When a contractor installs kitchen appliances for hotels, institutions, and tax-exempt organizations, which appliances are taxable free-standing property and which are tax-exempt capital improvements — and does it matter when title to the appliances transfers or whether the customer is tax-exempt?

Plain-English summary

An attorney asked, on behalf of a construction contractor client that installs new kitchens and appliances for hotels, institutions, tax-exempt organizations, and homeowners, how sales tax applies across two billing scenarios. In Scenario 1, the contractor bills its customer progressively as appliances are received, delivered, and installed, with title to the appliances staying with the contractor until the whole project (including a final "punch list") is complete. In Scenario 2, everything is the same except title to the appliances transfers to the customer early, by written agreement, even though the contractor still bears the risk of loss until the project wraps up.

The Department worked through six detailed questions and gave a consistent, multi-part answer. Free-standing appliances — dishwashers, refrigerators, ovens, stoves that remain tangible personal property once installed — never qualify as capital improvements no matter how large the surrounding project is; the contractor must collect tax on the full amount charged for them (including markup), due on the return covering the period the contract is completed, though the contractor can buy them tax-free for resale using a Contractor Exempt Purchase Certificate (Form ST-120.1). Built-in items — cabinets, sinks, built-in stoves/ovens, built-in and walk-in refrigerators/freezers, ducted hoods — generally DO qualify as part of the overall capital improvement and are exempt, as long as the contractor gets a properly completed Certificate of Capital Improvement (Form ST-124) from the customer within 90 days of completion; the contractor itself still owes tax on its own purchase of those materials. Whether title transfers early (Scenario 2) generally doesn't change any of this — tax is still due with the final billing on contract completion — unless the facts show the title transfer is really a separate, distinct sale. But selling to a tax-exempt organization (schools, cities, § 1116(a) charities) changes everything: those sales and installations are tax-exempt regardless of capital-improvement status, with a Contractor Exempt Purchase Certificate flowing to suppliers and either a government purchase order or an Exempt Organization Certification on file. The opinion also flags the separate tenant-installation wrinkle: appliances installed for a tenant rather than a building owner are presumed non-permanent (and so not capital improvements) unless the lease specifically vests title in the landlord and keeps the installation on the premises after the lease ends.

What this means for you

Contractors installing kitchens and appliances

Sort your appliance list into free-standing (always taxable, buy tax-free for resale with Form ST-120.1) versus built-in (potentially exempt capital improvement, get Form ST-124 from your customer within 90 days of completion). Keep those two categories billed and documented separately — this ruling shows the Department is comfortable applying different tax treatment to different items within the very same renovation contract.

Contractors dealing with early title-transfer arrangements

Structuring a deal so title to the appliances passes to the customer before the whole project finishes (often done to protect the customer if the contractor goes out of business) generally doesn't change when or how tax is collected — it's still due with the final billing at project completion, unless the early transfer is genuinely a separate transaction in its own right.

Contractors working for tax-exempt customers

Selling and installing appliances for a school, city, or other § 1116(a) exempt organization takes the whole transaction out of tax entirely, regardless of whether the specific appliance would otherwise qualify as a capital improvement — get a government purchase order (for governmental entities) or an Exempt Organization Certification (Form ST-119.1, for other exempt organizations) and pass copies to your suppliers and subcontractors.

Accountants and tax professionals

This is a comprehensive, six-question working template for mixed capital-improvement/free-standing-property construction contracts, cross-referencing the tenant-installation permanence rules (TSB-M-83(17)S; Flah's of Syracuse) for any project involving leased space, and the bad-debt refund mechanism (§ 1132(e)) for contracts where the customer doesn't fully pay.

Common questions

Q: Are free-standing dishwashers, refrigerators, ovens, and stoves taxable even in a big renovation project?
A: Yes — they remain taxable tangible personal property regardless of project size, though the contractor can buy them tax-free for resale using Form ST-120.1.

Q: Are built-in appliances like built-in stoves or walk-in refrigerators taxable?
A: Generally not to the customer, if they qualify as part of a capital improvement and the contractor obtains a Certificate of Capital Improvement (Form ST-124) within 90 days of completion — though the contractor itself owes tax on its own purchase of those materials.

