When a company buys communications towers and equipment buildings, are those assets taxable tangible personal property or exempt real property, and are the fees it charges other carriers to attach antennas subject to sales tax?

Plain-English summary

PricewaterhouseCoopers asked on behalf of a buyer that had just purchased a nationwide portfolio of wireless communications towers and equipment buildings from a group of affiliated telecom sellers, along with the underlying land at some sites and assumed ground leases at others. The buyer isn't itself a communications company -- its business is managing the tower sites and charging wireless carriers monthly fees to attach their antennas to the towers and place equipment in the buildings. Six of the purchased towers sit in New York, four on land the buyer also bought and two on leased land where the buyer assumed the ground lease.

The towers -- steel structures averaging 171 feet (some over 400 feet), bolted at the base to steel plates embedded in a concrete pad and secured with guy wires -- are taxable tangible personal property, not exempt real property, despite their size and the genuine practical difficulty of moving one (FCC relicensing delays, zoning hurdles, network-plan disruption, and $30,000-$50,000 in removal costs). The reason is narrow but decisive: the legal test isn't whether removal is expensive or inconvenient, it's whether the connection itself is strong enough that removal would cause material damage to the tower or the land. A bolted baseplate can be undone by reversing the installation process, so the towers fail that specific prong of the capital-improvement test regardless of how costly or slow removal actually is in practice.

Equipment buildings are judged the same three-part test but can come out differently depending on the facts. They clearly add value and (per the ruling) can, in principle, become genuinely permanent if they truly can't be removed without material damage -- but permanence also depends on the parties' intent, which the law presumes AGAINST when the installer isn't the landowner (like a tenant under a ground lease), especially where the lease itself requires removal at lease-end. The two New York equipment buildings sitting on leased land, where the ground lease obligated removal at termination, failed this third "intended to be permanent" prong and stayed taxable personal property. The four buildings on land the buyer actually owns, by contrast, can qualify as an exempt capital improvement (and thus real property) if they also satisfy the physical-permanence prong. Separately, the monthly fees the buyer charges other carriers for tower/building access are not taxable at all -- they're payments for the right to occupy space at a location, not a rental or license to use the buyer's tangible personal property.

What this means for you

Telecommunications tower owners and site-management companies

A bolted tower stays taxable personal property in New York regardless of its size, cost, or how genuinely difficult it is to remove in practice -- the legal test is about the physical connection's inherent permanence, not real-world removal difficulty. Buildings can go either way; ownership of the underlying land and the specific lease terms (does it require removal at term-end?) matter as much as construction method.

Buyers of infrastructure asset portfolios spanning owned and leased sites

Expect a site-by-site classification, not a portfolio-wide answer -- the same type of building can be exempt real property at an owned site and taxable personal property at a leased site with a removal-on-termination clause, purely because of the different presumption about permanence.

Accountants and tax professionals

The "trade fixture" presumption against permanence for tenant-installed equipment is doing real work here -- when a client's facts show a landlord-tenant relationship, check the actual lease language for a removal obligation before assuming a large, expensive installation automatically qualifies as a capital improvement.

Common questions

Q: Does a tower's size or removal cost affect whether it's a capital improvement?
A: No -- the test is whether removal would cause material damage to the property or the tower itself, not how expensive, slow, or logistically difficult removal actually is.

Q: Can the same type of equipment building be taxable at one site and exempt at another?
A: Yes -- ownership of the land and whether the lease requires removal at term-end can flip the classification even for structurally identical buildings.

Q: Are fees for letting other companies attach antennas to a tower taxable?
A: No -- they're treated as payment for site access, not a rental or license to use tangible personal property.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(5) (sale, selling or purchase)
• Tax Law § 1101(b)(9) (definition of capital improvement)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c)(3)(iii) (installation, capital-improvement exception)
• 20 NYCRR § 527.7(a)(3) (capital improvement criteria)
• 20 NYCRR § 526.8(c)(1) (tangible personal property vs. real property)

Prior rulings and cases referenced:

