Is installing point-of-sale cash register systems, related hardware, and power/cabling equipment in retail stores subject to New York sales tax, and does testing the pre-loaded software count too?

Plain-English summary

Macro Integration Services installs point-of-sale cash register systems in grocery stores and similar retailers, both in New York and elsewhere. It doesn't sell the registers — customers buy those from separate vendors, already loaded with software, and ship them to Macro's staging area. There, Macro tests the equipment and software before installing it on-site, where it also drills into countertops, runs cabling, and hooks everything up to power. Macro also sells and installs uninterruptible power supply (UPS) equipment and other hardware peripherals (keyboards, mice, cables, jacks, power strips), separately bills for those, does an on-site electrical/cabling survey, and sometimes charges for removing and storing old equipment. All these charges are separately itemized on its invoices.

The Department broke this into several taxable pieces and one significant exemption path. Installing the cash registers and peripherals is taxable computer-hardware installation under § 1105(c)(3), and the hardware itself is taxable under § 1105(a) — a straightforward "you sell it or install it, you tax it" result. But the UPS equipment, cabling, and power-supply items can be different: if the installation meets New York's capital-improvement test (substantially adds value, becomes a permanent part of the property, isn't just for a tenant's own temporary use), and the charge is reasonable and separately stated, that portion is exempt. Because New York taxes sales tax on a "destination" basis, equipment installed at New York locations is taxable there regardless of whether other equipment in the same job goes to out-of-state stores — though Macro can later apply for a refund or credit for property that ends up incorporated into real property outside New York. Separately, testing the pre-loaded software is treated as an exempt software maintenance service (if reasonably and separately billed), but Macro's on-site electrical/cabling survey is itself a taxable service to real and tangible property, and removal/storage of old equipment is taxable no matter how it's billed.

What this means for you

Companies installing computer/POS hardware in retail stores

Hardware sales and installation labor are taxable by default. The capital-improvement exemption is only available for installations that are genuinely permanent (wiring, breaker panels, permanently affixed power infrastructure) — and only if you separately state a reasonable charge for that portion. Don't assume a whole POS installation project is exempt just because part of it involves wiring work.

Businesses installing for tenants rather than property owners

Installations for a tenant, licensee, or franchisee are presumed non-permanent (and therefore not capital improvements) unless the lease specifically provides that title to the improvement vests in the landlord and it stays on the premises after the lease ends. If you're installing for a tenant customer, get that lease language, or expect the installation to be fully taxable.

Multi-state rollout vendors

New York taxes hardware delivered and installed within the state even if some units in the same rollout are headed out of state — but if equipment on which you already paid NY tax later gets incorporated into real property outside New York, you may be able to claim a refund or credit under § 1119.

Accountants and tax professionals

Note the layered exemptions here: § 1115(o) exempts services performed on computer software (distinct from hardware) when reasonably and separately stated, while § 1101(b)(9)'s capital-improvement test (elaborated in Publication 862 and the tenant-installation cases, Flah's of Syracuse and Beaman Corporation) governs the UPS/wiring portion. Diagnostic/testing services that don't repair anything are still taxable under Example 6 of § 527.5(a)(3).

Common questions

Q: Is installing a point-of-sale cash register system taxable?
A: Yes — installing computer hardware is a taxable service under § 1105(c)(3), and the hardware itself is taxable when sold.

Q: Can the UPS power supply and cabling installation be tax-exempt?
A: Yes, if it qualifies as a capital improvement (substantially permanent, adds value, becomes part of the property) and the charge is reasonable and separately stated on the invoice; otherwise it's taxable like the rest of the hardware.

Q: Is testing the pre-loaded cash register software taxable?
A: No — testing software is treated as an exempt software maintenance service, as long as the charge is reasonable and separately stated from the hardware-testing charge.

Q: Is the on-site electrical/cabling survey taxable?
A: Yes. That survey is a taxable service to real and tangible personal property, distinct from the exempt software testing.

Q: Is removing and storing old equipment taxable?
A: Yes, whenever the storage is performed in New York, regardless of whether the charge is separately stated.

