N.Y. Comp. Codes R. & Regs. tit. 20 § 541.14
Example 1:A homeowner engages a contractor to remodel the kitchen. The contract calls for replacing built-in appliances, countertops, cabinets and floor covering. The contractor bills the homeowner for the remodeling of the kitchen and correctly charges tax only on the sale and installation of the floor covering. The installation of the built-in appliances, countertops and cabinets constitutes capital improvements as described in section 527.7 of this Title. Thus, charges for such installation are exempt from tax to the homeowner. Since the floor covering is not the initial installation, as described in subdivision (b) of this section, it is subject to tax.
Example 2:A new home is constructed and its owner contracts to have hardwood floors installed in the bedrooms, living and dining rooms. In addition, the owner will have wall-to-wall carpet installed in these rooms before the house is occupied. The carpet qualifies as a capital improvement as it is the initial finished floor covering and the installation occurred during the original construction.
Example 3:Assume the same facts as in Example 2, except that the carpet will not be installed in one of the bedrooms until three months after the owner moves in because the carpet manufacturer cannot make timely delivery. The installation of the carpet still qualifies as a capital improvement since installation occurred within six months of construction in accordance with subdivision (b) of this section.
Example 4:Assume the same facts as in Example 2, except that the home owner does not have carpet installed until the house is a year old. The carpet installation does not qualify as a capital improvement since it was not made within six months of the time the home was built, and charges for both labor and material are taxable.
Example 5:A floor covering contractor removes wall-to-wall carpet and installs new wall-to-wall carpet padding and carpet as its replacement. The total charge for the installation and sale of the padding and carpet is subject to sales tax, as it is not installed as the initial finished floor covering.
Example 6:A tenant enters into a bare-wall lease to rent the entire third floor of a new office building. The tenant has the right to finish the third floor of the building to suit its needs. When the lease terminates, all improvements made by the tenant will become the property of the owner of the building. As part of finishing the premises, the tenant arranges with a building contractor for the installation of a suspended ceiling, construction of offices, paneling the walls, installation of complete electrical, plumbing, heating and air-conditioning systems and for the installation of wall-to-wall carpet. The new ceiling, offices, paneling and electrical, plumbing, heating and air-conditioning systems qualify as capital improvements in accordance with section 527.7 of this Title. The new wall-to-wall carpet qualifies as a capital improvement in accordance with subdivision (b) of this section because it is the installation of the initial finished floor covering in new construction.
Example 7:Assume that the tenant in Example 6, in the tenth year of the lease, hires a contractor to renovate the premises. The existing ceiling, overhead lighting, wall paneling and carpet are to be replaced. The new ceiling, lighting and paneling qualify as capital improvements in accordance with section 527.7 of this Title. However, the charge by the contractor for the new carpet and its installation is subject to sales tax because the renovation is not new construction, an addition or a total reconstruction.
Example 8:A room in a house is damaged by a fire that destroys the floor and causes smoke and water damage to the walls and ceiling. The homeowner hires a contractor to make the necessary repairs. The contractor replaces the floor, including the floor joists and plywood sub-floor. Vinyl tile floor covering is installed over the plywood. The contractor also removes and replaces the plaster board in the ceiling and on the walls and paints them. The charge by the contractor for the replacement of the floor joists and plywood sub-floor and the new walls and ceiling are exempt from tax as capital improvements in accordance with section 527.7 of this Title. However, the charge by the contractor for the new vinyl tile floor covering is subject to tax because it is not installed in the total reconstruction of the customer's home. In order for the floor covering to qualify as a capital improvement, most of the major structural elements of the entire building must be replaced. Here, the only structural element replaced was the floor of only one room of the building.
Example 9:A building is destroyed by fire. Only the shell remains. Because of its historical significance, the shell is preserved and the building is totally reconstructed. The foundation is shored up and the major structural elements of the building, including girders, support beams and floor joists and ceiling trusses, are replaced. The initial finished floor covering installed throughout the building at the time of the reconstruction is a capital improvement in accordance with subdivision (b) of this section.
N.Y. Comp. Codes R. & Regs. Tit. 20 § 541.14