Q: Does transferring title to the appliances early change when tax is due?
A: Generally no — tax is still typically due with the final billing at contract completion, unless the early transfer is shown to be a genuinely separate sale.

Q: Does selling to a tax-exempt organization change the analysis?
A: Yes — sales and installation of appliances for a § 1116(a) exempt organization (schools, cities, charities) are tax-exempt regardless of capital-improvement status, with the right exemption documentation.

Q: Are appliances installed for a tenant treated the same as for a building owner?
A: Not automatically — tenant installations are presumed temporary (not capital improvements) unless the lease specifically provides that title vests in the landlord and the installation stays after the lease ends.

Q: Can another contractor rely on this exact question-by-question breakdown?
A: No. This opinion binds the Department only for this petitioner's specific facts, though its structure closely tracks the Department's general rules for mixed appliance-installation projects.

Citations and references

Statutes, regulations, and guidance:

• Tax Law § 1101(b)(4), (9) (retail sale; capital improvement)
• Tax Law § 1105(c)(3) (installation services; capital improvement exception)
• Tax Law § 1115(a)(15), (16), (17) (exempt-organization/capital-improvement materials)
• Tax Law § 1116(a) (exempt organizations)
• Tax Law § 1132(c), (e) (exemption certificates; bad debt refunds)
• 20 NYCRR § 541.2(g)(2)(i); § 541.3(d); § 541.5
• TSB-M-83(17)S (Taxable Status of Leasehold Improvements for or by Tenants)
• Publication 862 (Capital Improvements and Repairs to Real Property)

Case law cited:

• Matter of Flah's of Syracuse, Inc. v. Tully, 89 A.D.2d 729

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_6s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-02(6)S
Sales Tax
April 12, 2002

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S001024A

On October 24, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Aaron M. Feinberg, 1777 East 10th Street, Brooklyn, New York 11223.
Petitioner, Aaron M. Feinberg, sets forth a number of questions concerning the application
of sales and compensating use tax to a contractor’s purchase of appliances for a construction project
and the subsequent sale and installation of the appliances by the contractor.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner’s client (Client) is a construction contractor who primarily installs new kitchens
and appliances. Client’s customers include hotels, large institutions, tax exempt organizations such
as schools and cities, and homeowners. The general construction contract does not separate the cost
of the tangible property from the cost of the project. Petitioner presents the following two scenarios
involving Client.
Scenario 1
A large institution contracts to install a commercial kitchen, including refrigerators,
dishwashers, freezers, ovens, stoves, sinks, cabinets, and hood exhausts. The contract provides for
payment as work is being done. When Client receives the appliances from the supplier, a certain
percentage of the allocable cost to such appliances is billed to the customer and collected. When
the appliances are delivered to the customer, an additional amount is billed and collected. When the
appliances are installed additional charges are made so that upon installation approximately 95%
of the final amount due has been billed and collected. In some cases, the appliance is installed and
can function, but certain racks, handles, or hinges are missing or broken and Client must order and
replace them. In some instances, 100% of the cost of the appliances will be billed if the customer
“signs off” on that part of the contract. However, after installation of the appliances there will still
be other work required under the contract that is not yet complete and will be billed later on a
percentage basis. When the contract is almost complete, the customer and Client prepare an “open­
list,” called a “punch list.” Until Client resolves all the items on the punch list, the contract is not
completed. Title to the appliances and liability for them remains with Client until the contract is
complete.

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Scenario 2
Same as in Scenario 1, except that title to the appliances is transferred to the customer by
written agreement before completion of the contract, as work is billed. However, Client retains a
lien on the appliances, and is fully responsible for all losses (including fire and theft) until the entire
project is completed, approved by the customer, and billed in total. Title is transferred before
completion of the project because the customers want protection in the event Client goes out of
business. Under this scenario, some of Client’s customers are tax exempt organizations such as
schools or cities.
Applicable Law and Regulations
Section 1101(b) of the Tax Law provides, in part:
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:
(1) Purchase at retail. A purchase by any person for any purpose other than
those set forth in clauses (A) and (B) of subparagraph (i) of paragraph (4) of this
subdivision.
*