Q: What if some of the equipment is ultimately delivered or used outside New York?
A: Tax still applies based on where the property is delivered and installed (New York's destination-tax rule), though a refund or credit may later be available under § 1119 if property is incorporated into real property outside the state.

Citations and references

Statutes, regulations, and guidance:

• Tax Law § 1101(b)(9) (capital improvement)
• Tax Law § 1105(a), (c)(3), (4), (5) (retail sales; installation; storage; real property maintenance)
• Tax Law § 1115(o) (software services exemption)
• Tax Law § 1119(a) (refund/credit for out-of-state incorporation)
• 20 NYCRR § 525.2(a)(3) (destination tax)
• 20 NYCRR § 526.5(e); § 527.1(b); § 527.5(a)(3), Example 6
• TSB-M-93(3)S (Computer Software Sales/Use Tax)
• Publication 862 (Capital Improvements and Repairs to Real Property)

Case law and prior opinions cited:

• Matter of Flah's of Syracuse v Tully, 89 A.D.2d 729
• TSB-A-82(32)S, Beaman Corporation, Aug. 19, 1982

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_33s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-08(33)S
Sales Tax
July 23, 2008

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

PETITION NO. S070928A

On September 28, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Macro Integration Services, Inc., 311 S. Regional Rd, Greensboro, NC
27409. Petitioner, Macro Integration Services, Inc., provided additional information with respect
to the Petition on January 28, 2008, and March 4, 2008.
The issues raised by Petitioner are:
1.

Whether the service of installing point-of-sale cash register systems is subject to
sales tax.

2.

Whether ancillary services sold in conjunction with the installation of cash
register systems are subject to sales tax.

Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a North Carolina based company that installs point-of-sale cash register
systems in grocery stores and similar retail establishments. Petitioner does not sell the cash
register systems. Customers purchase the cash register systems from third party vendors. The
equipment purchased by the customers is delivered to Petitioner at its staging area with software
already uploaded onto the registers. Petitioner tests the equipment and software before installing
the equipment at customers’ retail locations which are located both within and without
New York State. In addition, Petitioner provides an on-site survey which tests the power supply
and cable requirements at the customer’s retail location to ensure electrical needs are met.
Petitioner, at the customer’s retail location, drills holes into the countertops and runs necessary
cabling to hook up equipment to the power supply.
Petitioner sells uninterrupted power supply (UPS) equipment, which is delivered and
installed at the customer’s site location which may or may not be located within New York State.
Petitioner also provides cable, jacks, power strips, and other necessary computer hardware
peripherals such as a keyboard and mouse, for which items the customer is separately billed. In
certain circumstances, Petitioner will charge for the removal and storage of old equipment.
All charges for delivery of hardware, hardware installation services, staging services, and
removal and storage services of used equipment are separately stated on the bill or invoice to the
customer. Petitioner provided sample copies of invoices along with a “Scope of Work” document
which instructs each technician what to do at each store.

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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 … without any deduction for expenses or early payment
discounts and also including any charges by the vendor to the purchaser for shipping or
delivery,…
*

*

*

(5) Sale, selling or purchase. Any transfer of title or possession or both, exchange
or barter, rental, lease or license to use or consume (including, with respect to computer
software, merely the right to reproduce), conditional or otherwise, in any manner or by
any means whatsoever for a consideration, or any agreement therefore, including the
rendering of any service, taxable under this article, for a consideration or any agreement
therefor.
(6) Tangible personal property. Corporeal personal property of any nature.
However, except for purposes of the tax imposed by subdivision (b) of section eleven
hundred five, such term shall not include gas, electricity, refrigeration and steam. Such
term shall also include pre-written computer software, whether sold as part of a package,
as a separate component, or otherwise, and regardless of the medium by means of which
such software is conveyed to a purchaser . . .
*

*

*

(9) Capital Improvement. (i) An addition or alteration to real property which:
(A) Substantially adds to the value of 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.

