Is a contract to clean grease and odor exhaust systems in commercial kitchens exempt as interior cleaning and maintenance, or is it taxable equipment maintenance?

Plain-English summary

Shaban & Son, Inc. cleans grease and odor exhaust systems in commercial kitchens under service contracts (usually a year, with visits from twice weekly to quarterly). Each visit: remove, clean, and replace air filters; clean, polish, coat, and fire-retardant-spray canopies, ducts, fan chambers, and fans; check fan balance; adjust fire dampers. It asked whether this qualifies for the interior cleaning and maintenance exclusion under Tax Law § 1105(c)(5).

The Department held the work is taxable — it isn't ordinary interior janitorial cleaning.

• It's a real-property service. Built-in kitchen exhaust fans and ducted hoods become part of the building — capital improvements to real property (Publication 862). So the cleaning falls under § 1105(c)(5) (maintaining/servicing/repairing real property).
• The exclusion is narrow. Section 1105(c)(5) excludes interior cleaning and maintenance on a 30-day-or-longer contract — but "interior cleaning and maintenance" means only ordinary janitorial work: dusting; cleaning/waxing floors and walls; oiling hinges; replacing light bulbs; simple repairs like replacing washers (20 NYCRR § 527.7(c)(3)(iv)).
• This is specialized equipment maintenance, so it's taxable. However routine, these are specialized equipment-maintenance tasks, not general janitorial services, so they're subject to state and local sales tax (Matter of J.C. Penney Co., TSB-H-80(230)S).
• Transferred materials are resale-exempt. Under § 1101(b)(4)(i), Shaban need not pay tax on property actually transferred to the customer in performing the service — e.g., waxes (but not cleaners), preserving agents, fire retardant, tape, and sealers — using a Resale Certificate (Form ST-120) given to its supplier within 90 days of purchase.

What this means for you

A long-term cleaning contract isn't automatically tax-exempt. New York's exclusion for interior cleaning and maintenance covers ordinary janitorial work — dusting, floors, walls, bulbs, minor fixes. Specialized cleaning and upkeep of building equipment (like kitchen exhaust systems that count as part of the real property) falls outside that exclusion and is taxable, even on a regular multi-visit contract.

The label "cleaning" doesn't decide it — the nature of the work does. If your service is really equipment maintenance of a capital improvement, tax it.

You can buy transferred materials tax-free, but not your cleaning consumables. Items you actually hand over to the customer as part of the job (waxes, preserving agents, fire retardant, tape, sealers) can be bought for resale with Form ST-120 within 90 days; things you merely consume doing the work — like cleaners — remain taxable to you.

Common questions

Q: We clean restaurant kitchen exhaust hoods and ducts on an annual contract. Is that tax-exempt interior cleaning?
A: No. Built-in exhaust systems are part of the building, and specialized cleaning/maintenance of that equipment is taxable — it isn't the ordinary janitorial work the exclusion covers, even on a 30-day-plus contract.

Q: What actually qualifies as exempt "interior cleaning and maintenance"?
A: Ordinary janitorial services — dusting, cleaning and waxing floors and walls, oiling hinges, replacing light bulbs, and simple repairs like replacing washers.

Q: Do we owe tax on the supplies we use?
A: You owe tax on things you consume (like cleaners). But materials you actually transfer to the customer — waxes, preserving agents, fire retardant, tape, sealers — can be bought for resale with Form ST-120 within 90 days.

Citations and references

Statute, regulation, and authority:

• Tax Law § 1105(c)(5) — taxes services of maintaining, servicing, or repairing real property, but excludes interior cleaning and maintenance performed on a regular contractual basis for a term of at least 30 days
• Tax Law § 1105(c)(3) — taxes servicing or repairing tangible personal property
• Tax Law § 1101(b)(4)(i) — resale exclusion; property transferred to the customer in performing a service can be bought for resale
• 20 NYCRR § 527.7(c)(3)(iv) — construes interior cleaning and maintenance as ordinary janitorial services (Opinion of Counsel, 1965 NYTB-3, p. 29)
• Publication 862 (Classifications of Improvements and Repairs to Real Property for Sales Tax Purposes) — built-in kitchen exhaust fans and ducted hoods are capital improvements; Matter of J.C. Penney Co., TSB-H-80(230)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a88_26s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88(26)S
Sales Tax
May 11, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S870908B

On September 8, 1987, a Petition for Advisory Opinion was received from Shaban & Son,
Inc., P.O. Box 567, Sparta, N.J., 07871.
The issue raised is whether the cleaning and maintenance services provided by the Petitioner
qualify for exclusion from the imposition of sales tax pursuant to Tax Law §1105(c)(5).
Petitioner cleans odor and grease exhaust systems in commercial kitchens on a contractual
basis. The service agreements, usually extending over a term of one year, schedule service calls at
regular intervals ranging from twice weekly to once every three months.
During every service call, air filters are removed, cleaned and replaced; canopies, ducts, fan
chambers and fans are cleaned, polished, coated with a preserving agent and sprayed with fire
retardant; fans are checked for balance and, if necessary, fire dampers are adjusted.
Petitioner's employees do not tighten or replace fan belts nor are they obligated to check the
electrical parts of the exhaust system; however, they will report to the building engineer any
problems encountered while cleaning.
Section 1105(c)(3) of the Tax Law imposes tax on the receipts from servicing or repairing
tangible personal property. Section 1105(c)(5) of the Tax Law imposes tax on every sale of the
services of 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 ­
but excludes from taxation interior cleaning and maintenance services performed on a regular
contractual basis for a term of not less than thirty days.
It has been determined that built-in kitchen exhaust fans and ducted hoods, upon installation,
become part of the building and therefore capital improvements to real property. See Department of
Taxation and Finance Publication 862 (2/81), Classifications of Improvements and Repairs to Real
Property for Sales Tax Purposes, at p. 13. Petitioner's business activities, therefore, come under the
purview of Tax Law § 1105(c)(5).
The phrase "interior cleaning and maintenance" has been construed to mean ordinary
janitorial services such as dusting, cleaning and waxing the floors and walls of a building, oiling
door hinges, replacing light bulbs and simple repairs such as the replacement of washers. 20 NYCRR
527.7(c)(3)(iv); Opinion of Council, 1965 NYTB-3, p. 29.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-88(26)S
Sales Tax
May 11, 1988
The services at issue, although performed on a regular contractual basis, are not the general
janitorial building cleaning and maintenance services intended for exclusion from sales tax by the
statute. However routine, they are equipment maintenance tasks of a specialized nature which are
subject to state and local sales taxes in accordance with the above quoted sections of the Tax Law
and the Regulations of the Commissioner of Taxation and Finance. See also Matter of J.C. Penney
Co., Decision of the State Tax Commission, October 17, 1980, TSB-H-80(230)S.
It should be noted, however, that in accordance with Tax Law § 1101(b)(4)(i) Petitioner is
not required to pay tax on purchases of property transferred to the customer in the performance of
its services. This exemption, for instance, would apply to waxes (but not cleaners), preserving
agents, fire retardant, tape and sealers; it may be claimed by issuing a Resale Certificate (Form ST­
120), no later than 90 days after the purchase, to the vendor of the exempt supplies.

DATED: May 11, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.