Do a window-and-door distributor's fabrication operations qualify its machinery for the manufacturing (production) exemption?

Plain-English summary

RyTown Millwork, Inc. distributes windows and doors, selling to builders and contractors, and does no installation work. It asked whether its fabrication activities qualify its machinery and equipment for the production (manufacturing) exemption in Tax Law § 1115(a)(12) — for machinery used directly and predominantly in producing tangible personal property for sale. Its work includes:

• Standard window operations — adding extension jambs, "mulling" two or more units into a multisection unit, mulling custom units to standard ones, and applying special exterior casings;
• Door operations — assembling door frames from pre-cut parts, cutting openings and installing door lights, applying brickmould trim, and attaching custom casings, transoms, and sidelights;
• Custom millwork — manufacturing custom window units (round-top, elliptical, half-round, etc.) from rough-sawn lumber that is planed, cut, and milled to customer specifications.

The Department held the machinery qualifies.

• These operations are manufacturing, assembling, or processing. Under 20 NYCRR § 531.2, manufacturing produces property with a different identity from its ingredients, assembling unites parts into a new product, and processing changes the nature, shape, or form of property. RyTown's window, door, and custom-millwork work all fall within these definitions.
• No installation means production for sale. Because RyTown does not install, it is producing tangible personal property for sale — so machinery or equipment purchased for predominant use in these activities qualifies for the § 1115(a)(12) exemption.
• Refund available for tax already paid. If RyTown previously paid sales or use tax on machinery that qualified for the exemption, it may request a credit or refund on Form AU-11.

What this means for you

Fabrication and assembly can be "manufacturing" even without heavy industry

You don't need a factory floor to qualify. Modifying, combining, and building products so the result has a different identity from the raw parts is manufacturing, assembling, or processing under § 531.2. A millwork or fabrication shop that builds and modifies units for sale is producing tangible personal property.

Not installing is what keeps you on the "producer" side

The decisive fact here is that RyTown sells its products and doesn't install them. A business that installs what it makes may be treated as a contractor improving real property — a different (and often less favorable) analysis. If you want the production exemption, understand how installation changes your status.

Claim back tax you already paid on qualifying equipment

If you've been paying sales tax on production machinery that actually qualifies under § 1115(a)(12), you can recover it. File Form AU-11 for a credit or refund within the applicable time limit.

Common questions

Q: We modify and assemble windows and doors for sale — is our machinery exempt?
A: Yes, if the machinery is used directly and predominantly in that production. Modifying, mulling, and building units for sale is manufacturing/assembling/processing under § 531.2, so it qualifies under § 1115(a)(12).

Q: Does it matter that we start from purchased standard units, not raw lumber?
A: No. Combining and modifying purchased components into new units is still assembling/processing, alongside the custom millwork built from lumber.

Q: We've already paid tax on some of this equipment — can we get it back?
A: Yes. If it qualified for the exemption, file Form AU-11 for a credit or refund.

Citations and references

Statutes and regulations:

• Tax Law § 1115(a)(12) — exemption for machinery or equipment used directly and predominantly in producing tangible personal property for sale by manufacturing, processing, or assembling
• 20 NYCRR § 531.2 — definitions of manufacturing, assembling, and processing
• Form AU-11 — Application for Credit or Refund of State and Local Sales or Use Tax

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a90_11s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-90(11)S
Sales Tax
March 21, 1990

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S890921A

On September 21, 1989 a Petition for Advisory Opinion was received from RyTown
Millwork, Inc., Smith Terrace, Manchester, New York 14504.
The issue raised by Petitioner, RyTown Millwork, Inc., is whether its business activities
qualify its purchases of machinery or equipment for the exemption provided under Section
1115(a)(12) of the Tax Law for machinery or equipment for use or consumption directly and
predominantly in the production of tangible personal property for sale.
Petitioner is a distributor of windows and doors, selling directly to builders and contractors.
Petitioner does not perform installation work.
Petitioner's business activities frequently involve the following:
1.

