Does a company that bolts advertising display/directory units to mall floors owe sales tax on installing them, on selling the advertising space on them, or does it even need to register as a New York sales tax vendor?

Plain-English summary

Eye Mall Media (USA), LLC leases small floor spaces inside shopping malls and installs double- or triple-sided display units there — one side shows the mall directory, the other side(s) are advertising panels Eye Mall sells to its clients. The units are bolted to the floor and can be unbolted and removed (sometimes needing minor floor repair) if Eye Mall's mall lease ends. Eye Mall doesn't own the mall property, only leases space in it, and it retains ownership of the display units themselves throughout the lease term.

The Department worked through New York's three-part capital-improvement test and found the display units fail two of the three conditions:

• They likely do substantially add value to the real property (condition 1 could be met).
• But bolting alone doesn't create the "material damage on removal" needed for condition 2 — the units come off the same way they went on, without destroying the floor or the unit itself, similar to bolted equipment in prior rulings.
• And because Eye Mall only leases the mall space and keeps ownership of the units for the lease term (giving them back to the mall only if it chooses not to renew), condition 3's requirement of intended permanence isn't met either.

Since a capital improvement needs all three conditions, the display-unit installations are taxable installations of tangible personal property — sales tax applies to Eye Mall's installation and maintenance charges (labor and materials), and Eye Mall must pay sales/use tax on the materials it buys to assemble the units, including shipping charges (which are always part of the taxable receipt).

But Eye Mall's actual advertising business — selling ad space on the display units to clients — is a service not listed as taxable under § 1105(c), so those advertising-space charges are not subject to sales tax at all. Because that untaxed advertising service is Eye Mall's only activity in New York (it isn't otherwise selling taxable tangible property or services to its clients), the Department concluded Eye Mall isn't even required to register as a New York sales tax vendor — though it must still pay tax as a purchaser on its own materials and on the installation/maintenance services its independent contractors perform.

What this means for you

Advertising/media display companies

Bolting your equipment to a mall or building floor doesn't make the installation an exempt capital improvement — courts and the Department have consistently held that bolted (versus embedded/permanently affixed) installations can be removed without material damage, so they stay taxable. Also, retaining ownership of your equipment during a limited-term lease (rather than transferring it permanently to the property owner) undercuts the "intent to be permanent" element too.

Companies selling ad space or similar non-enumerated services

Selling advertising space itself is generally not a taxable service in New York. If that's your only New York activity, you may not need to register as a sales tax vendor at all — but you'll still owe tax as a purchaser on the equipment and materials you buy and on any taxable installation/repair services performed for you.

Anyone assembling equipment with out-of-state materials for installation in New York

Shipping and delivery charges are always part of the taxable receipt on your material purchases — you can't separately state them to avoid tax. And if you install/use materials in a different local jurisdiction than where they were first delivered to you, you may owe additional local use tax based on the rate difference.

Common questions

Q: Does bolting a display unit or sign to the floor make it an exempt capital improvement?
A: Not by itself. Bolted installations can typically be removed without material damage to the floor or the unit, which fails the second of the three capital-improvement conditions — so bolted units usually remain taxable tangible personal property.

Q: If I only sell non-taxable advertising services in New York, do I need to register as a vendor?
A: Not necessarily. If advertising space is your only New York revenue and it's not a taxable service under § 1105(c), you may not be required to register — but you'll still need to pay sales/use tax on your own purchases (equipment, materials, and any taxable services you buy from contractors).

Q: Are shipping charges taxable when I buy materials out of state for a New York installation?
A: Yes. Shipping and delivery charges are included in the taxable receipt regardless of whether they're separately stated on the invoice.

Q: Does this apply to any advertising display company?
A: This Advisory Opinion binds the Department only as to Eye Mall Media (USA), LLC and the specific facts described — how your units are affixed, who owns the space, and your lease terms could change the analysis.