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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:
(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,…
*

*

*

(4) Storing all tangible personal property not held for sale in the regular course of
business and the rental of safe deposit boxes or similar space.
(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(o) of the Tax Law provides:
Services otherwise taxable under subdivision (c) of section eleven hundred five or
under section eleven hundred ten shall be exempt from tax under this article where

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performed on computer software of any nature; provided, however, that where such
services are provided to a customer in conjunction with the sale of tangible personal
property any charge for such services shall be exempt only when such charge is
reasonable and separately stated on an invoice or other statement of the price given to the
purchaser.
Section 1119(a) of the Tax Law provides:
Subject to the conditions and limitations provided herein, a refund or credit shall
be allowed for a tax paid pursuant to subdivision (a) of section eleven hundred five or
section eleven hundred ten
(1) sale or use of tangible personal property if the purchaser or user, in the
performance of a contract, later incorporates that tangible personal property into
real property located outside this state.
Section 525.2 (a)(3) of the Sales and Use Tax Regulations provides, in part:
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:
(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….
*

*

*

(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.
Section 527.1 of the Sales and Use Tax Regulation provides, in part:
(a) Imposition. The sales tax is imposed on the receipts from every retail sale of
tangible personal property delivered by the vendor to the purchaser or the purchaser’s
designee in this State, unless specifically exempt or excluded under the Tax Law.
(b) Taxable and exempt items sold as a single unit. When tangible personal
property, composed of taxable and exempt items sold as a single unit, the tax shall be
collected on the total price.

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Section 527.5 of the Sales and Use Tax Regulations provides, in part:
(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.
*

*

*

Example 6: A company operates a diagnostic service in which it tests an
appliance for a set fee, but does not repair the appliance. The charge for the diagnostic
service is taxable.
Technical Services Bureau Memorandum, State and Local Sales and Compensating Use
Taxes Imposed on Certain Sales of Computer Software, March 1, 1993, TSB-M-93(3)S,
provides, in part:
Prewritten computer software is any computer software that is not designed and
developed by the author or other creator to the specifications of a specific purchaser.
*

*

*

Customer Support and Related Services
Services taxable under section 1105(c) of the Tax law are exempt from tax under
section 1115(o) of the Tax Law where performed on any computer software. However,
where such services to be performed on software are sold in conjunction with the sale of
tangible personal property, such as prewritten software, the charge for such services is
exempt only if it is reasonable and separately stated on the invoice or billing statement
given to the customer.
Thus, charges for customer (user) support or for information services provided by
a vendor to a customer, either in person or by some type of telecommunications
arrangement (e.g., telephone, modem, facsimile machine, etc.), in the nature of training,

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consulting, instructing or other diagnostic or troubleshooting services related to
prewritten software are exempt from sales and use taxes where the charges are reasonable
and separately stated. Charges for the service of installing, repairing, maintaining or
servicing prewritten software are also exempt from sales and use taxes where the charges
are reasonable and separately stated on the invoice. Of course, any charges for the above
described services sold in conjunction with custom software are exempt from tax.
Opinion
Petitioner installs point-of-sale cash register systems at its customers’ retail store
locations. The equipment is purchased by the customer from other vendors and delivered to
Petitioner at its staging area. The equipment together with software, already owned by the
customer and uploaded onto the cash register, is tested by Petitioner while the equipment is in
Petitioner’s staging area to ensure proper operation once the equipment is installed on site.
Petitioner also sells and installs UPS power supply equipment and related peripheral
equipment to customers, which is delivered to the customer’s retail site location which may or
may not be located within New York State. Petitioner may also make charges for the removal
and storage of old equipment.
Petitioner drills holes into the countertops and runs necessary cabling to hook up the
point-of-sale cash registers to the power supply. Petitioner’s services of installing the point-of­
sale cash registers and peripheral items such as a keyboard and mouse, constitute the installation
of computer hardware. Sales of the services of installing computer hardware are subject to sales
tax under section 1105(c)(3) of the Tax Law. Petitioner's sales of computer hardware or
peripheral items such as a keyboard and mouse are subject to sales tax under section 1105(a) of
the Tax Law.
The installation of UPS equipment, cable, and other power supply items, may qualify as a
capital improvement to real property and not be subject to New York State and local sales tax if
certain conditions are met. See section 1101(b)(9) of the Tax Law. Sales and Use Tax
Classifications of Capital Improvements and Repairs to Real Property, Publication 862 (4/01),
lists certain installations that will qualify as a capital improvement to real property provided all
of the conditions are met. The complete wiring or rewiring of structures; original installation of
circuit breakers, outlets, and switches; along with the original installation or complete
replacement of multi-outlet strips, breaker panels, and wiring are examples of some types of
work that may qualify as a capital improvement. If the installation of the UPS equipment, cable,
and other power supply items, meets the definition of a capital improvement, and the charges for
such installation are reasonable and separately stated on the bill or invoice to the customer, this
portion of the charges to the customer will be exempt from New York State and local sales and
use taxes. See sections 1105(c)(3)(iii) and 1115(a)(17) of the Tax Law. If the charges for
taxable and nontaxable property or services provided to a customer are not reasonable and