*

*

(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
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, except that a sale of a new mobile home to a contractor,
subcontractor or repairman who, in such capacity, installs such property is not a
retail sale. . . .
*

*

*

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(5) Sale, selling or purchase. Any transfer of title or possession or both,
exchange or barter, rental, lease or license to use or consume (including, with respect
to computer software, merely the right to reproduce), conditional or otherwise, in any
manner or by any means whatsoever for a consideration, or any agreement therefor,
including the rendering of any service, taxable under this article, for a consideration
or any agreement therefor.
*

*

*

(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 of the Tax Law provides, in part:
Imposition of sales tax. On and after June first, nineteen hundred
seventy-one, there is hereby imposed and there shall be paid a tax of four percent
upon:
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
*

*

*

(3) Installing tangible personal property, excluding a mobile home, or
maintaining, servicing or repairing tangible personal property, including a mobile
home, not held for sale in the regular course of business, whether or not the services
are performed directly or by means of coin-operated equipment or by any other
means, and whether or not any tangible personal property is transferred in
conjunction therewith, 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 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:
*

*

*

(15) Tangible personal property sold to a contractor, subcontractor or
repairman for use in (i) erecting a structure or building (A) of an organization
described in subdivision (a) of section eleven hundred sixteen or (B) used
predominantly either in the production phase of farming or in a commercial horse
boarding operation, or in both, or (ii) adding to, altering or improving real property,
property or land (A) of such an organization or (B) used predominantly either in the
production phase of farming or in a commercial horse boarding operation, or in both,
as the terms real property, property or land are defined in the real property tax law;
provided, however, no exemption shall exist under this paragraph unless such
tangible personal property is to become an integral component part of such structure,
building or real property.
(16) Tangible personal property sold to a contractor, subcontractor or
repairman for use in maintaining, servicing or repairing real property, property or
land (i) of an organization described in subdivision (a) of section eleven hundred
sixteen or (ii) used predominantly either in the production phase of farming or in a
commercial horse boarding operation, or in both, as the terms real property, property
or land are defined in the real property tax law; provided, however, no exemption
shall exist under this paragraph unless such tangible personal property is to become
an integral component part of such structure, building or real property.
(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

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made pursuant to a contract irrevocably entered into before September first, nineteen
hundred sixty-nine, no exemption shall exist under this paragraph.
Section 1116(a) of the Tax Law provides, in part:
Except as otherwise provided in this section, any sale or amusement charge
by or to any of the following or any use or occupancy by any of the following shall
not be subject to the sales and compensating use taxes imposed under this article:
(1) The state of New York, or any of its agencies, instrumentalities, public
corporations (including a public corporation created pursuant to agreement or
compact with another state or Canada) or political subdivisions where it is the
purchaser, user or consumer, or where it is a vendor of services or property of a kind
not ordinarily sold by private persons;
*

*

*

(4) Any corporation, association, trust, or community chest, fund or
foundation, organized and operated exclusively for religious, charitable, scientific,
testing for public safety, literary or educational purposes, or to foster national or
international amateur sports competition (but only if no part of its activities involve
the provision of athletic facilities or equipment), or for the prevention of cruelty to
children or animals, no part of the net earnings of which inures to the benefit of any
private shareholder or individual, no substantial part of the activities of which is
carrying on propaganda, or otherwise attempting to influence legislation, (except as
otherwise provided in subsection (h) of section five hundred one of the United States
internal revenue code of nineteen hundred fifty-four, as amended), and which does
not participate in, or intervene in (including the publishing or distributing of
statements), any political campaign on behalf of any candidate for public office....
Section 541.2(g)(2)(i) of the Sales and Use Tax Regulations provides:
A capital improvement does not include a contract for the sale and
installation of tangible personal property which when installed remains tangible
personal property.
Section 541.3(d) of the Sales and Use Tax Regulations provides, in part:
Contracts with exempt organizations.
*

*

*

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(2) Purchase for contracts (other than agency contracts).
*

