Are a company's permanently installed fabric canopies and awnings a nontaxable capital improvement, and what about illuminated awning signs?

Plain-English summary

Kohler Awning, Inc. fabricates and installs custom canopies, awnings, and illuminated awning signs made from durable plastic fabrics (vinyl, polyester, acrylic, or modacrylic). Each unit is built to fit a specific building, permanently attached, rigid, and made for year-round use: the frame is zinc-dipped welded steel bolted to the building, and the fabric is screwed on with extruded moldings so the unit can't be moved without alterations. The company asked whether its sales of these installed units are subject to sales tax.

The Department split the answer based on whether each item is a capital improvement:

• Canopies and awnings — nontaxable capital improvements. Under Tax Law § 1101(b)(9) and Regulation § 527.7, a capital improvement (i) substantially adds to the value of, or prolongs the life of, the real property, (ii) becomes part of or is permanently affixed to it so removal would cause material damage, and (iii) is intended to be permanent. Kohler's units meet all three. The Department noted it had previously determined that installing or replacing non-canvas awnings is a capital improvement (Publication 862), and stressed that these fabrics are durable plastic coverings, not non-durable canvas. So under § 1105(c)(3), the sale of the installed canopies and awnings is not taxable.
• Illuminated awning signs — taxable. Illuminated awning signs do not constitute capital improvements, so their sale is subject to sales tax. And critically: if Kohler does not separately state the charge for the awning and the charge for the illuminated sign, the entire charge is taxable.

What this means for you

Durable vs. canvas is the dividing line for awnings

The Department treats permanently installed durable-plastic awnings and canopies as capital improvements — non-taxable, installation included. Non-durable canvas awnings are treated differently (they've historically been repairs/TPP, not capital improvements). If you install fabric awnings, the material's durability and the permanence of the attachment drive whether the job is a tax-free capital improvement.

Signs aren't capital improvements

An illuminated awning sign is taxable even when it's mounted on an otherwise-exempt awning. Lighting and signage don't get the capital-improvement treatment.

Separately state the sign charge — or the whole job is taxable

This is the practical trap. When one invoice bundles a tax-free awning with a taxable illuminated sign, you must separately state the two charges. If you don't, the Department taxes the entire amount, dragging the otherwise-exempt awning into tax. Break out the sign on the invoice.

Common questions

Q: Are permanently installed fabric awnings taxable in New York?
A: Not when they're durable-plastic (vinyl/polyester/acrylic/modacrylic) units permanently affixed to a building — those are capital improvements, so the sale including installation isn't taxable.

Q: Why are canvas awnings treated differently?
A: The Department distinguishes durable plastic coverings from non-durable canvas; the capital-improvement treatment here rests on the fabric being durable.

Q: Are illuminated awning signs taxable?
A: Yes. Illuminated awning signs are not capital improvements, so their sale is subject to sales tax.

Q: What happens if I bundle the awning and the sign on one charge?
A: If you don't separately state them, the entire charge — awning included — becomes taxable. Break out the sign charge.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1101(b)(9) (three-part definition of capital improvement)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c)(3) (tax on installing tangible personal property, excluding installation that is a capital improvement)
• Sales and Use Tax Regulations § 527.7 (capital improvements)
• New York State Publication 862 (1/90) (Classifications of Capital Improvements and Repairs to Real Property), at 6

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_11s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (11)S
Sales Tax
February 19, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S911028B

On October 28, 1991 a Petition for Advisory Opinion was received from Kohler Awning,
Inc., 365 Nagel Drive, Buffalo, New York 14225.
The issue raised by Petitioner, Kohler Awning, Inc., is whether its sales of installed canopies,
illuminated awning signs or awnings fabricated with vinyl, polyester, acrylic, or modacrylic fabrics
are subject to the imposition of sales tax.
Petitioner fabricates and installs canopies, illuminated awning signs and awnings that are
fabricated with vinyl, polyester, acrylic or modacrylic fabrics.
These units are custom fabricated for each customer to fit to their building. They are
permanently attached to the building, rigid, and designed for year round use.
Installation may include lighting to illuminate the graphics (signage). Fabrics used in the
units meet and/or exceed New York State Fire Resistant requirements.
The framework is zinc dipped steel welded to conform to the building it is being attached to.
The fabrics are permanently attached to the frames with screws and extruded moldings. The units
cannot be relocated to another location without modifications and alterations.
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 Department has previously determined that the installation or replacement of existing
awnings (other than canvas) constitutes capital improvements within the meaning and intent of
Section 1101(b)(9) of the Tax Law.

-2­
TSB-A-92 (11)S
Sales Tax
February 19, 1992

See New York State Department of Taxation and Finance, New York State and Local Sales and Use
Tax Classifications of Capital Improvements and Repairs to Real Property, Publication 862 (1/90),
at 6.
Since the canopies and awnings fabricated by the Petitioner meet the conditions for being a
capital improvement as set forth in Section 1101(b)(9) of the Tax Law and Section 527.7 of the Sales
and Use Tax Regulations and since the fabrics used in their fabrication are durable plastic coverings
as opposed to being a non-durable canvas fabric, therefore the sale of such installed canopies, and
awnings 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.
However, illuminated awning signs do not constitute capital improvements and their sale
would be subject to the imposition of sales tax. Thus, if Petitioner does not separately state the
charge for the awning and the charge for the illuminated awning sign, the entire charge received from
the sale will be subject to sales tax.

DATED: February 19, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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