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separately stated on the bill or invoice to the customer, then the entire charge is subject to sales
tax. See section 527.1(b) of the Sales and Use Tax Regulations.
It should be noted that installations made for the purpose of conducting the business of
one who is not the owner of the real property (e.g., a tenant, licensee, or franchisee) are
presumed not to be permanent, but made for the sole use and enjoyment of the person who owns
the business and not for the purpose of the landlord’s estate. See Matter of Flah’s of Syracuse v
Tully, 89 AD2d 729. Such installations, therefore, are presumed not to be capital improvements.
An installation made for a tenant may nevertheless qualify as a capital improvement if the lease
provides that title to the improvement is to vest in the landlord upon installation and that the
improvement is to become a part of the premises and remain on the premises upon the
termination of the lease. See Publication 862, supra, and Beaman Corporation, Adv Op St Tx
Comm, August 19, 1982, TSB-A-82(32)S. If the installation of the UPS equipment, cable, and
other power supply items does not constitute a capital improvement, the sale and installation of
such UPS equipment and other items are all subject to sales tax under sections 1105(a) and
1105(c)(3) of the Tax Law when delivered and installed in New York State. Though the sale of
some of the equipment may ultimately be for delivery and use outside of New York, the receipts
for all such sales delivered within New York State are subject to tax. See section 525.2(a)(3) of
the Sales and Use Tax Regulations. Petitioner may be eligible for a credit or refund of sales tax
for any property which New York State sales tax was paid upon, and was subsequently installed
at an out of state location. See section 1119 of the Tax Law.
Petitioner tests the point-of-sale cash registers before installing them at customer
locations. Petitioner also provides an on-site survey which tests the power supply and cable
requirements at the customer’s location to ensure electrical needs are met. Maintaining,
servicing, or repairing are terms used to cover all activities that relate to keeping property in a
condition of fitness, efficiency, readiness or safety or restoring it to such condition. The
equipment testing and the on-site survey, which is comprised of electronic testing of the on-site
cabling to ensure proper capacity needs are met, are considered to be services to real and tangible
personal property subject to sales tax under section 1105(c)(3) and/or 1105(c)(5) of the Tax Law.
See section 527.5(a)(3), Example 6, of the Sales and Use Tax Regulations.
The taxable services enumerated under section 1105(c) of the Tax Law are not subject to
sales tax when performed on computer software. See section 1115(o) of the Tax Law. Petitioner
tests the software which was uploaded onto the cash register by a separate third-party vendor.
Such service is considered to be maintaining and servicing pre-written computer software.
Provided Petitioners’ charges are reasonable and separately stated on the bill or invoice to the
customer, the charges for testing the software are not subject to sales tax. See 1115(o) of the Tax
Law. If the charges for software testing are not reasonable and separately stated from the charges
for testing the cash register equipment, then the entire charge for such testing services will be
subject to tax.

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Charges for the removal and storage of old equipment are subject to sales tax regardless
of whether the charges are separately stated on the customer’s bill or invoice if the storage is
performed in New York. See section 1105(c)(4) of the Tax Law.

DATED: July 23, 2008

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.