Is installing a wood, pellet, or gas burning stove, a zero-clearance fireplace, or manufactured stone veneer a tax-exempt capital improvement in New York?

Plain-English summary

Countryside Stove and Chimney sells and installs gas, wood, and pellet burning stoves, zero-clearance fireplaces (built directly into a wall), and manufactured stone or brick veneer on interior or exterior walls. Stove installations often require venting straight through a wall or into an existing chimney (sometimes with a new stainless-steel liner and rain cap), and may require cutting or enlarging openings, removing an existing damper, or occasionally reinforcing floors or fireproofing walls, depending on the job.

New York's capital-improvement test requires an installation to (1) substantially add value or extend the property's useful life, (2) become part of the property or be permanently affixed so removal would cause material damage, and (3) be intended as permanent. The Department found that stove installations requiring holes cut in walls/ceilings/roofs, flues or liners installed in chimneys, or floor reinforcement/wall fireproofing generally satisfy all three conditions when the whole job is considered together (not evaluated component-by-component) — so they qualify as capital improvements, exempt from the installation-service tax. Zero-clearance fireplaces, which require opening a wall and inserting the unit into it, clearly meet the same test. Manufactured stone or brick veneer installed on a wall likewise generally qualifies, since it substantially adds value, would damage the property or veneer if removed, and is presumed permanent.

Two important qualifiers: first, whether any SPECIFIC installation actually qualifies still depends on its own facts (an Advisory Opinion can't make that call in the abstract) — the "generally qualifies" conclusion here rests on installations that require the described structural work. Second, when the installation is done for a TENANT rather than a property owner, it only counts as a capital improvement if the lease provides that the installed property becomes the landlord's. The Department also explicitly reversed two older, contrary Advisory Opinions from the 1980s that don't reflect current policy.

What this means for you

Stove, fireplace, and chimney installers

Bill your installation work as an exempt capital improvement (using Form ST-124, Certificate of Capital Improvement) when the job involves cutting into walls/ceilings/roofs, installing new flues or liners, or reinforcing floors/fireproofing walls — but only for work done for a property owner, or for a tenant whose lease vests title in the landlord. A minimal installation that doesn't require any structural modification may not qualify, so document what the job actually involved.

Property owners and tenants having heating appliances installed

If your installer's invoice charges sales tax on a genuine capital-improvement-level installation (structural cutting, new flue/liner, floor/wall reinforcement), ask about the exemption — but as a tenant, confirm your lease actually vests title to the installed equipment in your landlord, since that's what makes tenant-installed work eligible.

Accountants and tax professionals

This opinion explicitly disavows two 1980s-era Advisory Opinions that reached a contrary result — a reminder to check whether an older-vintage ruling on a similar fact pattern has since been superseded before relying on it, and to apply the "whole installation, not individual parts" framing from Publication 862.

Common questions

Q: Is installing a wood stove always a capital improvement?
A: Not automatically — it depends on the specific installation, but jobs that require cutting into walls/ceilings/roofs, new chimney flues or liners, or floor/wall reinforcement generally qualify.

Q: What about installing stone or brick veneer on a wall?
A: Generally yes, when installed for a property owner — it typically adds value, and removal would damage the property or the veneer.

Q: Does it matter if the installation is for a tenant instead of an owner?
A: Yes. For a tenant, the installation only counts as a capital improvement if the lease specifies that title to the installed property vests in the landlord.

Q: Can I rely on this Advisory Opinion for my own installation?
A: Not automatically — it binds the Department only for the petitioner and facts described, and whether a specific job qualifies still depends on its own facts and circumstances.

Citations and references

Statutes, regulations, and publications:

• Tax Law § 1101(b)(9)(i) (capital improvement, three-part test)
• Tax Law § 1105(c)(3), (c)(5) (installation; maintaining/servicing real property)
• 20 NYCRR 527.7(a), (b) (end-result test)
• Publication 862, Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property

Prior rulings/cases referenced:

• Matter of Flah's of Syracuse, Inc. v Tully, 89 AD2d 729
• Beaman Corporation, TSB-A-82(32)S
• M & C Stove World, Inc., TSB-A-81(42)S (superseded by this opinion)
• AA Nursery, Inc., TSB-A-85(32)S (superseded by this opinion)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2007.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a07_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-07(1)S
Sales Tax
February 8, 2007

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

PETITION NO. S040628D

On June 28, 2004, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Countryside Stove and Chimney of Burnt Hills, 839 Saratoga Road,
Burnt Hills, New York 12027.
The issues raised by Petitioner, Countryside Stove and Chimney of Burnt Hills, are:
1.

Whether installations of various wood, pellet, and gas burning heating appliances qualify
as capital improvements to real property for New York State and local sales and use tax
purposes.

2.

Whether the installation of manufactured stone veneers on an interior or exterior wall
qualifies as a capital improvement to real property for New York State and local sales
and use tax purposes.
Petitioner submits the following facts as the basis for this Advisory Opinion.

Petitioner is a retail store selling and installing gas, wood, and pellet burning stoves that
are placed on the floor on noncombustible material either purchased or provided by the
customer.
The gas stoves can be either directly vented from the stove out the side of the building
using a wall thimble and a cap on the outside of the building or vented into the customer’s
existing chimney by installing a stainless steel flexible liner in the chimney with its own rain cap.
The wood and pellet burning stoves are also vented straight out the back of the stove and
through a wall or chimney. Most of the time, Petitioner does not fireproof the wall or fireproof
or reinforce the floor when it installs a wood or pellet burning stove; however, Petitioner sells
hearth boards on which the stoves can be placed. Petitioner installs stoves according to the wall
clearances specified by the stove manufacturer and/or building code. Petitioner may install a
chimney as part of a wood or pellet burning stove installation and may also install a liner that is
attached to the wood or pellet burning stove with silicon sealer and installed in an existing
chimney.
Petitioner also sells and installs zero clearance fireplaces, which are built into the wall of
a building, and sells and installs manufactured stone or brick veneers, which are installed on
interior or exterior building walls.