Citations and references

• Tax Law § 1101(b)(3), (4), (8), (9)(i) (receipt, retail sale, vendor, capital improvement definitions)
• Tax Law § 1105(a), (c)(3) (imposition of sales tax; installation/repair/maintenance)
• Tax Law § 1110(a) (use tax)
• 20 NYCRR § 525.2(a)(3) (destination tax; point of delivery)
• 20 NYCRR § 527.5 (installing, repairing, servicing, maintaining tangible personal property)
• Matter of Charles R. Wood Enterprises, Inc. v. State Tax Commn., 67 A.D.2d 1042
• Matter of West Mountain Corp. v. Miner, 85 Misc. 2d 416
• Cornwell Energy Management, Inc., Adv Op Comm T&F, May 8, 2003, TSB-A-03(22)S
• Empire Vision Center, Inc., Dec Tax App Trib, Nov. 7, 1991, DTA No. 805767
• Apco Graphics, Inc., Adv Op Comm T&F, Jan. 28, 1999, TSB-A-99(5)S
• Matter of Flah's of Syracuse, Inc. v. James H. Tully, Jr. et al., 89 A.D.2d 729
• Spot and Company of Manhattan, Inc., Adv Op Comm T&F, Jan. 7, 2008, TSB-A-08(1)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a08_29s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Taxpayer Guidance Division

TSB-A-08(29)S
Sales Tax
July 21, 2008

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S061114A

On November 14, 2006, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Eye Mall Media (USA), LLC, 3701 Bee Cave Road, Suite 101, Austin,
Texas 78746-5364. Petitioner, Eye Mall Media (USA), LLC, provided additional information
pertaining to the Petition on March 19, 2007.
The issues raised by Petitioner are:
1.

Whether its installations of shopping mall directories (display units) qualify as
capital improvements to real property.

2.

Whether its sale of advertising space on these display units is subject to sales tax.

3.

Whether Petitioner's expenses incurred in installing and maintaining the display
units are subject to sales tax.

4.

Whether shipping or delivery charges incurred by Petitioner in purchasing
materials for its display units are deductible from the receipt subject to sales or
use tax.

5.

Whether Petitioner has an obligation to register for sales and use tax purposes in
New York State.

Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a Delaware company located in Austin, Texas. Petitioner installs double­
sided or triple-sided display units in shopping malls in spaces leased by Petitioner from shopping
malls. The display units are installed by being bolted to the floor. The display units are removed
by reversing the installation procedure, in some cases requiring minor repair to the floor. On one
side of the display unit is the mall directory; the other side or sides are available as advertising
space, which Petitioner sells to its clients. Petitioner is not an advertising agency and does not
design advertisements. Petitioner's clients provide the advertising materials to be placed within
the display units. Independent contractors hired by Petitioner install, repair, and maintain the
display units; update the directory; and replace advertisements in the display units. Petitioner
purchases materials to assemble the display units, which materials are shipped from an out-of­
state location for use in shopping malls in New York. The shipping charges for these materials
are separately stated on the sellers’ invoices.

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Petitioner retains ownership of the display units during the term of its lease with the
shopping mall. At the end of the lease with the shopping mall, Petitioner has the option to renew
its lease. If Petitioner decides not to renew the lease, it relinquishes the display units to the
shopping mall. Petitioner's display units are currently installed in two shopping malls in two
different counties in New York.
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, including gas and gas service and electricity and electric
service of whatever nature, 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 or early payment discounts and also including any charges by
the vendor to the purchaser for shipping or delivery, . . .
(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 . . .
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. . . .
*

*

(8) Vendor. (i) The term "vendor" includes:

*

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(A) A person making sales of tangible personal property or services, the receipts
from which are 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:
On and after June first, nineteen hundred seventy-one, there is hereby imposed
and there shall be paid a tax . . . upon:
(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, 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:
*

*

*

(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

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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 . . . .
Section 1110 of the Tax Law provides, in part:
(a) Except to the extent that property or services have already been or will be
subject to the sales tax under this article, there is hereby imposed on every person a use
tax for the use within this state on and after June first, nineteen hundred seventy-one
except as otherwise exempted under this article, (A) of any tangible personal property
purchased at retail, . . .
(b) For purposes of clause (A) of subdivision (a) of this section, the tax shall be at
the rate of four percent of the consideration given or contracted to be given for such
property, or for the use of such property, including any charges for shipping or
delivery. . . .
Section 1118 of the Tax Law provides, in part:
The following uses of property and services shall not be subject to the
compensating use tax imposed under this article:
*

