When a cabinet maker installs its own cabinets in custom-kitchen jobs, are those cabinets 'items of the same kind' it sells, so use tax is based on its selling price?

Plain-English summary

Triangle Pacific Corp. manufactures kitchen cabinets outside New York and sells them from in-state distribution centers to retail stores, contractors, and construction companies. It also installs kitchens: a salesman lays out each kitchen to fit the home (often with a design program), and the individual cabinet boxes are used as inventoriable parts to build a unique kitchen. No two finished kitchens are exactly alike, and the installer modifies materials to complete each job. Triangle Pacific asked how to value the cabinets it uses in its own installed jobs for use-tax purposes — are they "items of the same kind" it sells, or unique?

The Department held they are "items of the same kind":

• The use-tax rule. Tax Law § 1110 imposes a use tax on tangible personal property the user manufactures/assembles if items of the same kind are offered for sale by the user in the regular course of business.
• The basis is the offered-for-sale price. Under 20 NYCRR § 531.3(b)(1)(i)(a), when the user offers items of the same kind for sale, the use tax is computed on the price at which those items are offered for sale (evidenced by a price list, catalog price, or the average of prices charged customers). "Items of the same kind" means items in an identifiable class; they need not be identical (Example 2: standard windows of different shapes/sizes/materials are still items of the same kind).
• Same boxes, same kind. The cabinet boxes Triangle Pacific sells to stores/contractors are the same kind of boxes it uses when it installs a custom kitchen. The facts that its installer modifies the boxes, that no two custom kitchens are alike, and that retail stores don't sell the boxes as a custom install do not change their identity as "items of the same kind."

So Triangle Pacific's use-tax basis is its offered-for-sale price for those cabinet boxes, not a special per-job value.

What this means for you

Using your own inventory can trigger use tax

If you make or assemble goods and then use them yourself (rather than selling them), Tax Law § 1110 can impose a compensating use tax on that self-use — especially where you also offer the same kind of item for sale.

The basis is your selling price, not a cost or per-job figure

When you offer items of the same kind for sale, the use tax is computed on the price you offer them at — from your price list, catalog, or the average of prices you charge customers — not on your manufacturing cost or a bespoke value assigned to each job.

"Same kind" is about class, not identity

Items belong to the "same kind" if they fall in an identifiable class; they don't have to be identical, and downstream customizing doesn't move them out of that class. Truly job-specific, non-catalog items made to one job's specifications are a different story — those are not "items of the same kind" as your catalog/inventory items, or as items made for another job.

Common questions

Q: I install my own manufactured product. Do I owe use tax on it?
A: You can, under Tax Law § 1110, when you use property you manufactured/assembled and you also offer items of the same kind for sale in the regular course of business.

Q: What amount is the use tax based on?
A: The price at which you offer the same-kind items for sale — evidenced by a price list, catalog price, or the average of prices you charge customers (20 NYCRR § 531.3(b)(1)(i)(a)).

Q: My installer modifies the parts and every finished job is different — are the parts still "the same kind"?
A: Yes. Modification, unique finished results, and the fact that stores don't sell the parts as an installed job don't change the parts' identity as items of the same kind.

Q: When are items NOT the "same kind"?
A: When they're non-standard, non-catalog items made to the specifications of a particular job — those aren't the same kind as catalog/inventory items or as items made for a different job.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1110 (use tax on tangible personal property manufactured, processed, or assembled by the user, where items of the same kind are offered for sale by the user in the regular course of business)
• 20 NYCRR § 531.3(b)(1)(i)(a) (use-tax basis is the price at which items of the same kind are offered for sale — price list, catalog price, or average of prices charged; "items of the same kind" means an identifiable class, need not be identical; Example 2)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_78s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91 (78)S
Sales Tax
December 31, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S911008A

On October 8, 1991 a Petition for Advisory Opinion was received from Triangle Pacific
Corp., 16803 Dallas Parkway, Dallas, Texas 75248.
The issue raised by Petitioner, Triangle Pacific Corp., is whether cabinets used by the
Petitioner in installed contracts are "items of the same kind" or are unique when determining their
taxable basis for use tax liability.
Petitioner is a manufacturer/wholesaler of kitchen cabinets. Cabinet boxes are manufactured
outside of New York State and sold from various distribution centers within the State. Sales are
made to retail stores, contractors and construction companies. Petitioner also installs kitchen
cabinets. In the case of installed jobs, the sale is actually that of a complete kitchen as opposed to
boxes of cabinets. The salesman must layout each kitchen to fit the unique characteristics of the
home. No two kitchens are ever exactly alike. Often the layout is aided by a kitchen design computer
program created by the Petitioner. Individual cabinet boxes are treated as inventoriable parts used
to construct each unique kitchen.
Petitioner's salesman meets with the contractor to determine the actual needs for each
kitchen. Decisions are made regarding desired layouts and sizings. The order is then placed for the
various cabinets and/or cabinet parts that are required for each kitchen designed. Once the cabinets,
cabinet parts/components, and countertops are received, Petitioner's installer begins work. The
installer makes required modifications to the materials in order to complete the kitchen as designed
by the contractor and salesman. There are no two kitchens just alike, and the retail stores do not sell
the cabinets and countertops in such a manner.
Section 1110 of the Tax Law provides in part that:
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,. . .(B) of any tangible personal
property manufactured, processed or assembled by the user, (i) if items of the same
kind of tangible personal property are offered for sale by him in the regular course
of business. . .
Section 531.3(b)(1)(i)(a) of the Sales and Use Tax Regulations provides that:
(i)
If the user offers items of the same kind for sale in the regular course
of business, the basis on which use tax is computed is the price at which items of the
same kind of tangible personal property are offered for sale by the user. The price at

-2­
TSB-A-91 (78)S
Sales Tax
December 31, 1991
which items are offered for sale is evidenced by a price list, catalog price or record
of sales. In the absence of a catalog price or price list, the average of the prices
charged various customers will be deemed to be the price at which the user would
sell such item during the regular course of business.
(a)
Items of the same kind mean that items belong to an
identifiable class, but need not be identical.
Example 2:

Windows are items of the same kind when they are a standard
size and materials whether or not they are sold from inventory
or produced to order from a catalog description. A
manufacturer of windows produces from a catalog description
square, round and hexagon shaped windows from various
materials. The windows regardless of shape, size or materials
are considered to be items of the same kind.
When items which are not standard or cataloged are
made to the specifications of a particular job, these will not be
considered items of the same kind with catalog or inventory
sales.
Items made to the specifications of a particular job
will not be considered items of the same kind as items made
to the specifications of another particular job.

In the instant case the cabinet boxes manufactured and sold by Petitioner to retail stores,
contractors and construction companies are the same kind of cabinet boxes used by the Petitioner
when it installs a custom kitchen for a contractor. Therefore such cabinet boxes fall within the
definition of "items of the same kind" as set forth in Section 1110 of the Tax Law and Section
531.3(b)(1)(i)(a) of the Sales and Use Tax Regulations. The fact that Petitioner's installer may
modify the cabinet boxes or that no two custom kitchens when completed are alike or that the retail
stores do not sell the cabinet boxes as part of a custom kitchen installation does not change the
identity of the cabinet boxes from being "items of the same kind".

DATED: December 31, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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