*

*

(v) Documents. (a) If the customer is a governmental entity, copies of signed
contracts and government purchase orders are sufficient evidence to establish the
exempt status of the job between the governmental entity and the prime contractor.
With respect to the documents required between a prime contractor and the
subcontractors, a signed document between them which identifies the project,
location and exempt owner, will form the basis for tax exemption of tangible
personal property purchased for incorporation into the exempt project. When
purchasing such tangible personal property for the exempt project, the contractor or
subcontractor will issue a properly completed contractor exempt purchase certificate
to the supplier.
Section 541.5 of the Sales and Use Tax Regulations provides, in part:
Contracts with customers other than exempt organizations. (a) The term
customers in this classification includes, but is not limited to:
(1) residential customers; and
(2) business customers.
(b) Capital improvements contracts. (1) Purchases. All purchases of tangible
personal property (excluding qualifying production machinery and equipment
exempt under section 1115(a)(12) of the Tax Law) which are incorporated into and
become part of the realty or are used or consumed in performing the contract are
subject to tax at the time of purchase by the contractor or any other purchaser. A
certificate of capital improvement may not be validly given by any person or
accepted by a supplier to exempt the purchase of these materials.
(2) Labor and material charges. All charges by a contractor to the customer
for adding to or improving real property by a capital improvement are not subject to
tax provided the customer supplies the contractor with a properly completed
certificate of capital improvement.
*

*

*

(4) Documents; capital improvement contracts. (i) When a properly
completed certificate of capital improvement has been furnished to the contractor,

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the burden of proving the job or transaction is not taxable and the liability for the tax
rests solely upon the customer.
(a) The prime contractor should obtain a certificate of capital improvement
from the customer and retain it as part of his records. Copies of such certificate must
be furnished to all subcontractors on the job and retained as part of their records.
(b) A certificate of capital improvement may not be issued by a contractor,
subcontractor or any other person to a supplier on the purchase of tangible personal
property.
(ii) Where a contractor does not receive a capital improvement certificate
from a customer, the contract or other records of the transaction will prevail. In such
case:
(a) where the contractor does not receive a capital improvement certificate,
collects tax on the full invoice price and the job is a capital improvement to real
property, the contractor is liable for the tax on the cost of materials incorporated into
the job, plus the tax collected from the customer. The customer is entitled to a refund
of the tax paid to the contractor; or
(b) where the contractor does not receive a capital improvement certificate,
collects no tax on the charges billed to the customer and the job is a capital
improvement to real property, the contractor is liable for the tax on the cost of
materials incorporated into the job performed.
(iii) If a contract includes the sale of tangible personal property which
remains tangible personal property after installation, the contractor must collect the
appropriate New York State and local taxes from the customer on the selling price,
including any charge for installation, of the tangible personal property unless a
properly completed exemption certificate is issued by the customer. The contractor
may apply for a credit or refund of taxes he has paid on purchases of the tangible
personal property that remain tangible personal property after installation.
Example 1: A contractor sells a building he has constructed and, as a part of
the sale agreement, installs free standing water fountains which remain
tangible personal property when installed. The contractor's billing to his
customer must separately state all charges for tangible personal property
included in the sales agreement. The New York State and applicable local tax
rate must be collected on the total charges for the water fountains including
any installation charges. In this instance, the contractor may purchase the
water fountains tax-free using a contractor exempt purchase certificate. If he

