Is replacing a built-in electric wall oven a nontaxable capital improvement?

Plain-English summary

Robert E. Harrison asked whether replacing the built-in electric wall oven in his home kitchen is a capital improvement exempt from sales tax. The existing 15-year-old oven sits in a permanent cutout in the kitchen cabinets, is wired directly to a separate electrical line, and is bolted to the rear and side walls of the cutout. His appliance store will remove the old oven and furnish and install a new one (both electrical and physical connections) for $750; the new oven is intended to be a permanent part of the house and to be sold with the home as part of the real property.

The Department held the installed replacement is a capital improvement — not taxable.

• A capital improvement is a permanent addition to real property. Under Tax Law § 1101(b)(9) and 20 NYCRR § 527.7, a capital improvement adds value or prolongs the life of real property, becomes part of or is permanently affixed to it (so removal would cause material damage), and is intended to be permanent.
• Built-in ovens qualify — including replacements. Installing a built-in oven is a capital improvement, and so is replacing one (citing the Department's Publication 862). The bolted-in, hard-wired oven becomes a permanent part of the home.
• So the installed price isn't taxed. Under Tax Law § 1105(c)(3), which taxes installing tangible personal property except where the installation is a capital improvement, Harrison's purchase of the installed replacement built-in oven is not subject to sales tax.

What this means for you

Built-in, hard-wired appliances are capital improvements

When an appliance is built into cabinetry, bolted in place, and directly wired so it becomes a permanent part of the home, installing or replacing it is a capital improvement — the whole installed charge is exempt from sales tax. That's different from a freestanding appliance you simply plug in and roll away, which stays taxable tangible personal property.

Replacement counts, not just the first install

You don't lose capital-improvement treatment because you're swapping out an old unit. The Department treats replacing a built-in oven the same as the original installation. Publication 862 is the Department's go-to guide for which jobs are capital improvements versus taxable repairs.

Give your contractor a capital-improvement certificate

On a job like this, the homeowner typically gives the dealer/contractor a properly completed capital improvement certificate (Form ST-124) so the installed charge is billed without sales tax. The contractor, in turn, pays tax on the materials it buys. Handle the paperwork so the exemption is documented.

Common questions

Q: Is replacing a built-in wall oven taxable?
A: No. A bolted-in, hard-wired built-in oven is a capital improvement, so the installed replacement isn't subject to sales tax under § 1105(c)(3).

Q: Does it matter that it's a replacement, not a new install?
A: No. The Department treats replacing a built-in oven as a capital improvement, just like the original installation (Publication 862).

Q: What about a freestanding oven I just plug in?
A: That's generally taxable tangible personal property — it isn't permanently affixed, so it doesn't become a capital improvement.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(9) — definition of capital improvement (adds value/prolongs life, permanently affixed, intended to be permanent)
• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1105(c)(3) — tax on installing tangible personal property, except installations that constitute a capital improvement
• 20 NYCRR § 527.7 — capital improvements
• Publication 862 — Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property (built-in ovens)

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_5s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-90(5)S
Sales Tax
February 8, 1990

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S891228A

On December 28, 1989 a Petition for Advisory Opinion was received from Robert E.
Harrison, 912 Eileen Terrace, Woodmere, New York 11598.
The issue raised by Petitioner, Robert E. Harrison, is whether the purchase of a replacement
of an electric wall oven constitutes a capital improvement, exempt from the imposition of sales tax.
Petitioner would like to replace the existing electric wall oven located in the kitchen of his
home. The existing wall oven, which is 15 years old, is in a permanent hole in the kitchen cabinets.
The oven is connected directly into a separate electrical line running into the rear of the cutout. The
oven itself is fastened to the rear and side walls of the cutout with bolts.
Petitioner's local appliance store will remove the old oven, furnish a new oven, and properly
install the new oven (both the electrical and physical annexations) for a total cost of $750.00. The
wall oven is intended to become a permanent part of the house, and when the house is sold, the wall
oven will be sold as an integral part of the real property.
Section 1101(b)(9) of the Tax Law and Section 527.7 of the Sales and Use Tax Regulations
define the term capital improvement as an addition or alteration to real property (i) which
substantially adds to the value of the real property, or appreciably prolongs the useful life of the real
property, and (ii) which 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 (iii) is
intended to become a permanent installation.
Section 1105(a) of the Tax Law imposes a tax on "The receipts from every retail sale of
tangible personal property, except as otherwise provided in this article."
Section 1105(c)(3) of the Tax Law imposes a tax on receipts from the service of "Installing
tangible personal property...except for...installing property which, when installed, will constitute an
addition or capital improvement to real property..."
The installation of built-in ovens constitute capital improvements within the meaning and
intent of Section 1101(b)(a) of the Tax Law. Likewise the replacement of such ovens constitute
capital improvements. See New York State Department of Taxation and Finance, New York State

TP-9 (9/88)

-2­
TSB-A-90(5)S
Sales Tax
February 8, 1990

and Local Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property,
Publication 862 (7/87), at 15.
Therefore the purchase of an installed replacement of a built-in electric oven by the Petitioner
from his local appliance dealer would not be subject to the imposition of sales tax in accordance with
the meaning and intent of Section 1105(c)(3) of the Tax Law.

DATED: February 8, 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.