N.Y. Comp. Codes R. & Regs. tit. 20 § 527.7

Current through Register Vol. 46, No. 45, November 2, 2024

Section 527.7 - Maintaining, servicing or repairing real property

Tax Law, § 1105(c)(5)

(a)Definitions.

(1)Maintaining, servicing and repairing are terms which are used to cover all activities that relate to keeping real property in a condition of fitness, efficiency, readiness or safety or restoring it to such condition. Among the services included are services on a building itself such as painting; services to the grounds, such as lawn services, tree removal and spraying; trash and garbage removal and sewerage service and snow removal.

(2) Real property, property and land are defined as in subdivision 12 of section 102 of the Real Property Tax Law. Among the items considered in this classification are:

(i) land, including trees thereon and mines and quarries therein;

(ii) buildings and structures erected upon, under or above land, or affixed thereto;

(iii) railroad structures and tracks;

(iv) telephone and telegraph lines, wires, poles and appurtenances;

(v) mains, pipes and tanks for conducting steam, heat, water, oil, gas, electricity; and

(vi) boilers, heating, ventilating, lighting apparatus, plumbing.

(3)

(i) A capital improvement is an addition or alteration to real property:

(a) which substantially adds to the value of the real property, or appreciably prolongs the useful life of the real property;

(b) which becomes part of the real property or is permanently affixed to the real property so that removal would cause material damage to the property or article itself; and

(c) is intended to become a permanent installation.

(ii)

(a) Floor covering is a capital improvement only when it is installed as the initial finished floor covering in new construction, in a new addition to existing construction or in a total reconstruction of existing construction.

(b) The term floor covering includes carpet, carpet tile, carpet padding, linoleum and vinyl roll floor covering, linoleum tile, vinyl tile and other similar floor coverings. For a detailed discussion and description, see section 541.14 of this Title.

(iii) A mobile home is not an addition or capital improvement to real property, property or land, regardless of how it is installed. For a detailed discussion and description, see Part 544 of this Title.

(b)Imposition.

(1) The tax is imposed on receipts from every sale of the services of maintaining, servicing or repairing real property, whether inside or outside of a building.

Example 1:

The replacement of broken windows is a repair to real property, which is taxable.

Example 2:

Company A enters into an agreement to provide periodic maintenance services on elevators and escalators belonging to its customers. The contract provides for inspection, lubrication and the performance of necessary repairs. These services are taxable as maintaining, servicing of real property which is subject to the sales tax.

(2) All services of trash or garbage removal are taxable, whether from inside or outside of a building or vacant land.

Example 3:

A carting firm picks up trash and garbage at its customers' premises and dumps the materials at sites away from its customers' premises. Receipts from the sale of this service are taxable.

Example 4:

A contractor who is erecting a building engages a carter to haul away the debris resulting from the construction activities. The amounts paid to the carter are not taxable.

Example 5:

A contractor enters into an agreement with a farmer to demolish an old farm structure and haul away the resulting debris. The charge for demolition and debris removal is not subject to the tax.

(3) When the service of maintaining, servicing or repairing real property is performed in conjunction with the transfer of title to tangible personal property, the price of the tangible personal property is also subject to tax.

Example 6:

The periodic repainting of a building is not a capital improvement. The customer pays tax on the service. The painter pays tax on the materials he used for painting, subject to a right of refund or credit.

Example 7:

A landscaping company enters into a contract to mow a customer's lawn on a regular basis; re-seed in the spring and fall and fertilize as needed. The total charge to the customer for labor and materials is taxable as maintenance, and the tax paid by the company on materials used in performing the service which become part of the property serviced may be claimed as a credit or refund.

Example 8:

A customer has a maintenance contract with a heating and air conditioning company to supply all parts and emergency services for his heating and air conditioning system for one year for a set fee. The cost of the contract is taxable, whether or not any services or parts are actually furnished, as it is a contract for maintenance of real property. The company may apply for a refund or credit of any tax paid on parts purchased for use under the contract which become part of the property serviced for resale, or are transferred to the purchaser in performance of the service.

(4) The imposition of tax on services performed on real property depends on the end result of such service. If the end result of the services is the repair or maintenance of real property, such services are taxable. If the end result of the same service is a capital improvement to the real property, such services are not taxable.

Example 9:

The replacement of some shingles or patching of a roof is a repair, but a new asphalt shingle roof is a capital improvement.

Example 10:

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 into 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.