*

*

(7)(a) In respect to the use of property or services to the extent that a retail sales
or use tax was legally due and paid thereon, without any right to a refund or credit
thereof, to any other state or jurisdiction within any other state but only when it is shown
that such other state or jurisdiction allows a corresponding exemption with respect to the
sale or use of tangible personal property or services upon which such a sales tax or
compensating use tax was paid to this state. To the extent that the tax imposed by this
article is at a higher rate than the rate of tax in the first taxing jurisdiction, this exemption
shall be inapplicable and the tax imposed by section eleven hundred ten of this chapter
shall apply to the extent of the difference in such rates, except as provided in paragraph
(b) of this subdivision.

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(b) To the extent that the compensating use tax imposed by this article and a
compensating use tax imposed pursuant to article twenty-nine are at a higher aggregate
rate than the rate of tax imposed in the first taxing jurisdiction, the exemption provided in
paragraph (a) of this subdivision shall be inapplicable and the taxes imposed by this
article and pursuant to article twenty-nine shall apply to the extent of the difference
between such aggregate rate and the rate paid in the first taxing jurisdiction. In such
event, the amount payable shall be allocated between the tax imposed by this article and
the tax imposed pursuant to article twenty-nine in proportion to the respective rates of
such taxes.
Section 525.2(a)(3) of the Sales and Use Tax Regulations provides:
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 527.5 of the Sales and Use Tax Regulations provides, in part:
Installing, repairing, servicing and maintaining tangible personal property. (a)
Imposition. (1) The tax is imposed on receipts from every sale of the services of
installing, maintaining, servicing or repairing tangible personal property, by any means
including coin-operated machines, whether or not any tangible personal property is
transferred in conjunction with the services.
(2) Installing means setting up tangible personal property or putting it in place for
use.
*

*

*

(3) Maintaining, servicing and repairing are terms used to cover all activities that
relate to keeping tangible personal property in a condition of fitness, efficiency, readiness
or safety or restoring it to such condition.
Opinion
Issue 1
Petitioner hires independent contractors to install double-sided or triple-sided directory
and advertising display units in shopping malls in spaces leased by Petitioner from shopping
malls. The display units are bolted to the floor.

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The first condition for an installation to be considered a capital improvement as set forth
in section 1101(b)(9)(i)(A) of the Tax Law requires that the installation substantially add to the
value of the real property or appreciably prolong the useful life of the real property. The display
units described by Petitioner do not appreciably prolong the useful life of the real property.
However, it is possible that such display units may substantially add to the value of the real
property.
The second condition for a capital improvement set forth in section 1101(b)(9)(i)(B) of
the Tax Law requires that the display unit be installed in such a manner as to 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 the display itself. Although most forms of equipment, including
signage, normally require some form of affixation to real property, the courts have held that the
mere bolting of equipment to real property does not, in and of itself, create the degree of
permanence necessary to establish that a particular installation is a capital improvement. See
Matter of Charles R. Wood Enterprises, Inc. v State Tax Commn., 67 AD 2d 1042; Matter of
West Mountain Corp. v Miner, 85 Misc 2d 416. In Cornwell Energy Management, Inc., Adv Op
Comm T & F, May 8, 2003, TSB-A-03(22)S, the Tax Department opined that motor controllers
that were wired to a motor and bolted to real property and required only unwiring and unbolting
to be removed for service or repair did not have the degree of permanence necessary to establish
a capital improvement.
The primary method of affixing Petitioner's display units to the real property is using
bolts to attach them to a floor. The display units are removed by reversing the installation
procedure, in some cases requiring minor repair to the floor. Similar to the stools in Empire
Vision Center, Inc., Dec Tx App Trib, November 7, 1991, DTA No. 805767, these display units
can be removed from the bolts without destroying the display unit. Therefore, Petitioner's floor­
mounted display units fail to meet the second condition of the capital improvement test. See
Apco Graphics, Inc., Adv Op Comm T&F, January 28, 1999, TSB-A-99(5)S.
The third condition for a capital improvement set forth in section 1101(b)(9)(i)(C) of the
Tax Law requires that the installation of the display unit be intended to be permanent. Since
Petitioner leases space from the shopping mall and retains ownership of the display unit during
the term of the lease, it does not appear that the installation of the display unit is intended to be
permanent. 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.
Section 1101(b)(9)(i) of the Tax Law requires that all three of the conditions set forth be
met in order for an installation to be considered a capital improvement to real property. If the
installation of display units fails to meet one or more of these conditions, such installation cannot
qualify as a capital improvement to real property. Based on the facts and circumstances
described in this Opinion with respect to the display units, it appears the installation of
Petitioner's display units does not meet the second or third condition for a capital improvement to

