Does installing a gas stove that requires building a new chimney and adding new gas and electric lines qualify as an exempt capital improvement rather than a taxable installation service?

Plain-English summary

New Way Equipment sells and installs wood, gas, and pellet stoves, zero-clearance fireplaces, and fireplace inserts. It asked the Department whether one specific gas stove installation counted as an exempt capital improvement to real property rather than a taxable installation service. The installation required attaching the stove to a chimney, an electric line, and a gas line — but not to a wall or ductwork. Crucially, none of that infrastructure already existed: the company had to build a new chimney (cutting a hole in the roof) and run new gas and electric lines to the stove.

New York generally taxes installation of tangible personal property, but carves out an exception for installations that become a genuine "capital improvement" — an addition that (1) substantially adds value or prolongs the property's useful life, (2) becomes permanently part of the real property such that removing it would cause material damage, and (3) is intended to be permanent. The Department's own published guidance (Publication 862) specifically lists installing a new chimney, the original installation of a wood-burning stove, additions to wiring systems, and additions to piping systems as examples of capital improvements. Because this installation combined all of those elements — new chimney, new gas line, new electric line, built into the structure of the house — the Department held the entire project, evaluated as a whole rather than component-by-component, qualifies as a capital improvement. That means the installation charge is exempt from sales tax (though New Way Equipment still owes tax on its own purchase of the materials, per the standard contractor rule).

What this means for you

Stove, fireplace, and heating-appliance installers

Whether your installation is a taxable service or an exempt capital improvement depends on the whole project, not just whether you're "installing an appliance." If the job requires building new structural infrastructure — a new chimney, new wiring, new piping — that didn't exist before, and the result is a permanent fixture, the whole project (including the appliance itself) can qualify as a capital improvement.

Homeowners and property owners hiring contractors

If your contractor's invoice separates "capital improvement" installation labor from materials, remember that the contractor still pays sales tax on the materials it buys (the standard rule for contractors), even though you as the customer don't pay sales tax on the labor portion of a genuine capital improvement.

Accountants and tax professionals

This is a clean, fact-specific illustration of the "evaluate the entire project, not individual components" principle from Publication 862 (the interior-wall-repaint-vs-doorway-removal example is the classic analogy). It's also useful precedent alongside the earlier Countryside Stove and Chimney opinion on similar heating-appliance installations.

Contractors

Remember that even when the installation labor is exempt as a capital improvement, contractors remain liable for sales tax on their own purchases of the materials used (chimney parts, wiring, piping, the stove itself) — the capital-improvement exemption benefits the customer's labor charge, not the contractor's own materials purchase.

Common questions

Q: Is installing a gas stove always an exempt capital improvement?
A: Not automatically. It depends on the whole installation — a stove simply plugged into existing gas, electric, and chimney connections (with no new structural work) could be treated differently than one requiring entirely new infrastructure, as in this case.

Q: Does the contractor still pay sales tax if the installation is a capital improvement?
A: Yes, on the materials it purchases. The capital-improvement exemption applies to the installation charge to the property owner, not to the contractor's own purchases of the stove, chimney parts, wiring, and piping.

Q: What are examples of capital improvements to real property in New York?
A: The Department's Publication 862 lists installing a new chimney, the original installation of a wood-burning stove, additions to a wiring system, and additions to piping systems, among others.

Q: Can another stove or fireplace installer rely on this exact ruling?
A: No. This Advisory Opinion binds the Department only as to New Way Equipment and the specific installation it described. A different installation (for example, one using existing chimney, gas, and electric connections) could reach a different result.

Citations and references

Statutes, regulations, and guidance:

• Tax Law § 1101(b)(4)(i) (definition of retail sale, including sales to contractors)
• Tax Law § 1101(b)(9)(i) (definition of capital improvement)
• Tax Law § 1105(c)(3)(iii) (capital-improvement exclusion from installation tax)
• Tax Law § 1105(c)(5) (maintaining, servicing, or repairing real property)
• 20 NYCRR 541.1(b) (sales to contractors)
• Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property, Publication 862 (4/01)

Prior opinions cited:

• Countryside Stove and Chimney of Burnt Hills, Adv Op Comm T&F, February 8, 2007, TSB-A-07(1)S

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_24s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-07(24)S
Sales Tax
August 28, 2007

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

PETITION NO. S070118B

On January 18, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from New Way Equipment, 2027 Avon-Geneseo Road, Avon, New York
14414.
The issue raised by Petitioner, New Way Equipment, is whether the installation of a gas
stove as described below qualifies as a capital improvement to real property.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner sells and installs wood, gas, and pellet stoves; zero-clearance fireplaces; and
fireplace inserts. The issue in this Opinion is whether a particular installation of a gas stove
constitutes a capital improvement. The stove was installed by attaching it to a chimney, an
electric line, and a gas line. The stove was not attached to a wall or to ductwork. The
installation of the stove in this case required that Petitioner install a chimney, which involved
cutting a hole in the roof, and new gas and electric lines to the stove.
Applicable law and regulations
Section 1101(b)(4)(i) of the Tax Law defines the term retail sale, in part, as:
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. . . .
Section 1101(b)(9)(i) of the Tax Law defines the term capital improvement as:

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August 28, 2007

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
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 . . . .

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August 28, 2007

Section 541.1(b) of the Sales and Use Tax Regulations provides:
The principal distinguishing feature of a sale to a contractor, as compared
to a sale to other vendors who purchase tangible personal property for resale, is
that the sale of tangible personal property to a contractor for use or consumption
in construction is a retail sale and subject to sales and use tax, regardless of
whether tangible personal property is to be resold as such or incorporated into real
property as a capital improvement or repair. Whenever a contractor uses
materials, on which the contractor has paid sales tax, in a repair or maintenance
contract (except interior cleaning and maintenance contracts of 30 days or more)
subject to the sales tax on services under section 1105(c) of the Tax Law, the
contractor may be entitled to a refund or credit of the portion of the tax he paid
attributable to the materials transferred to the customer.
Opinion
Petitioner sells and installs gas stoves by attaching them to a chimney, a gas line, and an
electric line. The installation at issue in this case required that Petitioner install a chimney,
which involved cutting a hole in the roof, and new gas and electric lines to the stove.
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:
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.
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 entire project is a capital improvement, including the repainting of the
wall. 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, constitute capital
improvements: installation of a new chimney; the original installation of a wood burning stove;
the installation of a masonry or prefabricated chimney; additions to a wiring system, for

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August 28, 2007

example, new circuits; original installation of electrical receptacles and outlets; and additions to
piping systems. Accordingly, based on the nature and method of installing Petitioner’s gas
stove, Petitioner's installation of the stove as described in this Opinion qualifies as a capital
improvement. See Countryside Stove and Chimney of Burnt Hills, Adv Op Comm T & F,
February 8, 2007, TSB-A-07(1)S.

DATED: August 28, 2007

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the
person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.