• Clestra Hauserman, Inc., TSB-A-94(43)S (September 16, 1994)
• Peek 'N' Peak Recreation, Inc., TSB-A-87(24)S (July 9, 1987)
• Matter of Charles R. Wood Enterprises, Inc. v. State Tax Commn., 67 A.D.2d 1042
• Matter of West Mountain Corp. v. Miner, 85 Misc. 2d 416
• Crater's Wharf v. Valvoline Oil Co., 204 App. Div. 840
• Grumman Aerospace Corporation, TSB-D-91(22)S (April 11, 1991)
• Hudson River Estates, Inc., TSB-A-85(2)S (April 5, 1985)
• Matter of 100 Park Ave. v. Boyland, 144 N.Y.S.2d 88, aff'd 309 N.Y. 685
• Matter of Manhattan Cable TV v. New York State Tax Commn., 137 A.D.2d 925, lv denied 72 N.Y.2d 808
• Empire Vision Center, Inc., TSB-D-91(87)S (November 7, 1991)
• Flah's of Syracuse v. Tully, 89 A.D.2d 729
• Glenville Cablesystems Corp. v. State Tax Commn., 142 A.D.2d 851
• Beaman Corporation, TSB-A-82(32)S (September 6, 1982)
• T&K Communication Systems, Inc., TSB-A-98(87)S (December 30, 1998)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a99_47s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(47)S
Sales Tax
November 12, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S981214A

On December 14, 1998, the Department of Taxation and Finance received a Petition for
Advisory Opinion from PricewaterhouseCoopers, LLP, 1301 Avenue of the Americas, New York, NY
10019.
The issues raised by Petitioner, PricewaterhouseCoopers, LLP, are:
(1) Whether communications towers and equipment buildings are considered real property or
tangible personal property when these assets are affixed to real estate: (1) that the Buyer
described below has purchased; and (2) where the Buyer has assumed a Ground Lease.
(2) Whether fees charged by the Buyer for the right to attach antennas to the towers and place
transmitters/receivers in the buildings are subject to sales or compensating use tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
The Sellers, a group of affiliated corporations, provide wireless communications services to
their customers. In order to render these services, the Sellers and other providers operate
communications equipment (a “Communications System”), consisting of ground based radio frequency
transmission and reception equipment connected by coaxial cable to antennas mounted on
communications towers located throughout the United States. The ground-based equipment is housed
inside buildings at the tower sites.
The towers on which this equipment is located are steel structures averaging 171 feet in height
(with some exceeding 400 feet in height). The equipment buildings range in size from approximately
8' x 10' to 20' x 40'. Most of the buildings are constructed of brick, concrete block, or wood/metal with
siding and were built on site. All are equipped with electric and telephone service, and are climate
controlled. These buildings are used to house the transmission portion of a communications system
that consists of a transmitter and a receiver and associated antenna, which is installed on the tower.
This equipment is all powered by electricity and often has battery back-up capabilities or an on-site
generator system for emergency purposes.
A tower may be constructed only after licenses, permits and approvals are obtained from the
Federal Aviation Administration and from local zoning boards and building commissions. These
processes generally take from several months to several years to complete. When construction finally
begins, a concrete foundation (the “pad”) is poured, dried, and steel spikes or plates are embedded.
The tower is then constructed on the pad from the ground up with the base bolted to the embedded
steel spikes or plate. Generally, a substantial amount of land is required in order to construct a tower

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because guy wires are necessary to secure the tower to the land. Once constructed, it is expected that
the tower will remain indefinitely.
Prior to the sale to Buyer as described below, Sellers owned communications towers and
equipment buildings at tower sites in more than twenty states. Sellers owned the land at approximately
40 percent of the tower sites and entered into ground leases (the “Ground Leases”) at the remainder
of the tower sites. Some of the leases are long-term arrangements, but most have 5-10 year terms, with
options for the lessee to renew for one or two additional terms. Other leases permit the lessee to enter
into month-to-month or year-to-year arrangements once the initial term expires.
In addition to using the towers in the communications business, Sellers had entered into site
usage agreements with other communications companies to permit such parties a nonexclusive right
to attach their antennas to the towers and place transmitters and receivers in the equipment buildings
for a monthly fee. The agreements also generally granted these companies the right to enter the
premises to install, remove, repair or maintain any communications equipment placed on the towers
or in the equipment buildings. There are typically several site usage agreements at each tower site.
The Buyer, a Delaware corporation, recently purchased the following assets from the Sellers:
(1)

Substantially all of the Sellers’ tower site assets (i.e., communications towers and
equipment buildings);

(2)

Land;

(3)

Each interest as tenant in and to the Ground Leases; and

(4)

Each interest as grantor in and to the site usage agreements.

