refunded to its lessees based on adjustments made at the end of lease agreements. The case demonstrates the importance of perseverance when pursuing a tax dispute, as Gelco prevailed after losing at lower levels of appeal.

Why it matters

This decision provides an important precedent for companies that lease vehicles and make end-of-lease adjustments to the original estimated rent amounts. It affirms that they can claim sales tax credits for the refunded amounts, which can have a significant impact on their tax liabilities.

The details

Gelco leases commercial vehicles to businesses across the country, including in New York. Its lease agreements typically last 367 days with renewal options. The leases contained a terminal rental adjustment clause (TRAC) that allowed the actual rent to be adjusted up or down at the end of the lease based on the vehicle's residual value. When the residual value was higher than projected, the lessee was entitled to a rent refund, including the associated sales tax. Gelco claimed credits on its sales tax returns for these refunded amounts, but the New York tax authorities initially denied the credits. After losing at lower levels of appeal, Gelco persisted and ultimately prevailed at the Appellate Division, which ruled that the credits were proper given the contractual reality of the TRAC leases.

  • On February 5, 2026, the New York Appellate Division, Third Department, issued its ruling in the case.
  • Gelco had been pursuing this sales tax dispute for several years, losing at the Bureau of Conciliation and Mediation Services, an Administrative Law Judge, and the Tax Appeals Tribunal before taking the case to court.

The players

Gelco Corporation

A vehicle fleet management company that leases commercial vehicles to businesses across the country, including in New York.

New York Division of Taxation

The state tax authority that initially denied Gelco's sales tax credits and assessed the company.

New York Appellate Division, Third Department

The state appellate court that ultimately ruled in favor of Gelco, determining that the company was entitled to the sales tax credits.

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What’s next

The New York Division of Taxation may decide to appeal the Appellate Division's ruling to the state's highest court, the Court of Appeals.

The takeaway

This case demonstrates the importance of perseverance when pursuing a tax dispute, as Gelco ultimately prevailed after losing at lower levels of appeal. The decision provides an important precedent for companies that make end-of-lease adjustments, affirming their ability to claim sales tax credits for refunded amounts.