Is 'cleaning-up after the trades' construction cleaning of new condominium units — removing plaster, paint, dust, and packaging debris before occupancy — exempt from sales tax as part of the underlying capital-improvement construction project, or is it taxable maintenance?

Plain-English summary

XYZ Limited Partnership, developer of a luxury New York City condominium building, hired a contractor to clean every apartment interior during construction, before the units are occupied — what the construction industry calls "cleaning-up after the trades." The scope of work is detailed and extensive: an initial "construction clean" of bathrooms and kitchens (tile, countertops, cabinets, vanities, removing packaging and protective coatings), a later "final clean" after the punch list is completed (removing dust from cabinets/drawers, packing materials and adhesive residue from appliances, cleaning bathtub/shower enclosures, toilets, sinks, mirrors, marble and tile surfaces, excess plaster/paint/compound, sweeping/mopping floors, cleaning light fixtures and closet hardware), plus bagging and staging debris for removal. This cleaning contract covers only the construction phase — any later janitorial or routine-maintenance cleaning is handled separately, after occupancy.

New York's rule for services on real property depends on the "end result": if the end result is repair/maintenance, the service is taxable; if the end result is a capital improvement, it's exempt. The Department leaned on a 1982 appellate decision (Building Contractors Association v. Tully) that addressed the closely related question of construction/demolition debris removal — the court there held that hauling away construction debris doesn't fit the ordinary meaning of "maintaining, servicing or repairing" (keeping property in a condition of fitness), and that because completing a capital improvement generally can't happen without removing the resulting construction debris, that debris-removal service falls within the "end result" exemption for capital improvements.

Extending that same reasoning to construction cleanup, the Department held that XYZ's "cleaning-up after the trades" service — removing plaster, paint, packaging, and dust residue from brand-new apartment interiors as part of finishing the building before occupancy — is part of the capital improvement itself, not a separate taxable maintenance service. So the charges to XYZ for this construction-phase cleaning are exempt, and XYZ should give the cleaning contractor a Capital Improvement Certificate. The Department was careful to draw a boundary around this holding, though: it explicitly does not address cleaning provided in other contexts, like ordinary repair/maintenance work or routine janitorial service after occupancy — that kind of cleaning remains taxable real-property maintenance under the general rule.

What this means for you

Developers and general contractors on new construction

Pre-occupancy "cleaning-up after the trades" work tied directly to completing new construction can ride the same capital-improvement exemption as the underlying construction itself — get a Capital Improvement Certificate to the cleaning contractor to document it.

Cleaning contractors serving construction sites

The exemption here is tied specifically to construction-phase cleanup that's part of finishing a capital improvement — routine janitorial or post-occupancy maintenance cleaning for the same building is a completely separate, fully taxable service, so keep those contracts and invoices clearly distinguished.

Accountants and tax professionals

This opinion extends the "end result" logic from Building Contractors Association v. Tully (originally about construction debris removal) to construction cleanup services — a useful citation anytime a client's service is generated by, and inseparable from, completing a capital-improvement project, even if the service itself (cleaning) doesn't sound like "construction."

Common questions

Q: Is all cleaning done at a construction site tax-exempt?
A: No — only cleaning that's genuinely part of completing a capital-improvement construction project, performed before the building/units are ready for occupancy. Ordinary janitorial or routine-maintenance cleaning, even at the same property, is taxable.

Q: What paperwork does the developer need to document this exemption?
A: The developer should issue a Capital Improvement Certificate to the cleaning contractor, the same documentation used for the underlying construction work.

Q: Does this ruling cover cleaning services after the building is occupied?
A: No — the Department specifically limited its holding to construction-phase cleanup and stated it doesn't address cleaning provided as repair/maintenance or routine janitorial service.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(9) (capital improvement definition)
• Tax Law § 1105(c)(3) (installation exception for capital improvements); § 1105(c)(5) (real property maintenance)
• 20 NYCRR § 527.7(a)(1), (b)(4) (maintaining/repairing definitions; end-result test)
• 20 NYCRR § 541.7(b) (contractor debris-removal purchase exemption for capital improvements)

Cases referenced:

• Building Contractors Association, Inc. v. Tully, 87 AD2d 909, 449 NYS2d 547 (April 1, 1982), TSB-H-78(8.3)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2002.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a02_60s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-02(60)S
Sales Tax
December 13, 2002

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S011102B

On June 26, 2001, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Imowitz Koenig & Co., LLP, 125 Park Avenue, New York, New York 10017.
The issue raised by Petitioner, Imowitz Koenig & Co., is whether cleaning services
purchased by its client, XYZ Limited Partnership (XYZ), are subject to sales and compensating use
tax when such services are used in completing a capital improvement contract.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
XYZ is the owner/developer of a luxury condominium building located in New York City.
XYZ has entered into an agreement with a contractor to clean all apartment units during the
construction of this new residential building.
Cleaning will occur during the completion of the building and prior to the occupancy of the
apartment units. This type of cleaning is known in the construction industry as “cleaning-up after
the trades.” The purpose of the cleaning is to remove all construction residue from the apartments
including packaging and protective materials, plaster, paint, compound and dust.
The agreement between XYZ and the cleaning contractor provides the following:
“The Contractor shall provide all labor and material to clean all apartment interiors. This
Scope of Work shall include but not be limited to the following:
a)

Construction clean, (prior to punchlist) of apartment bathrooms, powder
rooms, and kitchens. All tile and countertops to be cleaned, inclusive of
cabinets and vanities (inside & out). Removal of all packing materials,
stickers or protective coatings from cabinetry. A second cleaning (Final) of
Kitchens and Bath will occur after punchlist is completed.

b)

Final clean (after punchlist) of apartment interiors, windows and window
frames.

c)

Final cleaning includes removal of all dust from cabinets and cabinet
drawers. Removal of all packing materials, stickers or protective coatings
from all appliances. Includes the removal of any residue left from tape
and/or adhesive.

