Is replacing the vinyl liner of an in-ground swimming pool -- pumping out the water, removing the old liner, repairing the pool walls, and installing a new liner -- a tax-exempt capital improvement, or a taxable repair?

Plain-English summary

AJE Supply Centre sells and installs replacement vinyl liners for in-ground swimming pools -- the liner keeps water from leaking out of the pool structure and typically lasts 20-25 years. The replacement job involves pumping the pool dry, removing the old liner, retroweling the sand base, checking and repairing the pool walls for stability and corrosion, installing the new liner, filling the pool, and installing gaskets and faceplates. AJE asked whether this work qualifies as an exempt "capital improvement" to real property.

New York's capital-improvement test asks whether the work substantially adds value or prolongs useful life, becomes a permanent part of the property (removal would cause material damage), and is intended as a permanent installation. The Department found all three satisfied for an in-ground pool liner replacement -- contrasting it with the regulations' own example of an above-ground pool (resting on sand with a removable frame, not affixed to the land), which is explicitly NOT a capital improvement because it can be dismantled and moved without damaging the property. An in-ground liner, by contrast, is integrated into the permanent pool structure itself.

Because the work qualifies as a capital improvement, both the liner and the labor to install it are exempt from sales and use tax -- but AJE needs a properly completed Certificate of Capital Improvement (Form ST-124) from its customer within 90 days of the work. And even though the customer's charge is exempt, AJE itself still owes sales or use tax on its own purchase of the liner and related materials, since a contractor performing a capital improvement is treated as the "ultimate consumer" of the tangible personal property it uses.

What this means for you

Swimming pool contractors and installers

In-ground pool liner replacement is a capital improvement, not a taxable repair -- get a signed Form ST-124 from each customer within 90 days to document the exemption. But remember you still pay tax when you purchase the liner and materials yourself; the exemption applies to your charge to the customer, not to your own cost of goods.

Above-ground vs. in-ground pool distinctions

Don't assume all pool work gets the same tax treatment -- the regulations specifically distinguish a removable, non-affixed above-ground pool (taxable installation) from a permanently integrated in-ground structure (capital improvement). The physical permanence and affixation to the land is what matters, not just that both are "swimming pools."

Accountants and tax professionals

This is a straightforward application of the three-part capital-improvement test in Tax Law § 1101(b)(9)(i), useful as a template for other in-ground fixture replacement/repair questions (liners, integrated equipment) where the above-ground/in-ground contrast in 20 NYCRR § 527.7(b)(4) Example 10 provides a clean point of comparison.

Common questions

Q: Is all swimming pool work exempt from sales tax as a capital improvement?
A: No. It depends on permanence and affixation -- an in-ground liner replacement qualifies, but installing a removable above-ground pool does not, per the regulations' own example.

Q: Does the contractor pay tax on the liner it installs?
A: Yes. Even though the customer's charge for the capital improvement is exempt, the contractor is the ultimate consumer of the liner and related materials and must pay sales/use tax on its own purchase of them.

Q: What paperwork does a pool contractor need for this exemption?
A: A properly completed Certificate of Capital Improvement (Form ST-124) from the customer, obtained within 90 days of performing the work.

Q: Can another pool contractor rely on this ruling?
A: No. It binds the Department only as to this petitioner and the specific liner-replacement work described. Other repair or replacement work should be checked against the same three-part capital-improvement test.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4)(i) (definition of "retail sale")
• Tax Law § 1101(b)(9)(i) (definition of "capital improvement")
• Tax Law § 1105(c)(3)(iii) (exclusion from tax for installation resulting in a capital improvement)
• Tax Law § 1115(a)(17) (exemption for contractor materials that become an integral part of a capital improvement)
• 20 NYCRR § 527.5(b)(4), § 527.7(b)(4)-(5) (capital improvement installation and materials rules)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2000.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a00_5s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(5)S
Sales Tax
January 28, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S990429A

