Is installing a retractable synthetic awning on a house a capital improvement, so it's exempt from New York sales tax?

Plain-English summary

Francis Gassert installed a retractable awning, made of a synthetic plastic fabric similar to polyester, on the roof of his house. The awning was attached to brackets bolted directly into the roof just above the gutter, was left up year-round, and removing it would cause substantial damage -- repairing the roof sheathing and replacing shingles. He asked the Department whether installing this awning counted as a "capital improvement," which would make the installation charge exempt from sales tax (only the materials themselves, not the installation labor, would be taxable to whoever bought them).

The Department said yes, it's a capital improvement. New York defines a capital improvement as an addition to real property that (1) substantially adds value or extends the property's useful life, (2) becomes part of the real property or is so permanently affixed that removing it would cause material damage, and (3) is intended as a permanent installation. The Department had already answered a very similar question in a 1992 ruling, Kohler Awning, Inc., which held that awnings and canopies made of durable plastic-type fabrics (vinyl, polyester, acrylic, modacrylic) -- as opposed to non-durable canvas -- meet all three parts of the test and qualify as capital improvements. Applying that same rule here, since Gassert's awning is made of a comparable durable synthetic fabric, bolted to the roof, and left up permanently, its installation is a capital improvement and the installation charge is not subject to sales tax.

What this means for you

Homeowners considering an awning

If you install a retractable awning made of a durable synthetic material (not plain canvas) that's permanently bolted to your house and would damage the structure if removed, the installation charge should not be taxed as an "installation" service -- it's treated as a capital improvement. Ask your contractor for a properly completed capital improvement certificate (Form ST-124) to document the exemption.

Awning and canopy installers/contractors

This ruling reaffirms the fabric-type distinction the Department first drew in the 1992 Kohler Awning opinion: canvas awnings historically were not treated as capital improvements, while durable synthetic fabrics (vinyl, polyester, acrylic, modacrylic) are. You still owe sales tax on the materials you purchase to fabricate and install the awning (since you're the "consumer" of those materials in a capital-improvement job), but you should not charge your customer sales tax on the installation labor itself.

Accountants and tax professionals

The three-part capital-improvement test under § 1101(b)(9)(i) -- value/useful-life increase, permanent affixation with material damage on removal, and intent to be permanent -- applies fact-by-fact. This ruling is a useful precedent for any awning, canopy, or similar exterior-attachment installation question, but always confirm the fabric type and mounting method match the facts here (or the Kohler Awning ruling) before assuming the same result.

Common questions

Q: Is installing an awning always a capital improvement in New York?
A: Not always. The Department has drawn a line based on fabric durability: awnings made of vinyl, polyester, acrylic, or modacrylic (durable, non-canvas materials) qualify as capital improvements when permanently affixed; older guidance treated canvas awnings differently.

Q: Does the homeowner pay sales tax on anything in this transaction?
A: The contractor, as the consumer of the materials used in a capital-improvement job, generally pays tax on the materials it buys. The homeowner should not be charged sales tax on the installation labor itself once the job qualifies as a capital improvement.

Q: Can another homeowner or contractor rely on this ruling directly?
A: Not automatically. This advisory opinion binds the Department only as to the petitioner and the specific facts (fabric type, mounting method, permanence) described. A different awning material or mounting approach could change the analysis.

Citations and references

Statutes and rules:

• Tax Law § 1101(b)(9)(i) (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, except where it becomes a capital improvement)
• Kohler Awning, Inc., Adv Op Comm T&F, Feb. 19, 1992, TSB-A-92(11)S
• NYS Dept. of Taxation and Finance Publication 862 (1/90), New York State and Local Sales and Use Tax Classification of Capital Improvements and Repairs to Real Property

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_76s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(76)S
Sales Tax
November 6, 1998

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S980831A

On August 31, 1998, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Francis X. Gassert, 9 Lorraine Ct., Jamesport,
New York, 11947.
The issue raised by Petitioner, Francis X. Gassert, is whether the
installation of a retractable, synthetic awning constitutes the installation of
a capital improvement.
Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner installed a retractable awning on the roof of his house. The
awning is made of a synthetic plastic fabric similar to polyester. The pictures
submitted by Petitioner show that the awning is attached to brackets which are
bolted to the roof of the house immediately above the gutter. If the awning were
to be removed, substantial costs would be incurred to repair roof sheathing and
replace shingles. The awning is left on Petitioner’s house throughout the year.
Applicable Law
Section 1101(b)(9)(i) of the Tax Law defines the term capital improvement
as:
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.
Section 1105 of the Tax Law provides in part, as follows:
Imposition of sales tax.-On and after June first, nineteen
hundred seventy-one, there is hereby imposed and there shall be paid
a tax of four percent upon:
(a) The receipts from every retail sale of tangible personal
property, except as otherwise provided in this article.
*

*

*

-2­
TSB-A-98(76)S
Sales Tax
November 6, 1998

(c) The receipts from every sale, except for resale, of the
following services:
*

*

*

(3)
Installing
tangible
personal
property....except
for...installing property which, when installed, will constitute an
addition or capital improvement to real property...
Opinion
Kohler Awning, Inc., Adv Op Comm T&F, February 19, 1992, TSB-A-92(11)S
addressed whether the installation of awnings that are fabricated with vinyl,
polyester, acrylic or modacrylic fabrics constitute the installation of a capital
improvement. Kohler Awning, Inc. stated:
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.
See New York State Department of Taxation and Finance, New York
State and Local Sales and Use Tax Classification of Capital
Improvements and Repairs to Real Property, Publication 862 (1/90),
at 6.
Since the canopies and awnings fabricated by 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 [sic] 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.
Therefore, assuming the covering portion of Petitioner's awning is made of
a durable synthetic material, in accordance with Kohler Awning, Inc., supra, and
the information contained in Publication 862, the installation of the awning as
described by Petitioner constitutes the installation of a capital improvement,
which is not subject to sales tax.

DATED:

November 6, 1998

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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