Does an out-of-state HVAC service-contract manager with one New York employee and a network of local subcontractors have to collect New York sales tax, and how are capital-improvement vs. taxable repair charges split?

Plain-English summary

First Service Networks, Inc. is a Maryland corporation with no office, assets, or facilities in New York, and only one New York-resident employee, who does site analysis and survey work for customers nationwide. The company contracts with multi-location businesses to manage nationwide HVAC (heating, ventilation, air conditioning) installation, maintenance, and repair. It doesn't do the physical work itself — instead, for each customer location, it hires an unrelated local subcontractor to perform the actual work, and that subcontractor bills First Service for its fee plus any parts or equipment it bought. First Service then bills its customer a higher amount that covers the subcontractor's charge plus a markup for First Service's own overhead: managing the contractor network (hiring, firing, dispute resolution) and customer service, all run out of its Maryland headquarters using a custom-built information system.

The Department found First Service has enough connection to New York to be required to register and collect sales tax, even without any physical office or property here — hiring local subcontractors to perform work on its behalf in New York, coordinated through its contracts with customers, is itself a sufficient physical presence ("nexus") under both New York precedent and the U.S. Supreme Court's Scripto decision. That makes First Service a "vendor" for HVAC work performed on New York property. From there, the analysis splits by service type: work that genuinely qualifies as a capital improvement (substantially adds value, becomes a permanent part of the property, and is intended to be permanent) is exempt — First Service just needs a properly completed Certificate of Capital Improvement from its customer, shared with the subcontractor. But ordinary repair, maintenance, or installation work that doesn't rise to that level stays fully taxable, and First Service can't shrink the taxable receipt by subtracting out its own administrative overhead (network management, customer service, its computer system) — those costs are simply part of the taxable price. The tax applies based on where the work is physically performed or delivered (a "destination tax"), not where First Service's invoice happens to be mailed, so any repairs actually done outside New York aren't subject to New York tax at all, even if billed on the same periodic invoice as New York work.

What this means for you

Out-of-state companies managing nationwide service networks through local subcontractors

Having zero office space or owned property in New York doesn't mean you're off the hook for sales tax nexus — routing work through local subcontractors who perform services on your behalf, combined with even minimal personnel presence, can be enough physical presence to require you to register, collect, and remit New York sales tax on the taxable portion of your charges.

Companies billing customers a marked-up price over subcontractor costs

You can't deduct your own administrative overhead — network management, customer service, IT systems — from the taxable receipt. Sales tax applies to your full charge to the customer, not just the pass-through subcontractor cost.

Facilities-management companies distinguishing capital improvements from repairs

Get a properly completed Certificate of Capital Improvement (Form ST-124) from the property owner whenever a project genuinely qualifies (substantially adds value, becomes permanently affixed, intended to be permanent), and pass copies to every subcontractor on that job — that paperwork is what substantiates the exempt treatment. Ordinary repair and maintenance work, even bundled into the same periodic invoice, stays separately taxable and should be itemized distinctly from any exempt capital-improvement charges.

Multi-state facilities contracts spanning New York and other states

New York sales tax applies only to work actually performed or delivered within New York — the "destination" of the service controls, not the address on the invoice. Services performed entirely outside New York on the same nationwide contract aren't subject to New York tax even if consolidated into one bill.

Common questions

Q: Does a company need an office or physical location in New York to be required to collect sales tax there?
A: No — routing work through local subcontractors performing services in New York on the company's behalf, combined with even a single resident employee, can establish sufficient nexus to require registration and tax collection.

Q: Can a facilities-management company deduct its own overhead (network management, customer service costs) from the taxable receipt?
A: No — those administrative costs are not deductible; sales tax applies to the company's full charge to the customer, regardless of how the underlying costs break down.

Q: How does a company know if HVAC work qualifies as an exempt capital improvement versus a taxable repair?
A: It must meet all three statutory tests: substantially add value or appreciably prolong useful life, become a permanent part of (or permanently affixed to) the real property, and be intended as a permanent installation. A properly completed Certificate of Capital Improvement from the property owner substantiates the exempt treatment.

Q: If a nationwide contract covers work both inside and outside New York, is the whole invoice taxed at the New York rate?
A: No — sales tax is a destination tax based on where the work is actually performed or delivered; only the portion of the periodic bill attributable to work performed in New York is subject to New York sales tax.