On April 29, 1999, the Department of Taxation and Finance received a Petition for Advisory
Opinion from AJE Supply Centre, Inc., 929 Route 25A, Miller Place, New York 11764. Petitioner,
AJE Supply Centre, Inc., furnished additional information relating to the Petition by telephone on
May 10, 1999.
The issue raised by Petitioner is whether the replacement of a vinyl liner in an in-ground
swimming pool and related services associated with such replacement constitute a capital
improvement and are, therefore, not subject to New York State and local sales and compensating use
taxes.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is in the business of selling and replacing vinyl in-ground swimming pool liners.
The vinyl liner keeps the water from leaking out of the in-ground pool structure. The expected life
of a vinyl in-ground pool liner is 20 - 25 years.
When the vinyl liner of an in-ground pool has to be replaced, Petitioner must first pump the
water from the swimming pool. Petitioner then removes the old liner from the swimming pool
structure. Next, Petitioner retrowels the sand on the bottom of the pool and checks the walls of the
pool for stability and corrosion. If needed, Petitioner repairs the walls. Petitioner then installs the
new vinyl swimming pool liner and fills the pool with water. When this is completed, Petitioner
installs gaskets and faceplates.
Applicable Laws and Regulations
Section 1101(b) of the Tax Law provides, in part:
(b) When used in this article for the purposes of the taxes imposed by
subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section eleven
hundred ten, the following terms shall mean:
*

*

*

(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such or as a physical component part of tangible
personal property, or (B) for use by that person in performing the services subject to

-2­
TSB-A-00(5)S
Sales Tax
January 28, 2000

tax under paragraphs (1), (2), (3), (5), (7) and (8) of subdivision (c) of section eleven
hundred five where the property so sold becomes a physical component part of the
property upon which the services are performed or where the property so sold is later
actually transferred to the purchaser of the service in conjunction with the
performance of the service subject to tax. Notwithstanding the preceding provisions
of this subparagraph, a sale of any tangible personal property to a contractor,
subcontractor or repairman for use or consumption in erecting structures or buildings,
or building on, or otherwise adding to, altering, improving, maintaining, servicing or
repairing real property, property or land, as the terms real property, property or land
are defined in the real property tax law, is deemed to be a retail sale regardless of
whether the tangible personal property is to be resold as such before it is so used or
consumed . . . .
*

*

*

(9) Capital improvement. (i) An addition or alteration to real property which:
(A) Substantially adds to the value of the real property, or appreciably
prolongs the useful life of the real property; and
(B) 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.
Section 1105(c)(3)(iii) of the Tax Law provides an exclusion from tax "for installing property
which, when installed, will constitute an addition or capital improvement to real property, property
or land, as the terms real property, property or land are defined in the real property tax law as such
term capital improvement is defined in paragraph nine of subdivision (b) of section eleven hundred
one of this chapter."
Section 1115(a) of the Tax Law provides, in part:
Receipts from the following shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating
use tax imposed under section eleven hundred ten:
*

*

*

-3­
TSB-A-00(5)S
Sales Tax
January 28, 2000

(17) Tangible personal property sold by a contractor, subcontractor or
repairman to a person other than an organization described in subdivision (a) of
section eleven hundred sixteen, for whom he is adding to, or improving real property,
property or land by a capital improvement, or for whom he is about to do any of the
foregoing, if such tangible personal property is to become an integral component part
of such structure, building or real property; provided, however, that if such sale is
made pursuant to a contract irrevocably entered into before September first, nineteen
hundred sixty-nine, no exemption shall exist under this paragraph.
Section 527.5(b)(4) of the Sales and Use Tax Regulations provides that tax is not imposed
on the charge for installation of tangible personal property which, when installed will be an addition
or capital improvement to real property.
Paragraphs (4) and (5) of Section 527.7(b) of the Sales and Use Tax Regulations provide, in
part:
(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. (Emphasis added)
(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.

-4­
TSB-A-00(5)S
Sales Tax
January 28, 2000

Opinion
Petitioner’s replacement of vinyl pool liners and the related services associated with such
replacement meet the three prong test of Section 1101(b)(9)(i) of the Tax Law in determining
whether such liner replacement constitutes a capital improvement. Upon installation a new liner
substantially adds to the value of the real property, or appreciably prolongs the useful life of the real
property; 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 is intended to become a
permanent installation. Therefore, pursuant to Sections 1105(c)(3)(iii) and 1115(a)(17) of the Tax
Law, Petitioner’s charges for installation of the pool liner and the related services described above,
as well as for the liner itself, will not be subject to sales and use taxes.
Petitioner should receive from its customer a Certificate of Capital Improvement (Form
ST-124), within 90 days from the date of performing the capital improvement. See Section 1132(c)
of the Tax Law and Section 532.4 of the Sales and Use Tax Regulations.
It should be noted that since Petitioner is making a capital improvement when it replaces a
vinyl liner as described above, sales or compensating use tax is due on the cost of the liner and
related materials used by Petitioner in performing the capital improvement, as it is considered the
consumer of the tangible personal property. See Section 1101(b)(4)(i) of the Tax Law and Section
527.7(b)(5) of the Sales and Use Tax Regulations.

DATED: January 28, 2000

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.