Is a pond/lakefront restoration company's weed, debris, and silt removal work a nontaxable capital improvement in its first year (like planting a new lawn) and only taxable maintenance in later years, as the company argues by analogy to dry-land landscaping — or is it taxable real-property maintenance from day one?

Plain-English summary

PondCleaner, LLC performs "aquatic landscaping and pond restoration consulting" — removing nuisance weeds, underwater debris (cans, sunken docks, waterlogged trees), zebra mussels, and silt from ponds and lakefront properties, plus offering consulting on preventing future material buildup. Clients range from individuals and farmers to homeowners associations, golf courses, and manufacturers. PondCleaner argued its services should be treated like "dry land" landscaping: the initial, often large-scale first-year job (sometimes called "crisis management," clearing an overgrown or silted-in pond) should count as a nontaxable capital improvement — comparable to planting new perennials, shrubs, or lawns — while only the smaller follow-up maintenance in later years (typically 10-20% of the initial cost) would be taxable maintenance.

The Department rejected the capital-improvement theory even for the initial-year work. A capital improvement requires (among other things) that something be permanently affixed to the property such that removing it would cause material damage — but PondCleaner doesn't install anything; it only removes unwanted vegetation, debris, and silt. The Department drew its own analogy: PondCleaner's initial "crisis management" cleanup is more like the very first cutting of an overgrown, seeded-over lawn (itself a maintenance activity), not like planting new landscaping. Since "maintaining, servicing, and repairing real property" broadly covers activities that keep property in a condition of fitness, efficiency, or readiness — which fully describes removing nuisance vegetation, debris, and silt — all of PondCleaner's cleanup work, both the initial job and later years' follow-up, is taxable real-property maintenance under Tax Law § 1105(c)(5).

Consulting/inspection charges are taxable too: advising clients on preventing future material re-deposit is itself part of "keeping real property in a state of fitness," so it's taxable whether or not any recommended follow-up work is actually performed. Two narrow exemption paths exist regardless: a farmer using the pond to irrigate crops or water livestock (production-related use) can furnish a Farmer's and Commercial Horse Boarding Operator's Exemption Certificate (Form ST-125) to buy the service tax-free, and if PondCleaner's work amounts to servicing production machinery/equipment for a manufacturer, that manufacturer can use an Exempt Use Certificate (Form ST-121) instead.

What this means for you

Pond, lake, and aquatic maintenance businesses

Don't assume a large first-year restoration job qualifies as a nontaxable capital improvement just because it's expensive and long-lasting — the legal test requires a permanent installation whose removal would damage the property, not merely removing unwanted material, however substantial the cleanup.

Landscaping businesses drawing analogies to "dry land" capital improvements

The Department's reasoning here (comparing an overgrown pond cleanup to mowing an overgrown lawn, both maintenance) suggests the capital-improvement exemption is genuinely narrow — reserved for actual installation work (new plantings, structures), not restoration/removal work regardless of scale or how infrequently it's repeated.

Farmers and manufacturers using these services

If your pond serves a genuine production purpose (irrigation, livestock watering, manufacturing process water), you likely qualify for an exemption certificate that a "dry land" landscaping customer wouldn't have access to — worth confirming with your service provider.

Common questions

Q: Is a large, expensive first-year pond restoration a nontaxable capital improvement?
A: No, according to this ruling — without a permanent installation whose removal would damage the property, removing weeds/debris/silt is maintenance, not a capital improvement, regardless of scale or cost.

Q: Is consulting/advice about preventing future problems taxable, even if no work is actually done?
A: Yes — inspection and advisory services that are part of keeping property in good condition are taxable whether or not the recommended work is ever performed.

Q: Can a farmer buy pond-cleaning services tax-free?
A: Yes, if the pond is used predominantly in the production of tangible personal property for sale by farming (e.g., irrigation, livestock watering) — by furnishing Form ST-125 within 90 days of purchase.