Citations and references

Statutes and rules:

• Tax Law § 1101(b)(3), (4), (5), (8), (9) (receipt, retail sale, sale/purchase, vendor, capital improvement)
• Tax Law § 1105(a), (c)(3), (c)(5) (retail sales tax; tangible personal property and real property services)
• Tax Law § 1115(a)(15), (16) (exempt organization/farming capital improvement and maintenance exemptions)
• 20 NYCRR 525.2(a) (transactions/destination tax); 526.5(e) (nondeductible expenses); 526.6(b) (contractor purchases); 526.10(a)(4) (nexus via agents); 527.5(c) (maintenance contracts); 527.7 (real property maintenance); 541.2 (construction contractor definitions)

Case law and prior advisory opinions relied on:

• Orvis v Tax Appeals Tribunal, 86 NY2d 165 (1995); Scripto, Inc. v Carson, 362 US 207 (1960) (nexus via in-state agents/subcontractors)
• Mark S. Klein, Esq., TSB-A-00(42)S (vendor nexus)
• AA Nursery, TSB-A-85(32)S (separately stated capital improvement charges)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2005.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a05_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-05(7)S
Sales Tax
March 11, 2005

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S040218A

On February 18, 2004, the Department of Taxation and Finance received a Petition for
Advisory Opinion from First Service Networks, Inc., 939 Elkridge Landing Road, Suite 300,
Linthicum, Maryland, 21090.
The issue raised by Petitioner, First Service Networks, Inc., is whether Petitioner is
required to collect New York State and local sales taxes on its sales of HVAC service contracts
in New York.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a Maryland corporation incorporated on January 12, 2001, with headquarters
in Linthicum, Maryland. All of Petitioner’s assets are located in Maryland. Petitioner has one
employee who resides in New York. This employee provides site analysis and survey services
for Petitioner’s customers nationwide. Petitioner does not maintain any office or place of
business in New York. Petitioner is registered for sales and use tax purposes in New York.
Petitioner contracts with multi-location businesses to provide nationwide installation,
maintenance and repairs primarily for heating, ventilation and air conditioning (HVAC) systems.
Once Petitioner secures a service contract, it contracts with unrelated direct service providers
(subcontractors) in the same geographic areas as the customer locations covered under the
service contract. The subcontractor agrees to perform a menu of services for agreed upon fees.
In the performance of these services, the subcontractors often purchase replacement parts,
or if the contract is for an initial installation, all of the required initial equipment and parts.
When the work is performed, the subcontractor bills Petitioner for the repair or other service at
its agreed upon fee plus amounts for equipment and parts purchased by the subcontractor.
Petitioner periodically (e.g., monthly) bills its customer for services performed both
within and without New York State pursuant to its contract with that customer. This bill is for an
amount that is greater than the amounts the subcontractor bills Petitioner. This differential is
meant to cover the services provided by Petitioner at its Maryland location that include managing
the contractor network (hiring, firing and dispute resolution) and customer service (negotiation,
drafting and entering into contracts, monitoring contract performance and problem resolution).
In addition to the approximately 100 employees at the Maryland location who perform these
services, Petitioner also maintains in its Maryland offices an advanced computer system, which
Petitioner custom designed, to manage its information requirements.

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Petitioner currently provides its New York subcontractors with a resale certificate. When
the subcontractor bills Petitioner, no sales tax is charged. When Petitioner bills its customer,
sales tax is charged on the entire amount billed to its customer and remitted to the Tax
Department.
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:
*

*

*

(3) Receipt. The amount of the sale price of any property and the charge for any
service taxable under this article . . . valued in money, whether received in money or
otherwise, including any amount for which credit is allowed by the vendor to the
purchaser, without any deduction for expenses. . . .
*

*

*

(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. . . .
*

*

*

(5) Sale, selling or purchase. Any transfer of title or possession or both, exchange
or barter, rental, lease or license to use or consume . . . conditional or otherwise, in any
manner or by any means whatsoever for a consideration, or any agreement therefor,

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including the rendering of any service, taxable under this article, for a consideration or
any agreement therefor.
*

*

*

(8) Vendor.
(i) The term "vendor" includes:
(A) A person making sales of tangible personal property or services, the receipts
from which are taxed by this article;
*