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pays the tax to his supplier, he is entitled to a refund or credit of the tax paid
on the purchase of the water fountains.
Opinion
Petitioner presented the following questions about Scenarios 1 and 2 described above.
Scenario 1
Question 1. Will free standing dishwashers, refrigerators, ovens, and stoves be subject to
New York State Sales tax?
Answer: Yes. Free standing dishwashers, refrigerators, ovens, and stoves qualify as
installations of tangible personal property which remain tangible personal property after installation.
Such installations do not meet the conditions set forth in Section 1101(b)(9) of the Tax Law to
qualify as capital improvements to real property. As stated in Section 541.5(b)(4)(iii) of the Sales
and Use Tax Regulations, “If a contract includes the sale of tangible personal property which
remains tangible personal property after installation, the contractor must collect the appropriate
New York State and local taxes from the customer on the selling price, including any charge for
installation, of the tangible personal property unless a properly completed exemption certificate is
issued by the customer. The contractor may apply for a credit or refund of taxes he has paid on
purchases of the tangible personal property that remain tangible personal property after installation.”
(Emphasis added) Contractors may purchase such tangible personal property for resale without the
payment of sales tax by issuing a properly completed Contractor Exempt Purchase Certificate (Form
ST-120.1) to the supplier.
Question 2. If Client pays sales tax on the purchase of these items, will they be subject to
any additional tax when included as a part of the total construction job? Client includes a mark-up
when pricing the job.
Answer: Client is required to collect tax from its customer on the total amount charged to
the customer for the appliances discussed in Question 1, including any mark-up and amounts
charged for expenses, whether or not Client has paid tax on its material purchases or issued a
properly completed Contractor Exempt Purchase Certificate. If the charge by Client to its customer
for the appliances includes the amount of sales tax paid by Client on its purchase of the appliances,
then Client must collect tax on the total amount charged for the appliances. If Client pays sales tax
when it purchases such tangible personal property, as stated in the answer to Question 1, Client may
apply for a refund or credit of the sales tax paid to the supplier. Since Client is entitled to a refund
or credit of any sales tax paid on the purchase of appliances which are not capital improvements
when installed, Client need not include the tax paid by it in computing its cost of materials when
arriving at a price to charge its customer.

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Question 3. (a) If the answer to Question 2 is yes, is the original cost of the appliances or
Client’s marked-up price included in internal estimate calculations used as the taxable base? (b) Is
the tax due on completion of the entire project, or when the installation of the appliances is
completed and billed?
Answer: (a) When Client bills the customer for the sale of tangible personal property that
remains tangible personal property after installation, the total charge by Client to the customer for
such tangible personal property, including any markup or expenses, are included in the receipts
subject to tax.
(b) The sales tax is due and payable by Client on the sales tax return covering the period in
which the contract is completed. Amounts paid to the contractor by his customer prior to the
completion of the contract should be treated as amounts paid on account. Tax should be collected
from the customer upon completion of the contract with the final billing.
Question 4. If Client uses a Contractor Exempt Purchase Certificate and does not pay sales
tax on the purchase of the appliances described in Question 1, is the tax due on this purchase upon
completion of the entire project or when the installation of the appliances is completed and billed?
Answer: As noted in the answer to Question 3(b), sales tax due on the sale of the appliances
must be collected from the customer upon completion of the project. Client’s purchase of these
appliances using a Contractor Exempt Purchase Certificate is a purchase for resale and is not subject
to tax.
Question 5. Will cabinets, sinks, built-in dishwashers, built-in wall or counter stoves and
ovens, built-in refrigerators, walk-in refrigerators and freezers, and ducted hoods be considered part
of the entire capital improvement and therefore, not subject to tax when sold to Client’s customer?
Answer: Generally, yes. Client’s charges to the customer for performing a capital
improvement, including charges for these appliances and their installation, are not subject to sales
and use tax provided that the conditions set forth in Section 1101(b)(9)(i) of the Tax Law are met.
See Sections 1105(c)(3)(iii) and 1115(a)(17) of the Tax Law. Generally, the installation of these
items will qualify as capital improvements when installed for the property owner. Client will not
be required to collect tax on the sale and installation of these appliances if it accepts in good faith
from the customer a properly completed Certificate of Capital Improvement (Form ST-124) within
90 days of completion of the contract. See Section 1132(c) of the Tax Law and Sections 532.4 and
541.5(b)(4) of the Sales and Use Tax Regulations. Client is liable for sales tax on purchases of those
appliances that qualify as capital improvements when installed. See Section 1101(b)(4)(i) of the Tax
Law and Section 541.5(b)(i) of the Sales and Use Tax Regulations. Sales tax paid by Client on these
purchases may be included as part of the cost of materials when Client quotes a price to its customer.