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Applicable law and regulations
Section 1101(b)(9)(i) of the Tax Law defines the term capital improvement as:
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 . . . there is hereby imposed and there shall be paid
a tax . . . upon:
*

*

*

(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 . . . 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

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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 527.7(a) of the Sales and Use Tax Regulations provides, in part:
(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.
Section 527.7(b) of the Sales and Use Tax Regulations provides, in part:
(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.
*

*

*

(4) The imposition of tax on services performed on real property depends
on the end result of such service. If the end result of the services is the repair or
maintenance of real property, such services are taxable. If the end result of the
same service is a capital improvement to the real property, such services are not
taxable.
Opinion
Petitioner is a retail store that sells and installs zero clearance fireplaces and gas, wood,
and pellet burning stoves. Petitioner inquires as to whether installations of these appliances
qualify as capital improvements to real property.
Petitioner installs stoves according to the wall clearances specified by the stove
manufacturer and/or building code. Petitioner may install a chimney as part of a stove
installation and may also install a liner that is attached to the stove with silicon sealer and
installed in an existing chimney. Presumably, installations in an existing chimney generally
require modifications to the existing construction. It may be necessary to remove and enclose
the fireplace’s existing damper; create or enlarge and enclose an opening to connect the
stovepipe with the chimney flue; or install a liner in the chimney flue with its own rain cap.
Section 1101(b)(9)(i) of the Tax Law provides that in order to constitute a capital
improvement, an installation must meet all three of the following conditions:

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1) the installation must substantially add to the value of the real property or
appreciably prolong the useful life of the real property;
2) the installation must become part of the real property or be permanently
affixed to the real property so that removal would cause material damage to the property
or article itself; and
3) the installation must be intended to be a permanent installation.
Section 527.7(b) of the Sales and Use Tax Regulations further provides that the
imposition of tax on a service performed on real property depends on the end result of such
service. If the end result of the service is the repair or maintenance of real property, the receipt
from such service is taxable. If the end result of the same service is a capital improvement to the
real property, the receipt from such service is not taxable.
In order to determine whether a particular installation qualifies as a capital improvement
to real property, the entire installation must be considered rather than the individual components
of the installation. For example, when an interior wall is repainted, a taxable maintenance
service has occurred. However, if an interior doorway is removed and the resultant opening in
the wall is closed, the repainting of that wall will qualify as a capital improvement. See Sales
and Use Tax Classifications of Capital Improvements and Repairs to Real Property, Publication
862 (4/01).
Publication 862, supra, provides that the following, among others, constitutes a capital
improvement: the addition or complete replacement of a flue or liner (metal or foam) in a
chimney; the original installation of wood burning stoves (including strengthening floors and
fireproofing walls and floors) or the installation of a masonry or prefabricated chimney.
Accordingly, given the nature and method of affixation of Petitioner’s stoves, it appears that
Petitioner's installation of gas, wood, and pellet burning stoves, as described in this Opinion, may
qualify as a capital improvement.
Whether or not a particular installation qualifies as a capital improvement to real property
can only be determined by examining the facts and circumstances of that particular installation.
Such determination is beyond the scope of an Advisory Opinion. However, it is evident from the
facts presented in this Opinion that Petitioner's original installation of gas, wood, and pellet
burning stoves, when taken as a whole, generally appear to satisfy the three conditions set forth
in section 1101(b)(9)(i) of the Tax Law for a capital improvement.
Therefore, where Petitioner's installation of a gas, wood, or pellet burning stove is
performed for a property owner and requires holes to be cut in walls, ceilings, or roofs; flues or
liners to be installed and attached in chimneys; or the reinforcement of floors or fireproofing of
walls, the entire installation qualifies as a capital improvement to real property.

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Zero clearance fireplaces are installed in a wall of a building and require that the wall be
opened and the zero clearance fireplace be inserted in the resulting opening. Such an installation
clearly meets the conditions set forth in section 1101(b)(9)(i) of the Tax Law for a capital
improvement. Accordingly, the installation of a zero clearance fireplace for a property owner
will qualify as a capital improvement to real property.
The installation of manufactured stone or brick veneers will generally meet the conditions
set forth in section 1101(b)(9)(i) of the Tax Law to qualify as a capital improvement to real
property when installed for a property owner. That is, generally such installations substantially
add to the value of the real property, are installed so that removal would damage the property and
the stone or brick veneer, and are, presumably, intended to be permanent.
Where installations are made for a lessee or tenant of the real property, the installation
will not be considered a capital improvement unless the lease provides that the property which
was installed becomes the landlord’s property. See Matter of Flah's of Syracuse, Inc. v James H.
Tully, Jr. et al, 89 AD 2d 729; Beaman Corporation, Adv Op St Tx Comm, September 6, 1982,
TSB-A-82(32)S.
These conclusions represent the current position of the Department. To the extent M & C
Stove World, Inc., Adv Op St Tx Comm, October 28, 1981, TSB-A-81(42)S; AA Nursery, Inc.,
Adv Op St Tx Comm, August 21, 1985, TSB-A-85(32)S, or any other advice from the
Department suggests a contrary conclusion, it does not represent current policy.

DATED: February 8, 2007

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.