*

*

(C) A person who solicits business either:
(I) by employees, independent contractors, agents or other representatives; or
(II) by distribution of catalogs or other advertising matter, without regard to
whether such distribution is the result of regular or systematic solicitation, if such person
has some additional connection with the state which satisfies the nexus requirement of
the United States constitution;
and by reason thereof makes sales to persons within the state of tangible personal
property or services, the use of which is taxed by this article;
*

*

*

(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 . . . upon:

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(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
*

*

*

(c) 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 . . . 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:
*

*

*

(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 . . .
*

*

*

(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. . . .
Section 1115(a) of the Tax Law provides, in part:
Exemptions from sales and use taxes (a) 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

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(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.
Section 525.2 of the Sales and Use Tax Regulations provides, in part:
Nature of tax. (a) Sales tax. (1) (i) Except as specifically exempted or excluded,
sales tax is imposed on the receipts from:
(a) every retail sale of tangible personal property, as provided in section 1105(a)
of the Tax Law;
(b) every sale, other than a sale for resale, of specifically enumerated services, as
provided in sections 1105(b) and (c); . . .
*

*

*

(2) Except as specifically provided otherwise, the sales tax is a "transactions tax,"
with the liability for the tax occurring at the time of the transaction. Generally, a taxed
transaction is an act resulting in the receipt of consideration for the transfer of title to or
possession of (or both) tangible personal property or for the rendition of an enumerated
service. The time or method of payment is generally immaterial, since the tax becomes
due at the time of transfer of title to or possession of (or both) the property or the
rendition of such service. . . .
(3) Except as specifically provided otherwise, the sales tax is a "destination tax."
The point of delivery or point at which possession is transferred by the vendor to the
purchaser, or the purchaser's designee, controls both the tax incidence and the tax rate.
Section 526.5 of the Sales and Use Tax Regulations provides, in part:

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Receipt (a) Definition. The word receipt means the amount of the sale price of
any property and the charge for any service taxable under articles 28 and 29 of the Tax
Law, valued in money, whether received in money or otherwise. The following
subdivisions of this section discuss elements of a receipt.
*

*

*

(e) Expenses. All expenses, including telephone and telegraph and other service
charges, incurred by a vendor in making a sale, regardless of their taxable status and
regardless of whether they are billed to a customer are not deductible from the receipts.
Example 1: A photographer contracts with a customer to furnish photographs at
$50 each in addition to expenses.
The customer is billed as follows:
Photographs (2)

$100

Model fees

60

Meals

10

Travel

25

Props (Flowers)

5

Total due

$200

Receipt subject to tax is $200
Example 2: An appliance repairman charges $10 per hour plus expenses when on
a service call. The customer is billed as follows:
3 hrs. at $10

$30

Travel

15

Parts

20

Meals

5

Total due

$70

Receipt subject to tax is $70
Section 526.6 of the Sales and Use Tax Regulations provides, in part:

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Retail sale (a) The term retail sale or sale at retail means the sale of tangible
personal property to any person for any purpose, except as specifically excluded.
(b) Special rule--sales specifically included as retail sales. (1) A sale of any
tangible personal property to a contractor, subcontractor or repairman for use or
consumption in erecting structures or buildings or adding to, altering, improving,
maintaining, servicing or repairing real property, property or land, is deemed to be a retail
sale, regardless of whether the tangible personal property is to be resold as such before it
is used or consumed.
Section 526.10(a)(4) of the Sales and Use Tax Regulations provides, in part:
(i) A person who solicits business by the distribution of catalogs or other
advertising matter, without regard to whether such distribution is the result of regular or
systematic solicitation, if such person has some additional connection with the State
which satisfies the nexus requirement of the United States Constitution and by reason
thereof makes sales to persons within the State of tangible personal property or services
the use of which is subject to tax, is a vendor.
(ii) For purposes of subparagraph (i) of this paragraph, the additional connection
with the State a person may have in order to qualify as a vendor shall include, but not be
limited to:
(a) the operation of retail stores in the State;
(b) the presence of traveling sales representatives in the State;
(c) the presence of employees, independent contractors or agents in the State;
Section 527.5(c) of the Sales and Use Tax Regulations provides, in part:
Maintenance and service contracts. (1) The purchase of a maintenance or service
contract is a taxable transaction.
(2) The vendor making sales of such contracts may purchase for resale any
tangible personal property which is transferred to his customer in connection with the
services rendered.
(3) Any charge made for services rendered in addition to the purchase price of the
maintenance or service contract is taxable.