2.

Standard Window Operation - Petitioner withdraws standard set-up window units
(brand name window units purchased for resale by Petitioner) from stock and
modifies such units as follows:
a.

Extension jambs are added to accommodate various wall thicknesses.

b.

Two or more units are mulled together to form a multisection unit.

c.

Custom units (manufactured in Petitioner's custom millwork shop) are mulled
to standard set-up window units.

d.

Special exterior casings (manufactured by Petitioner) are applied to standard
set-up window units.

Door Operation - Petitioner withdraws a basic door from door shop stock and
modifies such door as follows:
a.

A basic door frame is assembled from pre-cut parts.

b.

An opening is cut in a basic door; a door light (any one of various designs)
is installed.

c.

Brickmould, cut from lineal stock, is applied as exterior trim.

d.

Custom exterior casings and transom units (manufactured from raw materials
in Petitioner's door shop) and sidelights are then attached.

-2­
TSB-A-90(11)S
Sales Tax
March 21, 1990

3.

Custom Millwork Operation - Petitioner's custom millwork shop manufactures
custom window units (round top windows, round windows, half-round windows,
elliptical windows, etc). These custom units are built from rough sawn lumber.
Petitioner's manufacturing process requires the rough sawn lumber to be planed and
cut prior to use in building a custom unit. Thin layers of wood, glued together,
compressed and then milled into various curve shaped frames are used to
manufacture the custom window units to specifications supplied by the customers.

Section 531.2 of the Sales and Use Tax Regulations states, in part:
Definitions....
(b)
Manufacturing. Manufacturing is the production of tangible personal
property that has a different identity from its ingredients. Manufacturing includes the
production of standardized items as well as the production of items to a customer's
specifications...
Example 5:

Company E combines metal, wood, glass, and other
component parts into structural panel sections which
are joined to form the bearing walls of a building.
These panels are manufactured products...

(c)
Assembling. Assembling is the coupling or the uniting of parts or
materials as a manufacturing process or as a step in the manufacturing process which
results in a new product...
Example 2:

Company C combines pre-cut glass, plastic,
aluminum extrusions and rubber gaskets to make
storm windows. Such combining of materials is
assembling...

(e)
Processing. Processing is the performance of any service on tangible
personal property which effects a change in the nature, shape or form of the
property...
Section 1115 of the Tax Law states, in part:
Exemptions from sales and use taxes. ­
(a)
Receipts from the following shall be exempt from the tax on retail sales imposed
under subdivision (a) of section eleven hundred five and the compensating use tax imposed
under section eleven hundred ten:...
(12) Machinery or equipment for use or consumption directly and predominantly in the
production of tangible personal property... for sale, by manufacturing, processing, ...
assembling,....

-3­
TSB-A-90(11)S
Sales Tax
March 21, 1990

Whereas all of Petitioner's business activities fall within the definitions of manufacturing,
assembling or processing as stated in Section 531.2 of the Sales and Use Tax Regulations and
whereas Petitioner does not perform any installation work, Petitioner is considered to be
manufacturing, assembling or producing tangible personal property for sale. Accordingly, any
machinery or equipment which is purchased by Petitioner for predominant use in the business
activities described herein will qualify for the tax exemption provided under Section 1115(a)(12) of
the Tax Law.
It is noted that if Petitioner has paid New York State and Local Sales or Use Tax on any
purchases of machinery or equipment which qualified for the exemption provided under Section
1115(a)(12) of the Tax Law at the time of such purchase, Petitioner may request a credit or refund
of such taxes paid by completing a properly completed form AU-11, Application for Credit or
Refund of State and Local Sales or Use Tax and submitting it to New York State Department of
Taxation and Finance, Central Office Audit Bureau - Sales Tax, W.A. Harriman Campus, Albany,
New York 12227.

DATED: March 21, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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