Tax Law, §§ 1101(b)(4)(i), (9); 1105(c)(3), (5);
1115(a)(17)
(a) The term
customers in this classification includes, but is not limited
to:
(1) residential customers; and
(2) business customers.
(b)
Capital improvements
contracts.
(1) Purchases. All purchases
of tangible personal property (excluding qualifying production machinery and
equipment exempt under section
1115[a][12] of the Tax
Law) which are incorporated into and become part of the realty or are used or
consumed in performing the contract are subject to tax at the time of purchase
by the contractor or any other purchaser. A certificate of capital improvement
may not be validly given by any person or accepted by a supplier to exempt the
purchase of these materials.
(2)
Labor and material charges. All charges by a contractor to the customer for
adding to or improving real property by a capital improvement are not subject
to tax provided the customer supplies the contractor with a properly completed
certificate of capital improvement.
(3) Direct payment permit. A direct payment
permit cannot be used as a device to defer payment of the sales tax on
purchases which are taxable. A contractor who receives a direct payment permit
from a customer cannot use such permit to defer his payment of tax on purchases
used by him or incorporated into a capital improvement to real property. The
contractor's liability for the tax on his purchases are not relieved by his
customer's direct payment permit.
Cross-reference:
For information on direct payment permits, see section
532.5 of
this Title.
(4) Documents;
capital improvement contracts.
(i) When a
properly completed certificate of capital improvement has been furnished to the
contractor, the burden of proving the job or transaction is not taxable and the
liability for the tax rests solely upon the customer.
(a) The prime contractor should obtain a
certificate of capital improvement from the customer and retain it as part of
his records. Copies of such certificate must be furnished to all subcontractors
on the job and retained as part of their records.
(b) A certificate of capital improvement may
not be issued by a contractor, subcontractor or any other person to a supplier
on the purchase of tangible personal property.
(ii) Where a contractor does not receive a
capital improvement certificate from a customer, the contract or other records
of the transaction will prevail. In such case:
(a) where the contractor does not receive a
capital improvement certificate, collects tax on the full invoice price and the
job is a capital improvement to real property, the contractor is liable for the
tax on the cost of materials incorporated into the job, plus the tax collected
from the customer. The customer is entitled to a refund of the tax paid to the
contractor; or
(b) where the
contractor does not receive a capital improvement certificate, collects no tax
on the charges billed to the customer and the job is a capital improvement to
real property, the contractor is liable for the the tax on the cost of
materials incorporated into the job performed.
(iii) If a contract includes the sale of
tangible personal property which remains tangible personal property after
installation, the contractor must collect the appropriate New York State and
local taxes from the customer on the selling price, including any charge for
installation, of the tangible personal property unless a properly completed
exemption certificate is issued by the customer. The contractor may apply for a
credit or refund of taxes he has paid on purchases of the tangible personal
property that remain tangible personal property after installation.
Cross-reference:
For refunds and credits, see Part 534 of this Title. For
vendors' obligations to the Department of Taxation and Finance in relation to
exemption certificates, see section
532.4
of this Title.
Example 1:
A contractor sells a building he has constructed and, as a
part of the sale agreement, installs free standing water fountains which remain
tangible personal property when installed. The contractor's billing to his
customer must separately state all charges for tangible personal property
included in the sales agreement. The New York State and applicable local tax
rate must be collected on the total charges for the water fountains including
any installation charges. In this instance, the contractor may purchase the
water fountains tax-free using a contractor exempt purchase certificate. If he
pays the tax to his supplier, he is entitled to a refund or credit of the tax
paid on the purchase of the water fountains.
Cross-references:
For production machinery and equipment, see section
541.6
of this Part. For equipment, tools, and supplies, see sections
541.9
and
541.10 of this
Part. For use tax liability, see Part 531 of this Title. For refunds and
credits, see Part 534 of this Title.
(c)
Agency contracts.
(1) If a customer enters into an agency
contract with a prime contractor and all subcontractors, all purchases of
materials for such contract are taxable to the customer (other than qualifying
production machinery and equipment exempt under section
1115(a)(12) of the Tax
Law). In order to create an agency relationship, all of the following
conditions must be met:
(i) purchases must be
billed or invoiced by the vendor to the customer or to the contractor
specifying that the contractor is acting as agent for the customer
(e.g., X contractor, as agent for Y, name of corporation) and
identify the place of delivery;
(ii) payment must be made by the customer or
by the contractor, acting as agent, directly to the vendor from a special fund
created by the customer for this specific purpose; and
(iii) deliveries must be made to the job
site; or under certain circumstances (such as where the materials require
additional fabrication before installation on the job site or for storage to
protect the materials from theft or vandalism prior to installation at the job
site) deliveries may be made to a site, other than the job site, providing the
ultimate delivery of the materials is made to the job site. Where delivery is
made to a site, other than the job site, the purchases must be billed or
invoiced by the vendor to the customer or to the contractor as agent, identify
the place of delivery, the customer's full name and address and the job site
location where the materials will ultimately be delivered for
installation.