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Example 1: A vendor selling home appliances also offers a 12-month extended
service contract with unlimited parts and labor. The charge for the service
contract is taxable.
Example 2: The same vendor also offers a service contract for the price of $50
under which the purchaser will receive one service call at no additional charge,
including parts and labor, and each additional service call will cost the purchaser
$5 for parts and labor. All the charges are receipts subject to tax.
Section 527.7 of the Sales and Use Tax Regulations provides, in part:
Maintaining, servicing or repairing real property.
(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.
*

*

*

(3) When the service of maintaining, servicing or repairing real property is
performed in conjunction with the transfer of title to tangible personal property, the price
of the tangible personal property is also subject to tax.
*

*

*

Example 8: A customer has a maintenance contract with a heating and air
conditioning company to supply all parts and emergency services for his heating
and air conditioning system for one year for a set fee. The cost of the contract is
taxable, whether or not any services or parts are actually furnished, as it is a
contract for maintenance of real property. The company may apply for a refund
or credit of any tax paid on parts purchased for use under the contract which
become part of the property serviced for resale, or are transferred to the purchaser
in performance of the service.

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Section 541.2 of the Sales and Use Tax Regulations provides, in part:
Definitions. The words, terms and phrases used in this Part have the following
definitions except when the context clearly indicates a different meaning:
(a) Construction contract. (1) A construction contract means a contract to erect,
construct, alter, repair or maintain any building or other structure, project, development
or other improvement on or to real property, property or land.
*

*

*

(d) A construction contractor means any person who engages in erecting,
constructing, adding to, altering, improving, repairing, servicing, maintaining,
demolishing or excavating any building or other structure, property, development, or
other improvement on or to real property, property or land.
(e) Contractor means a construction contractor, subcontractor or repairman.
Opinion
Petitioner is a Maryland corporation with headquarters in Linthicum, Maryland.
Petitioner contracts with multi-location businesses to provide nationwide installation,
maintenance and repairs primarily for heating, ventilation and air conditioning (HVAC) systems.
Petitioner uses subcontractors in the same geographic areas as the customer locations to perform
a menu of services for agreed upon fees. In the performance of these services, the subcontractors
often purchase replacement parts, or if the contract is for an initial installation, all of the required
initial equipment and parts. When the work is performed, the subcontractor bills Petitioner for
the repair or other service at its agreed upon fee plus amounts for equipment and parts purchased
by the subcontractor. Petitioner bills its customer for services performed both within and
without New York State on a periodic basis pursuant to its contract with that customer.
Petitioner is, in many instances, making sales to its customers of services to real property.
For purposes of the sales tax, Petitioner is providing the services of a construction contractor as
defined in section 541.2(d) and (e) of the Sales and Use Tax Regulations. Petitioner hires
subcontractors to do the work Petitioner has contracted with its customers to perform. The
subcontractors are delivering, on Petitioner’s behalf, services to its customers in New York. At
least a portion of these services are subject to sales tax pursuant to section 1105(c)(3) or
1105(c)(5) of the Tax Law. The conduct of economic activities performed in a taxing state by a
vendor’s personnel or on a vendor’s behalf demonstrates a sufficient physical presence to subject
a vendor to the state’s requirements to collect tax. See Orvis v Tax Appeals Tribunal, 86 NY2d
165 [1995], cert denied 516 US 989[1995]; Scripto, Inc. v Carson, 362 US 207 [1970].
Accordingly, Petitioner is a vendor for purposes of section 1101(b)(8)(i)(A) of the Tax Law and
has sufficient nexus with New York to be required to register to collect and remit the tax on its