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real property. Such installation is, therefore, considered to be an installation of tangible personal
property that remains tangible personal property after installation. Accordingly, charges for the
installation of Petitioner's display units, including labor and materials, are subject to sales tax
under sections 1105(a) and 1105(c)(3) of the Tax Law.
Issue 2
Petitioner sells advertising space on the display units to clients. Petitioner's sales of
advertising space on its display units are sales of a service not enumerated as taxable in section
1105(c) of the Tax Law. Therefore, Petitioner's charges to a client for displaying advertising on
a display unit are charges for the sale of advertising services that are not subject to sales tax. See
Matter of Ruth Outdoor Advertising Co., Dec State Tax Comm, April 3, 1981, TSB-H-81(102)S;
Stillman Advertising Inc., Adv Op Comm T&F, May 26, 1988, TSB-A-88(30)S; Spot and
Company of Manhattan, Inc., Adv Op Comm T&F, January 7, 2008, TSB-A-08(1)S.
Issue 3
Petitioner hires independent contractors to install, repair, and maintain the display units,
replace the advertisements in the display units, and update the directories. Sales tax is imposed
on the installation, repair, maintenance, or servicing of tangible personal property. See section
1105(c)(3) of the Tax Law. Therefore, charges by independent contractors to Petitioner for the
above services to the display units are subject to sales tax. See section 527.5 of the Sales and
Use Tax Regulations. Contractors performing such work in New York are required to be
registered for sales tax purposes and collect the applicable sales tax from Petitioner on the work
described above. See section 1101(b)(8) of the Tax Law.
Issue 4
Petitioner has materials used in erecting its display units in shopping malls in New York
shipped from an out-of-state location. The shipping and delivery charges for these materials are
separately stated on the vendors’ invoices. Petitioner is liable for the New York State and local
sales or compensating use tax computed on the full amount of the receipt, including any charges
for shipping and delivery, on its purchase of materials delivered to a location in New York State.
See section 1101(b)(3) of the Tax Law. If the vendor of the materials is registered for sales and
use tax purposes in New York, the vendor is required to collect New York State and local sales
or use tax from Petitioner. If, for any reason, New York State and local sales or use tax is not
collected from Petitioner by the vendor on receipts from the sale of materials used to construct
and install the display units, Petitioner must pay the tax itself directly to the Tax Department.
The rate and incidence of the local tax is determined by the point of delivery of the materials
from the vendor to Petitioner. See section 525.2(a)(3) of the Sales and Use Tax Regulations.
Petitioner may also be liable for local compensating use tax based on the purchase price for the
materials it purchases (including the charges for shipping and delivery) if the materials are used

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and installed by Petitioner in a local jurisdiction other than the jurisdiction where the materials
were initially delivered to Petitioner by the vendor. See Custom Design Kitchens, Inc., Adv Op
Comm T & F, October 7, 1996, TSB-A-96(66)S.
Issue 5
Petitioner's sales of advertising space on its display units are sales of a service not
enumerated as taxable in section 1105(c) of the Tax Law. See Spot and Company of Manhattan,
Inc., supra. Based on the facts in this Opinion, it appears that Petitioner is not making sales of
tangible personal property or services the receipts from which are taxed under section 1105.
Therefore, it appears that Petitioner is not a vendor for sales tax purposes and is not required to
register for sales tax purposes in New York State. See section 1101(b)(8) of the Tax Law.

DATED: July 21, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulation 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.