(2) Under
an agency relationship, the sale of tangible personal property is deemed to be
a retail sale to the customer (principal) and the customer is liable for the
tax due on his purchases of such tangible personal property.
(3) A contractor is liable for the tax due on
purchases made under a purported agency contract if subsequently it is
determined the contract does not qualify as an agency contract.
Example 1:
A contractor enters into a purported agency contract with a
customer for the construction of a capital improvement to real property. The
customer or contractor, acting as agent for the customer, makes taxable
purchases of materials, and purchases and rental of tools and/or equipment and
supplies. Subsequently, it is determined the contract does not qualify as an
agency contract. The contractor is liable for the tax due on the purchases or
rentals of materials, tools and/or equipment and supplies. The contractor
should include the tax as part of his cost of materials and services billed to
the customer. The customer may submit a claim for refund or credit of the tax
paid on purchases or rentals made before it was determined the contract did not
qualify as an agency contract, providing the claim is submitted within three
years of the date the tax was payable to the Department of Taxation and
Finance.
Example 2:
Same as the example in subdivision (b) of this section
except the customer is a holder of a direct payment permit. The customer either
issues the direct payment permit to vendors and makes tax free purchases or
issues the direct payment permit to the contractor, who acting as agent for the
customer, uses the direct payment permit to make tax free purchases.
Subsequently, it is determined the contract does not qualify as an agency
contract. The contractor is liable for the tax due on the purchases or rentals
of materials, tools and/or equipment and supplies. The contractor should
include the tax as part of his cost of materials and services billed to his
customer.
If a proposed agency contract differs from the conditions
in this paragraph, copies of the proposed contract and procedures may be
submitted for an opinion to the Instructions and Interpretations Unit, Sales
Tax Section, Technical Services Bureau, W.A. Harriman Campus, Albany, NY
12227.
(d)
Maintaining, installing, repairing, and servicing tangible personal property
and real property.
(1) Tangible
personal property.
(i) Charges for repair,
service, maintenance, and installation of tangible personal property which
retains its identity as tangible personal property are taxable to the customer
based on the full invoice price.
(ii) Some items of tangible personal property
that retain their identity as tangible personal property after installation
are:
(a) theater seats;
(b) bowling lanes and related
equipment;
(c) free-standing
shelves, counters, bars and appliances (refrigerators, stoves, window air
conditioning units); and
(d) above
ground swimming pools.
Example 1:
A customer contracts for the installation of a washer and
dryer to be hooked up to existing wiring and plumbing in his home. The charge
for the installation is taxable.
Example 2:
A contractor sells and installs an above-ground swimming
pool. The pool consists of a vinyl liner supported by an aluminum and wood
frame, which rests on the ground, and a wood and metal deck. The vinyl liner
rests on a bed of sand to prevent damage. The deep end (hopper) of the pool is
set approximately two feet in the ground. The pool may be dismantled and moved
without substantially damaging the real property. The installation of this pool
is not a capital improvement, as it may be dismantled and moved without
substantial injury to the land, there is no intent that it become a permanent
installation and it has not become affixed so that it has become part of the
real property. Therefore, the charges for the sale and installation of the pool
are subject to the tax.
(iii) A subcontractor must collect tax on all
his charges to a prime contractor for repair, service, maintenance, and
installation of tangible personal property unless the prime contractor issues a
properly completed exemption certificate or a capital improvement certificate
to the subcontractor.
(iv) For
treatment of repairs, service, maintenance, and installation charges for
production machinery and equipment, see section
541.6
of this Part.
(2) Real
property. Charges for repair, service, and maintenance to real property, except
for interior cleaning and maintenance services of a janitorial nature performed
on a regular contractual basis for a term of not less than 30 days, are
taxable. However, charges for the services of window cleaning, rodent and pest
control, and trash removal from buildings are also subject to tax.
Cross-reference:
For debris removal, see section
541.7 of
this Part. For exclusion of interior cleaning and maintenance services, see
section
527.7(c)(3)
of this Title. For repairing, servicing, maintaining production machinery and
equipment, see section
541.6
of this Part.
(3) Purchases.
Purchases of any tangible personal property (excluding qualifying production
machinery and equipment exempt under section
1115[a] [12] of the Tax
Law) made by a contractor, subcontractor, or repairman for use or consumption
in maintaining, servicing, or repairing real or personal property of others are
subject to tax. The contractor is entitled to a refund or credit of tax paid on
such materials incorporated into real property where such property is later
transferred to the purchaser in conjunction with the performance of a service
subject to the tax.
Example 3:
The repainting of a building is not a capital improvement.
The customer must pay tax on the total contract charge for this service. The
painter is liable for the tax on the materials, tools and supplies he uses for
painting ( e.g., paint, spackling, brushes and drop cloths),
subject to a right of refund or credit for the tax paid on the cost of the
materials incorporated into the real property (e.g., paint,
spackling).
Cross-reference:
For refunds and credits, see Part 534 of this
Title.
