Tax Law, §§ 1105(c)(2), 1110, 1111(a)
(a) Fabricators and manufacturers who install
their fabricated or manufactured product into real property are
contractors.
(b)
Fabricators
as contractors.
(1) When a
contractor-fabricator purchases
tangible personal property which he fabricates
and installs to the specifications of a
capital improvement, the value added by
such
fabrication is not subject to the use tax.
Example 1:
A contractor-fabricator purchases steel beams from a
manufacturer and pays the sales tax on his cost. His employees fabricate the
beams to job specifications and install the beams in a capital improvement job.
The contractor-fabricator is not subject to a use tax on the value added by his
fabrication.
(2) However,
where a
contractor fabricates
tangible personal property of others, without
installation, he is required to collect the tax on his total charges even if
the property is to be installed by another to the specifications of a
capital
improvement. If he fabricates
tangible personal property and sells the
tangible
personal property, the total charge for the
tangible personal property and
services performed thereon is subject to tax.
Example 2:
A contractor purchases steel beams which must be fabricated
before they can be installed. The work is subcontracted out for fabrication.
The fabricator's charge to the contractor for the fabrication of the steel
beams which the contractor will install is subject to the tax.
(3) Machinery and equipment used
predominantly to fabricate tangible personal property which the fabricator
installs are subject to the tax.
(4) When a fabricator uses machinery and
equipment directly and predominantly to process
tangible personal property for
sale without
installation (as the term
directly and
predominantly is used in section
528.13
and the term
processing is used in section
531.2 of
this Title), such machinery and equipment is exempt from the New York State and
local sales and use taxes, including the taxes imposed in New York City under
section
1107 of the Tax Law.
(c)
Manufacturers as
contractors.
(1) Manufacturing is the
production of tangible personal property that has a different identity from its
ingredients. Manufacturing includes the production of standardized items as
well as the production of items to a customer's specifications.
(2) When a manufacturer incorporates its
manufactured product into real property in New York State to the specifications
of a capital improvement, the manufacturer is making a use of the product that
is subject to use tax. The amount subject to use tax depends on whether the
manufacturer offers items of the same kind for sale in the regular course of
business.
(3) When a manufacturer
fabricates its manufactured product and later incorporates the product into
real property in New York State to the specifications of a
capital improvement
to real property, the manufacturer does not owe a use tax on the value added by
the
fabrication. However, the incorporation of the manufactured product into
real property in New York State is a use of the product that is subject to use
tax. The amount subject to tax depends on whether the manufacturer offers items
of the same kind for sale in the regular course of business.
Cross-reference:
For a detailed discussion of the computation of use tax on
property manufactured by the user, see section
531.3(b)
of this Title.
(4) Machinery
and equipment used directly and predominantly to produce
tangible personal
property for sale, as the terms
production and
directly and predominantly are used in section
528.13
of this Title, are exempt from the New York State and local sales and use
taxes, including the taxes imposed in New York City under section
1107 of the Tax Law.
Cross-reference:
For production machinery and equipment, see section
541.6
of this Part. For computation of compensating use tax on fabricated or
manufactured property, see Part 531 of this Title.
