Is the sale and installation of custom interior window shutters a tax-exempt capital improvement to real property, or a taxable sale?

Plain-English summary

A company that sells and installs custom interior window shutters asked whether that work is a capital improvement to real property — which would make it tax-exempt — or a taxable sale. Its shutters are measured for each specific window, usually inside-mounted directly to the woodwork, cannot be recut to fit other windows, are sold with the house, and use materials that do not deteriorate from exposure.

New York taxes retail sales of tangible personal property (Tax Law § 1105(a)) and the service of installing tangible personal property (§ 1105(c)(3)) — but installation is not taxable when what is installed becomes a capital improvement. A capital improvement (§ 1101(b)(9)) must substantially add to the property's value or appreciably prolong its life, become part of or be permanently affixed to the real property so that removal would cause material damage, and be intended as a permanent installation.

The Department held the shutters do not meet that test. It analogized them not to storm windows (which can be capital improvements) but to window quilts, insulated draperies, and vertical blinds — items its prior opinions (David W. Sprague, TSB-A-81(23)S; Verticals Inc., TSB-A-86(34)S) had found were not capital improvements even when custom-cut and energy-efficient. So the custom shutters remain tangible personal property after installation, and their sale and installation is taxable under § 1105(a) and (c).

What this means for you

Window-treatment and interior-finish sellers

Being custom-measured, permanently mounted, and sold with the house does not, by itself, make an installation a capital improvement in New York. The Department has repeatedly placed window treatments — quilts, insulated draperies, vertical blinds, and now custom interior shutters — on the taxable side of the line, treating them as tangible personal property rather than a permanent structural improvement. Charge sales tax on both the shutters and their installation.

Contractors and home-improvement businesses

The capital-improvement test in § 1101(b)(9) is demanding: substantial added value or prolonged life, permanent affixation with material damage on removal, and permanence of intent. Items that function like decorative or energy window coverings tend to fail it, even if screwed or glued in place. When in doubt, compare to how the Department has already treated similar products.

Accountants and tax professionals

This opinion is a clean application of the storm-window analogy the Department uses for window treatments: shutters were grouped with quilts, draperies, and blinds (Sprague; Verticals Inc.), not with storm windows, so § 1105(c)(3)'s capital-improvement exception did not apply and the whole sale-and-install charge is taxable.

Common questions

Q: Is installing custom window shutters a capital improvement?
A: No. The Department held custom interior window shutters are like blinds and draperies, not a capital improvement, so their sale and installation is taxable.

Q: Why isn't a permanently mounted, custom-fit shutter a capital improvement?
A: It does not meet the § 1101(b)(9) test the way a storm window might. The Department analogized shutters to window quilts, insulated draperies, and vertical blinds, which its prior opinions treated as taxable tangible personal property.

Q: Does selling the shutters "with the house" change the result?
A: No. The Department noted that fact but still concluded the shutters remain tangible personal property after installation and do not qualify as a capital improvement.

Q: Would a storm window be treated differently?
A: The Department distinguished storm windows, which are not similar in design to these shutters. Its analysis compared the shutters to window quilts and blinds, not to storm windows.

Q: Can another installer rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described. It illustrates the Department's reasoning, but your facts may differ.

Citations and references

Statutes and authorities:

• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c)(3) (tax on installing tangible personal property; exception for capital improvements)
• Tax Law § 1101(b)(9) (definition of capital improvement)
• David W. Sprague, TSB-A-81(23)S (custom window quilts not a capital improvement)
• Verticals Inc., TSB-A-86(34)S (energy-efficient vertical blinds not a capital improvement)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_9s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (9) S
Sales Tax
January 25, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S921103B

On November 3, 1992 a Petition For Advisory Opinion was received from The Shutter Shop,
116 Killewald Avenue, Tonawanda, New York 14150.
The issue raised by Petitioner, The Shutter Shop, is whether the sale and installation of
custom interior window shutters qualifies as a capital improvement to real property under Section
1101(b)(9) of the Tax Law.
Petitioner sells and installs custom shutters that are measured specifically for a given
window. More often than not they are installed as an inside mount directly to woodwork. The
materials cannot be successfully re-cut to fit other windows. The shutters are always sold with the
house.
The materials used in the shutters do not deteriorate due to exposure as compared to other
window treatments which are subject to rot or track wear.
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 (a)
... capital improvement to real property .... "
Section 1101(b)(9) of the Tax Law defines the term capital improvement as "... (i) An
addition or alteration to real property which: (A) Substantially adds to the value of the real property,
or appreciably prolongs the useful life of the real property, and (B) 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 (C) is intended to become a permanent installation."
In David W. Sprague Adv Op, St Tx Comm, TSB-A-81(23)S, August 25, 1981 it was held
that window quilts which are custom cut for each window, are installed using nails, screws or glue,
have a life expectancy of fifteen years, cost $6.00 per square foot, and are eligible for the federal
energy credit are not similar in use and design to storm windows and therefore did not constitute
capital improvements. Thus their sale and installation was subject to sales tax.
In Verticals Inc., Adv Op, St Tx Comm, September 3, 1986, TSB-A-86(34)S it was similarly
held that the sale and installation of energy efficient vertical blinds did not constitute a capital
improvement and thus their sale and installation was subject to sales tax.

-2­
TSB-A-93 (9) S
Sales Tax
January 25, 1993
Custom interior window shutters are not similar in design to a storm window, but rather are
similar to window quilts, insulated draperies and vertical blinds. They do not meet the definition of
a capital improvement as set forth in Section l101(b)(9) of the Tax Law.
Accordingly Petitioner's sale and installation of custom interior shutters does not qualify as
a capital improvement. It constitutes the sale of tangible personal property that remains so after its
installation. Thus, the sale and installation of custom window shutters by Petitioner is subject to the
sales tax imposed under Sections 1105(a) and (c) of the Tax Law.

DATED: January 25, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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