(5) Any contractor who is making a capital improvement must pay a tax on the cost of materials to him, as he is the ultimate consumer of the tangible personal property.

Cross reference:

For special rules concerning the imposition and computation of the compensating use tax owed by a manufacturer who incorporates its own product into real property to the specifications of a capital improvement, see section 531.3(b) of this Title.

(c)Exclusions.

(1) Repair and maintenance services are not taxable when rendered by an individual who does not offer these services to the public in a regular trade or business. This exclusion is limited to individuals who do occasional odd jobs in their spare time, and who do not regularly perform such services either in their own business or as an employee.

Example 1:

A homeowner has his lawn mowed by a student on vacation who does this kind of work only occasionally. The homeowner is not required to pay sales tax on such services.

Example 2:

A person advertises in the newspaper that he is available for repairing concrete walks on weekends and during evening hours. Such person is in a regular trade or business, offering his services to the public, and must register as a vendor and charge appropriate tax.

Example 3:

A company furnishes painters to a customer for painting the premises of the customer. The customer's payment to the company consists of the labor cost for the painters and an amount for profit, overhead and commissions. The customer supplies the paint, and all their materials, equipment and supplies. The customer supervises the manner of performing the work and directs where the painting shall be done. The company warrants that if any of the work is unsatisfactory within one year, it will at its own expense repair the condition. The company is responsible for all employment-related taxes, contributions and benefit costs. The company is performing a taxable service of maintaining the customer's property. It is not performing an interior cleaning and maintenance service, which is limited in scope to janitorial duties. The company is required to collect the tax on its entire charge to the customer; the amount for profit, overhead and commission are not deductible. (See Part 526 of this Title-Receipt.) The customer is required to pay a tax on the paint, and all other materials, equipment and supplies.

(2) Where repair and maintenance services are rendered by an employee for his employer, the wages, salaries and other compensation paid to the employee are not receipts subject to tax for the performance of such services.

(3) Interior cleaning and maintenance services performed on a regular contractual basis for a term of not less than 30 days are excluded from tax, with the exception of window cleaning, rodent and pest control and trash removal from buildings.

(i) The contract pursuant to which the services are performed may be oral or written; if it is oral, evidence such as regular billing listing the date of service will be required.

(ii) If the contract or billing does not separately state the charges applicable to taxable services and nontaxable services, the entire charge is subject to tax.

(iii) The person performing the nontaxable service is required to pay the sales tax on the materials he uses in performing such service.

(iv) Interior cleaning and maintenance services include ordinary janitorial services such as dusting, cleaning and waxing of the walls and floors of a building, oiling of door hinges, replacing light bulbs, and simple repairs such as replacement of washers.

Example 4:

A homeowner who engages a service company to clean the complete interior of his home on a one-time basis is required to pay the sales tax.

Example 5:

A business concern who engages a service company to provide regular interior cleaning and maintenance services in its offices for a period of 30 days or more under a contract is not required to pay the tax since the contract covers a period of 30 days or more. However, all tangible personal property used by the service company, including floor wax, oil, etc., are taxable to the service company as these items are being transferred in connection with an exempt service.

(d)Municipal services.

(1) When services are provided by a municipality, which are of a type ordinarily provided by a private person, then such services shall not be subject to tax when the charge for such services is a tax based on the assessed valuation of the property in the municipality rather than specific charges for such services.

(2) Charges for services rendered by municipalities are subject to tax when such charges are for services of a type ordinarily provided by private persons and the charges are arrived at based solely on the services rendered to a specific individual, family or location.

(3) Municipalities which provide services subject to tax are required to register as a vendor with the bureau and collect the appropriate tax which shall be remitted with a timely filed return.

(4) The fact that a charge is added to a real property tax bill for the purposes of collection and levy, shall not change the taxability of the charge.

Example 1:

A town levies a tax based on assessed valuation on all taxpayers for garbage removal services. This tax is not subject to the sales tax.

Example 2:

A town charges a fee to residents who desire garbage removal, at a rate of $15 quarterly, and rents dumpsters for a fee of $5 quarterly. These fees are subject to tax.

Example 3:

A municipality charges its property owners $10 for the removal of snow only when the property owner has not removed the snow himself. The $10 charge is taxable.

Example 4:

A municipality requires that all water meters be tested periodically. If the municipality tests the meter and charges a fee, the fee is taxable.

Cross reference:

See Part 529 of this Title, with respect to municipalities.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 527.7