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It should be noted that commercial installations of stoves, ovens, dishwashers and similar
appliances may be done for tenants rather than the property owner. Items which are installed for
a tenant which would otherwise be a capital improvement may not qualify as a capital improvement
depending on the terms of the tenant’s lease. See Matter of Flah's of Syracuse, Inc. v. James H.
Tully, Jr. et al, 89 AD 2d 729. Additions or alterations to real property for or by a tenant of such
property will be presumed to be temporary in nature for purposes of the definition of capital
improvement set forth in Section 1101(b)(9)(i) of the Tax Law, unless a contrary intention is
demonstrated. A specific lease provision which states that: 1) immediately upon installation, title
to such installation vests in the lessor, and 2) the addition or alteration becomes part of and remains
with the premises after the termination of the lease, will demonstrate an intention to make the
installation permanent. A provision granting the lessor the right to require removal of the
improvement will not negate this demonstration of intention of permanence; nor will a provision
which states that the improvement becomes the property of the lessor upon expiration of the lease
or upon termination of the tenancy. In the absence of a lease provision, other factors such as the
nature of the installation, or written agreements other than a lease provision may be considered in
determining the intention of the parties with respect to the permanence of the installation. Factors
which may indicate that a tenant installation is not intended to be permanent include a lease
provision requiring that the leased premises be restored to its original condition at the termination
of the lease; or the rental of the installed property by the tenant from someone other than the lessor
of the premises. See Technical Service Bureau Memorandum, Taxable Status of Leasehold
Improvements for or by Tenants, June 15, 1983, TSB-M-83(17)S, and Publication 862, Sales and
Use Tax Classifications of Capital Improvements and Repairs to Real Property (4/01) for further
details.
Question 6. Does Client’s liability change if a portion of the contract price remains unpaid
by the customer upon completion of the contract?
Answer: No. Client remains liable for sales tax due on the total amount charged to the
customer for the sale and installation of appliances that do not qualify as capital improvements. See
Section 1132(e) of the Tax Law and Section 534.7 of the Sales and Use Tax Regulations for
information concerning refunds and credits of sales tax attributable to bad debts.
Scenario 2
Question 1. Do the answers under Scenario 1 change as a result of title transfer?
Answer: In general, no. With respect to Question 3(b) above, where title to appliances is
transferred before completion of the contract and Client retains a lien on the appliances and is
responsible for all losses until completion of the project, any applicable tax will generally still be
due on completion of the contract with the final billing. However, if it appears from the facts in a
particular case that the transfer of title to appliances should be treated as a sale separate and apart

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from the rest of the project, Client may be required to remit the tax on the sales tax return for the
period in which the sale was made.
Question 2. Do the answers change if the customer is a tax exempt entity?
Answer: Yes. Where Client bills a customer which is exempt from sales tax under 1116(a)
of the Tax Law, Client may purchase tangible personal property which is actually transferred to the
customer and becomes an integral component part of the project without payment of tax. See
Section 1115(a) (15), (16) of the Tax Law. Client should issue a properly completed Contractor
Exempt Purchase Certificate (Form ST-120.1) to suppliers. If Client’s customer is an exempt
governmental entity, Client should keep a signed copy of the contract between Client and the
customer as evidence of the exempt status of the project. A signed contract between Client and any
subcontractor identifying the project, location and exempt governmental entity will form the basis
for tax exemption of tangible personal property purchased by subcontractors for incorporation into
the exempt project. In the case of a contract with an exempt organization other than a governmental
entity, Client should obtain a properly completed Exempt Organization Certification (Form
ST-119.1) from the exempt organization and provide a photocopy of such exemption document to
all subcontractors on the project. See Section 541.3(d)(2)(v) of the Sales and Use Tax Regulations.
It should be noted that charges for the sale of tangible personal property, including
appliances, and charges for installation of tangible personal property to organizations exempt under
Section 1116(a) of the Tax Law are not subject to sales or use tax, regardless of whether the
installation qualifies as a capital improvement. Client should receive a properly completed Exempt
Organization Certification from the organization claiming exemption, or in the case of a government
entity, a government purchase order or other appropriate exemption document. See Part 529 of the
Sales and Use Tax Regulations. As discussed above, Client may make tax exempt purchases of
tangible personal property for installation into a project for an organization exempt under Section
1116(a) of the Tax Law by providing the supplier or subcontractor with a properly completed
Contractor Exempt Purchase Certificate.

DATED: April 12, 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.