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d)

Cleaning of all parts of the bathtubs/shower enclosures, toilets, sinks,
mirrors, and medicine cabinets. Included cleaning of marble and tile
surfaces.

e)

Remove any excess plaster, paint or compound.

f)

Includes all sweeping, dry mopping of floors.

g)

Includes cleaning of all light fixtures and grilles, closet shelving and mirrored
slider doors.

h)

Includes cleaning of hopper window gasket and closing it.

i)

All debris will be placed in plastic bags supplied by contractor and left in an
area to be determined.”

The cleaning contract in question relates only to the construction of the new building. Any
cleaning required after the construction of the building (i.e., janitorial cleaning or routine
maintenance) will be performed either by the owner of the unit or by XYZ under a separate contract.
Applicable Law and Regulations
Section 1101(b)(9) of the Tax Law provides, in part:
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) of the Tax Law, in part, imposes tax upon:
The receipts from every sale, except for resale, of the following services:
*

*

*

(3) Installing tangible personal property ... or maintaining, servicing or
repairing tangible personal property ... except:

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*

*

*

(iii) 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 article....
*

*

*

(5) Maintaining, servicing or repairing real property, property or land, as such
terms are defined in the real property tax law, whether the services are performed in
or outside of a building, as distinguished from adding to or improving such real
property, property or land, by a capital improvement as such term capital
improvement is defined in paragraph nine of subdivision (b) of section eleven
hundred one of this chapter....
Section 527.7(b)(4) of the Sales and Use Tax Regulations provides, in part:
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. (Emphasis added)
Section 541.7(b) of the Sales and Use Tax Regulations provides, in part:
Capital Improvements. A contractor may purchase the service of trash or
debris removal without payment of tax where:
(1) the contractor performs work which constitutes a capital improvement,
to real property, property or land;
(2) the contractor generated the trash or debris to be removed from such real
property, property or land as a result of such work;
(3) the contractor obtains a properly completed certificate of capital
improvement from the contractor's customer; and
(4) the contractor or such customer furnishes a copy of such certificate to the
person performing such trash or debris removal service.

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Since the contractor's purchase of the trash or debris removal service is in
conjunction with the performance of a capital improvement, the contractor's total
charge to its customer for the capital improvement is not subject to tax. (Emphasis
added)
Opinion
XYZ is the owner/developer of a luxury condominium building located in New York City.
XYZ has entered into an agreement with a contractor to clean the units during the construction of
the building.
Cleaning will occur during the completion of construction of the building and prior to the
occupancy of the apartment units. This type of cleaning is known in the construction industry as
“cleaning-up after the trades.” The purpose of the cleaning is to remove all construction residue
from the apartments including packaging and protective materials, plaster, paint, compound and dust.
In Building Contractors Association, Inc. v. Tully, 87 AD2d 909, 449 NYS2d 547, April 1,
1982, TSB-H-78(8.3)S, demolition and construction debris removal services were determined to be
related to the preparation of a work site for future construction or part of the ongoing construction
of a capital improvement. The court stated in part:
“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” (20 NYCRR 527.7[a][1])
(emphasis added). The removal of debris resulting from demolition or construction
at a capital improvement project hardly fits within that definition.
*

*

*

It is true that the “capital improvement” tax exemption for sales of tangible
personal property (Tax Law, §1115, subd. [a], par. [17]) applies only when the
personal property becomes part of the realty. . . . Almost by definition, personal
property cannot constitute a capital improvement unless it becomes part of the realty.
In the case of capital improvement-related services, however, such a physical test
cannot be applied, and the Tax Commission has instead incorporated the criterion of
the “end result” of the service to determine taxability (20 NYCRR 527.7[b][4]).
Since the completion of a capital improvement project generally cannot be
accomplished without removal of construction and demolition debris, the services
at issue here fall well within the commission’s “end result” test for exemption from
the tax. (Emphasis added)

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Extending the court's rationale to the facts presented here, the services rendered under the
agreement between XYZ and the cleaning contractor during construction will qualify as part of the
capital improvement. Under the facts of this Opinion, these services will not be subject to sales tax.
Therefore, the charges to XYZ for cleaning services related to construction of the building will be
exempt. XYZ should issue a Capital Improvement Certificate to the cleaning contractor.
This opinion does not address the taxability of cleaning services when provided in other
circumstances such as in conjunction with repair and maintenance services or as routine janitorial
services. Generally, services to real property, including cleaning services, not performed as part of
a capital improvement are taxable under Section 1105(c)(5) of the Tax Law.

DATED: December 13, 2002

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

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