Q: What about a manufacturer using a pond in its production process?
A: If the servicing relates to machinery/equipment used directly and predominantly in production, the manufacturer can furnish Form ST-121 to exempt those receipts.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(9) (capital improvement definition)
• Tax Law § 1105(c)(5) (real property maintenance, incl. farming/manufacturing carve-outs)
• Tax Law § 1105-B(b) (services to exempt production machinery)
• Tax Law § 1115(a)(12) (production machinery/equipment exemption)
• 20 NYCRR § 527.7(a)(1) (real property maintenance definition)

Prior rulings referenced:

• Mark S. Klein, TSB-A-94(21)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_30s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(30)S
Sales Tax
July 16, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S021008A

On October 8, 2002, the Department of Taxation and Finance received a Petition for
Advisory Opinion from PondCleaner, LLC, 8 Horton Street, Hornell, New York 14843.
The issue raised by Petitioner, PondCleaner, LLC, is whether, under the circumstances
presented below, the following services offered by Petitioner are subject to sales tax:

1. Weed and debris removal at lake front properties
2. Weed and debris removal at ponds
3. Silt, weed and debris removal at lake front properties
4. Silt, weed and debris removal at ponds
5. Silt removal at ponds and inlet/outlets
6. Consulting
7. Follow-up maintenance performed in succeeding years
   Petitioner submitted the following facts as the basis for this Advisory Opinion.
   Petitioner performs aquatic landscaping and pond restoration consulting. Petitioner performs
   its services for individuals, farmers, homeowners associations, golf courses, corporate properties,
   and manufacturers. While each client may have specific reasons for purchasing Petitioner’s services
   and the scope of the following tasks may vary from one job site to another, the functions are
   generally the same, whether the tasks are performed at lakefront properties or ponds.
   Weeds
   Petitioner identifies nuisance aquatic vegetation that interferes with recreational activities
   such as boating, swimming and fishing. Petitioner uproots the targeted plants and physically
   removes them from the job site.
   Debris
   Petitioner removes underwater debris such as cans, bottles, tires, waterlogged limbs and
   trees, sunken docks and other foreign elements that may create hazards to boats, boating, or people
   swimming, wading or working around docks and boat hoists.

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Zebra Mussels
Petitioner captures, contains and removes zebra mussels from lake bottoms, docks, boat
hoists and water intake lines.
Silt Removal
When ponds are used as a source of water to be used for irrigation or manufacturing
purposes, often the only way to increase or re-establish their holding capacity is to remove silt. This
is also true of lake inlets and outlets where debris and silt must be removed so that it does not
impede the flow of water. In addition, increasing the depth of the water column is an extremely
effective method of long-term weed control. If sunlight cannot penetrate to the bottom, weeds will
not grow and consequently, will not need to be removed.
Consulting
Silt, weed and debris removal is a semi-permanent treatment and as such requires little, if
any, secondary work for a number of years except when winter wave and water current action may
naturally re-deposit nuisance materials on lake fronts. In the case of ponds, debris, sediment, and
silt may enter the pond from an outside source, especially in times of flooding caused by excessive
rain. Petitioner advises its clients of such possibilities and for a nominal consulting fee, will suggest
ways of preventing such problems by applying various barriers within the stream or inlet to inhibit
the re-entry of nuisance materials. Petitioner seldom performs such work itself.
Maintenance
Maintenance duties normally consist only of locating, targeting, uprooting and removing
recurrent nuisance aquatic vegetation and/or zebra mussels. Since debris and silt are rarely
accumulated in any significant amount on an annual basis, removal of such is, more often than not,
unnecessary. This is particularly true of ponds belonging to one entity where the body of water is
treated in its entirety, as opposed to a lake where one property owner has his/her lake front treated
and a neighbor does not. As a result, pond maintenance can normally be handled in 2 or 3 year
intervals instead of annually at a cost of approximately 10 -20 % of the initial year’s cost. Lakefront
properties may require annual maintenance costing approximately 10 -20 % of the initial year’s cost.
Many projects are classified as “crisis management,” i.e., Petitioner is not called in until the
aquatic property is so overcome with vegetation or silt that it is in danger of becoming a swamp.
In most instances, projects require massive amounts of labor to remove immense quantities of
vegetation and/or silt. Often initial projects are too costly for the client to complete in one year and
Petitioner will budget a set amount of money to be spent annually. Since debris and/or silt removal
need not be redone and weed recurrence is minimal, each year the scope of the area can be increased
and after a period of time, the entire area can be covered for the budgeted amount. Although work

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Sales Tax
July 16, 2003

of this kind is moderately expensive, the result of such work increases the property value more than
the cost of the project.
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:
*

*

*

(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) of the Tax Law imposes sales tax upon the following:
The receipts from every sale, except for resale, of the following services:
*

*

*

(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 article, but excluding . . . (ii) services rendered directly
with respect to real property, property or land used or consumed directly and
predominantly in the production for sale of gas or oil by manufacturing, processing,
generating, assembling, refining, mining, or extracting and (iii) services rendered
with respect to real property, property or land used or consumed predominantly