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taxable sales in New York. See also Mark S. Klein, Esq., Adv Op Comm T & F, October 13,
2000, TSB-A-00(42)S.
The services performed by Petitioner’s subcontractors will constitute capital
improvements to Petitioner’s customer’s real property, property or land, if all three of the
conditions in section 1101(b)(9) of the Tax Law are met. If a subcontractor installs property or
performs a repair or maintenance which does not meet the three conditions set forth in section
1101(b)(9) of the Tax Law, the services performed by the subcontractor may be subject to tax
under section 1105(c) of the Tax Law. See Sales and Use Tax Classifications of Capital
Improvements and Repairs to Real Property, Publication 862 (4/01) for additional information.
If the service performed by a subcontractor for Petitioner constitutes a capital improvement to
Petitioner’s customer’s real property, Petitioner should obtain a properly completed Certificate of
Capital Improvement (Form ST-124) from its customer in order to substantiate the tax exempt
nature of the services. Copies of this certificate should be provided to all subcontractors
involved in performing the particular capital improvement service to which the certificate
pertains. Petitioner is not required to collect sales tax from its customers for services resulting in
a capital improvement to real property. See sections 1105(c)(3)(iii) and 1105(c)(5) of the Tax
Law. Petitioner’s subcontractors must pay the sales or use tax on any purchases of materials
incorporated into the capital improvement project at the rate in effect where such use occurs,
except where such materials are incorporated into the real property of an entity exempt from
sales tax pursuant to section 1116(a) of the Tax Law. See section 1115(a)(15) and (16) of the
Tax Law. Sales tax paid on such materials is an expense incurred by the subcontractor which
may be included in its material costs when billing Petitioner. Any tools or supplies used or
consumed by a subcontractor in the performance of a capital improvement project are subject to
sales tax at the time of purchase.
If Petitioner’s subcontractor provides repair, maintenance or installation services which
do not qualify as capital improvements, the subcontractor should collect sales tax on its total
charges to Petitioner unless Petitioner provides the subcontractor with a properly completed
Contractor Exempt Purchase Certificate (Form ST-120.1) indicating that the services are to be
resold by Petitioner. A Resale Certificate (Form ST-120) is not a valid exemption certificate for
purchases of materials or services by construction contractors. See section 526.6(b) of the Sales
and Use Tax Regulations. Petitioner must collect sales tax on the total amount of charges for
repair, maintenance or installation services to its customers, except where the customer claims
exemption pursuant to section 1115 or 1116(a) of the Tax Law. In those cases, Petitioner must
obtain the appropriate and properly completed exemption certificate or other documentation
(such as a governmental purchase order) from its customer. See section 1132(c) of the Tax Law.
Petitioner’s subcontractors may obtain a refund or credit for sales tax paid on their purchases of
materials which become a physical component of the real property being repaired or maintained.
Materials which retain their identity as tangible personal property after installation may be
purchased by Petitioner or its subcontractor for resale by issuing a properly completed
Contractor Exempt Purchase Certificate (Form ST-120.1) to its supplier. Any tools or supplies

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used or consumed by the subcontractors in the performance of the repair or maintenance work
are subject to sales tax.
Petitioner’s periodic bills to its customers are for the actual services performed plus a
mark-up to cover Petitioner’s administrative and other costs. If Petitioner’s bill itemizes both
taxable services and exempt capital improvement services, and separately states the charges for
the services, Petitioner need not collect sales tax on any charges to its customer for the
performance of capital improvement services. Petitioner should obtain certificates of capital
improvement from customers on whose real property capital improvement services are
performed. See AA Nursery, Adv Op St Tx Comm, August 21, 1985, TSB-A-85(32)S. If the
project qualifies for exemption from tax pursuant to section 1115(a) of the Tax Law or if
Petitioner’s customer is an organization exempt from sales tax pursuant to section 1116(a) of the
Tax Law, Petitioner need not collect sales tax on any portion of its bill or invoice to such
customer.
However, Petitioner must collect sales tax on the full amount of its charges for any
taxable repair, maintenance or installation services performed on property located in New York
State. The taxable receipts may not be reduced by Petitioner’s costs of managing the contractor
network (hiring, firing and dispute resolution), customer service costs and any other costs
incurred by Petitioner in the administration and performance of its service contracts with its
customers. Such expenses are not deductible from the taxable receipt. See section 1101(b)(3) of
the Tax Law and section 526.5(e) of the Sales and Use Tax Regulations. Petitioner must collect
sales tax at the rate in effect at the location where the services are performed or delivered. The
address to which Petitioner’s bill or invoice is mailed to its customer is irrelevant in determining
the taxable status of a receipt or the tax rate. Any repair, maintenance or installation services
performed on real property at locations outside New York State are not subject to New York
State and local sales taxes. See section 525.2(a)(2) and (3) of the Sales and Use Tax
Regulations.

DATED: March 11, 2005

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.