Sales tax on invoices in New York

In New York, the kind of job decides the tax line. A capital improvement to real property carries no sales tax to the customer, while repair, maintenance and installation work is taxable on the materials and the labor.

Certificate of Authority and who collects the tax

If your business sells property or services subject to New York sales tax, register and get a Certificate of Authority, which authorizes you to collect the tax. Apply at least 20 days before you begin operating in New York State. Contractors and subcontractors need a valid Certificate of Authority to do repair, maintenance or installation work.

Capital improvements and Form ST-124

A capital improvement is an addition or alteration to real property that meets all three conditions:

• it substantially adds to the property’s value or appreciably prolongs its useful life;
• it becomes part of the property, or is permanently affixed so that removing it would cause material damage to the property or the article itself; and
• it’s intended to be a permanent installation.

For capital improvement work, get a properly completed Form ST-124, Certificate of Capital Improvement, from your customer, including an exempt organization, and don’t collect sales tax. The form relieves you of liability for tax on the work; without it, the contract or other project records can still show the work was a capital improvement. Give a copy to any subcontractor you hire, so its charges are exempt too.

Materials for a capital improvement are generally taxable whoever buys them (for an exempt organization’s property you may be able to buy them exempt with Form ST-120.1), and contractors can’t use the Resale Certificate (Form ST-120) to buy them tax-free. The tax you pay is an expense you can pass on in your overall price.

Two limits on the capital improvement rule:

• Tenants: work done for a tenant may be temporary. If the lease doesn’t transfer ownership of the improvement to the property owner, it may not qualify as a capital improvement; in the Department’s example, sinks that a hair salon must remove at the end of its lease don’t qualify.
• Freestanding appliances, such as a refrigerator, washer and dryer supplied under a contract to build a house, don’t become part of the real property. You may buy them exempt with Form ST-120.1, Contractor Exempt Purchase Certificate, but you collect sales tax on your charge for them.

Repair, maintenance and installation: taxable, labor included

Repair and maintenance keep real property in good working order, readiness or safety, or restore it to that condition, such as fixing a broken railing or replacing damaged roof shingles. All the charges for materials and labor you bill for these jobs are taxable, including expenses and markups. Installing items that don’t become part of the real property, such as freestanding appliances or above-ground swimming pools, is taxable too.

You generally pay tax on the materials you buy, and may take a credit for it when they’re transferred to your customer. In the Department’s example, a contractor who paid $8 in tax on $100 of materials sends in the $30.40 in sales tax collected on the repair bill with its next return, and takes a credit for the $8.

You don’t need to charge a customer eligible for exemption, such as a charitable organization or governmental entity, if you receive a properly completed exemption certificate or other appropriate documentation.

Same trade, different tax line

Many trades do both kinds of work, so check each job. The first three pairs are the Department’s own in TB-ST-104; the roofing and electrical examples come from its older Publication 862, which its current bulletins still cite.

Capital improvement: no tax	Repair or maintenance: taxable
Building a deck	Repairing a broken step
Installing a hot water heater	Replacing the heater’s thermostat
Installing kitchen cabinets	Painting existing cabinets
Replacing a complete roof, or a complete side of a peaked roof	Repairing or spot-replacing roofing
Completely wiring or rewiring a structure, upgrading a service, or adding new circuits	Replacing a switch with a dimmer switch

Installing a sink normally qualifies as a capital improvement. Publication 862 also lists installing central air conditioning systems and replacing complete central air conditioning units as capital improvements. The method of installation can change the answer, so some work is judged case by case.

Services: exempt unless listed as taxable

New York taxes sales of tangible personal property unless they’re specifically exempt, but services are generally exempt unless specifically taxable. Taxable services include maintaining, installing, servicing and repairing tangible personal property; maintaining, servicing and repairing real property; interior decorating and design; and protective and detective services. Building or installing a capital improvement is listed as exempt.

Tax line on your invoice: separately stated

You don’t have to give a written receipt, but any invoice, receipt or sales slip you give must separately state the sales tax due. Only a vendor that gives no written receipt may use the alternate unit price method, a price that includes tax, and must then display a sign saying the price includes sales tax.

• Capital improvement, with Form ST-124 from your customer: no sales tax line. The tax you paid on materials is built into your price like any other expense, and no sales tax is due on your charge; the Department’s sample bill shows materials, including sales tax and markup, and labor.
• Repair, maintenance or installation: charge sales tax on the subtotal of materials and labor.

A contractor isn’t required to accept Form ST-124. If you charge tax on work your customer believes is a capital improvement, the customer can apply to the Tax Department for a refund.

Local rates: where the customer takes delivery

New York’s sales tax is a destination tax: the point of delivery, or where you transfer possession to the purchaser, sets the rate. Cities, counties and school districts can add a local rate to the state rate on this page, and taxable sales in the Metropolitan Commuter Transportation District (MCTD) carry an additional 0.375%. Materials bought in one New York jurisdiction may be taxed at a different rate, higher or lower, if you use them in another.

Landscaping, lawn care and cleaning

• Landscaping: landscapers are contractors, with the same split. Capital improvement landscaping, such as planting a new lawn, shrubs or trees, or installing retaining walls or permanent ponds and water features, isn’t charged sales tax. Removing shrubs and trees is a capital improvement only as part of another capital improvement project; otherwise it’s taxable maintenance.
• Lawn care: mowing lawns, reseeding bare spots, painting or repairing an existing fence, and repairing or opening and closing sprinkler systems are taxable maintenance. Installing items that aren’t capital improvements, such as freestanding water fountains, or replacing flagstones, bricks or small sections of sod, is taxable too. Charge tax on materials and labor, unless the customer gives you a properly completed exemption document.
• Cleaning: interior cleaning and maintenance services performed in New York State, such as ordinary janitorial work, are taxable, whether as needed or under a long-term contract. TB-ST-740 lists carpet, rug, drapery and upholstery cleaning, with laundering and dry cleaning, among exempt services.

Residential energy storage installations

According to TB-ST-740, retail sales of residential energy storage systems equipment and the service of installing it are exempt from state and local sales and use taxes from June 1, 2024 through May 31, 2028.