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either in the production of tangible personal property, for sale, by farming or in a
commercial horse boarding operation, or in both. (emphasis added)
Section 1105-B(b) of the Tax Law provides:
Receipts from every sale of the services of installing, repairing, maintaining
or servicing the tangible personal property described in paragraph twelve of
subdivision (a) of section eleven hundred fifteen of this article . . . to the extent
subject to such tax, shall be exempt from the tax on sales imposed under subdivision
(c) of section eleven hundred five of this article.
Section 1115(a)(12) of the Tax Law provides an exemption from sales and use tax for:
Machinery or equipment for use or consumption directly and predominantly
in the production of tangible personal property, gas, electricity, refrigeration or steam
for sale, by manufacturing, processing, generating, assembling, refining, mining or
extracting. . . .
Section 527.7 of the Sales and Use Tax Regulations provides, in part:
(a) Definitions. (1) 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. Among the
services included are services on a building itself such as painting; services to the
grounds, such as lawn services, tree removal and spraying; trash and garbage
removal and sewerage service and snow removal.
*

*

*

(b) Imposition. (1) The tax is imposed on receipts from every sale of the
services of maintaining, servicing or repairing real property, whether inside or
outside of a building.
Opinion
Petitioner performs aquatic landscaping and pond restoration consulting for owners of ponds
and lake front properties. Petitioner removes debris, weeds, zebra mussels, and silt from these
aquatic properties as needed to restore or maintain them.
Petitioner may also advise its clients regarding ways of preventing the natural re-deposit of
nuisance materials in these aquatic properties by means of various barriers within the stream or inlet
to inhibit the re-entry of nuisance materials. Petitioner, however, seldom performs such work itself.

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Petitioner contends that its services should be considered as “aquatic landscaping.” Equating
such aquatic landscaping to “dry land” landscaping services, Petitioner asserts that its initial year
of service results in a capital improvement to real property and is nontaxable, while the subsequent
years of service are subject to sales tax as maintenance of real property.
In order for Petitioner’s services to be considered nontaxable, these services would have to
meet all the requirements of a capital improvement. See section 1101(b)(9) of the Tax Law. While
such services may meet the first criteria of prolonging the useful life of these aquatic properties,
these services do not meet the second criteria since Petitioner does not make any installation which
could be construed to be permanently affixed to the real property so that its removal would damage
the property or the article.
Maintaining, servicing and repairing real property 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. See section 527.7(a)(1) of the Sales and Use Tax Regulations.
Petitioner’s services (both the initial service and later follow-up) meet this definition. While initial
installation of perennials, shrubs, trees, and lawns can qualify as a capital improvement, Petitioner’s
services are not unlike the first cutting of a neglected lawn that has gone to seed, which is a
maintenance service to real property. Maintaining, servicing and repairing real property are services
subject to tax under section 1105(c)(5) of the Tax Law. Therefore, Petitioner must collect the
appropriate state and local rate of sales tax on charges for its service.
Although Petitioner’s services are taxable, certain purchasers may employ such services for
an exempt purpose. For instance, farmers may maintain their ponds which are used to irrigate their
fields or as a water source for dairy cows. If the farmer purchased such services with respect to
property or land used predominantly in the production of tangible personal property for sale by
farming, then the farmer could issue a properly completed Farmer’s and Commercial Horse
Boarding Operator’s Exemption Certificate, Form ST-125, within 90 days of the purchase. See
sections 1105(c)(5)(iii) and 1132(c) of the Tax Law.
Similarly, to the extent that Petitioner’s services constitute a servicing of machinery and
equipment used directly and predominantly in the production of tangible personal property for sale,
a manufacturer may issue and Petitioner may accept Form ST -121, New York State and Local Sales
and Use Tax Exempt Use Certificate, to exempt the receipts from such services from tax. See
section 1105-B(b) of the Tax Law.
With regard to charges for consulting services, Petitioner inspects the property and advises
its clients how to prevent the re-deposit of nuisance materials by applying various barriers within
the stream or inlet. Such inspections and diagnostic services are activities which are part of the
process of keeping real property in a state of fitness, efficiency, readiness or safety and are subject

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to sales tax whether or not the work is done. See Mark S. Klein, Adv Op Comm T&F, April 27,
1994, TSB-A-94(21)S.

DATED: July 16, 2003

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.