For a monthly fee, the Buyer grants wireless communication companies the right to attach their
equipment to the towers. These site usage agreements generally range in duration from three to five
years. The Buyer is not a communications company and does not render communication services.
Six of the towers sold in the transaction are located in New York. Four of these towers are
located on land also acquired by the Buyer and two are located on leased land where the Buyer has
assumed a Ground Lease. Although the leases generally provide that the towers are subject to removal
at the end of the lease term, for the following reasons, it is the Buyer’s intention that the towers will
remain indefinitely:
•

It takes approximately 7 - 10 days to remove a tower. Removing the tower requires
deconstructing the tower in a process that mirrors constructing the tower, and costs
between $30,000 and $50,000.

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•

The Federal Communications Commission (“FCC”) generally licenses transmitters
only for a specific location. Thus, in order to remove a tower and construct a new one
elsewhere (even 100 feet away), each transmitter located at that tower site may need
to be relicensed by the FCC. The FCC does not provide expedited approval for
relicensing transmitters that must be moved because the tower site has moved; thus,
the process of obtaining a license for a new site would take three months to three years
to complete.

•

Each wireless communications company develops a Network Plan whereby
communications equipment is strategically placed at tower sites in order to provide
adequate signal coverage throughout a specific geographic area. Removal of this
equipment from a tower site would not only be costly, but could require the revision
of the Network Plan to avoid gaps in signal coverage.

•

It is now extremely difficult to obtain zoning approval to construct a tower in most
communities in the United States. The process can take from six months to two years.
In many communities, new towers can no longer be built; however, existing towers are
generally grandfathered.

•

Many of the Ground Leases require that the property be restored to its original
condition when the lease has been terminated. This process, which is both time
consuming and expensive, would not only include removing the towers and equipment
buildings from the site, but would also require the removal of the concrete foundations
to which these assets are securely connected.

On the same date Buyer purchased the assets from Sellers, Buyer entered into site usage
agreements with Sellers at those sites where Sellers currently have communications systems and other
related equipment in place. The initial term of these agreements is fifteen years. In accordance with
standard industry practice, Sellers are granted a nonexclusive right of access to the premises twenty
four hours a day, 365 days a year for their employees, agents, contractors or representatives to install,
remove, repair or maintain any communications equipment attached to the towers or located in the
equipment shelters. Sellers maintain ownership of the equipment. Sellers do not, however, have
possession or control over the towers. Buyer is now responsible for maintaining the towers and the
sites.
Buyer will now collect monthly payments from: (1) the customers that have been permitted to
place their equipment at the tower sites pursuant to the site usage agreements that Buyer assumed; (2)
Sellers, pursuant to the site usage agreement entered into on the date of the transaction; and (3) any
other new customers with whom Buyer enters into site usage agreements.

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Applicable Law
Section 1101(b) of the Tax Law provides, in part
When used in this article for the purposes of the taxes imposed by subdivisions (a), (b), (c) and
(d) of section eleven hundred five and by section eleven hundred ten, the following terms shall mean:
*

*

*

(5) Sale, selling or purchase. Any transfer of title or possession or both,
exchange or barter, rental, lease or license to use or consume . . . , conditional or
otherwise, in any manner or by any means whatsoever for a consideration, or any
agreement therefor, including the rendering of any service, taxable under this article,
for a consideration or any agreement therefor.
*

*

*

(9) Capital improvement. 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(a) of the Tax Law imposes sales tax on the receipts from every retail sale of
tangible personal property, except as otherwise provided.
Opinion
An exclusion from the imposition of sales tax is provided in Section 1105(c)(3)(iii) of the Tax
Law for an installation of tangible personal property which, when installed, will constitute a capital
improvement to real property, property or land. In order for the installation to constitute a capital
improvement, it must meet all three criteria of a capital improvement as described in Section
1101(b)(9) of the Tax Law and Section 527.7(a)(3) of the Sales and Use Tax Regulations (see Clestra
Hauserman, Inc., Adv Op Comm T&F, September 16, 1994, TSB-A-94(43)S). Thus, in Buyer’s case
as presented by Petitioner, if the communications towers and equipment buildings qualified as capital
improvements at the time they were installed, then they constitute real property, not tangible personal
property. If the towers and buildings did not qualify as capital improvements at the time they were

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installed, then they would remain tangible personal property. See Section 526.8(c)(1) of the Sales and
Use Tax Regulations.
The communications towers are steel structures averaging 171 feet in height which come in
sections (beams). The bases of the towers are bolted to steel spikes or plates which are embedded in
concrete pads. Guy wires are necessary to secure the towers to the land. The towers are subject to
specific locations requirements and must comply with various federal and local statutes and
ordinances. Removing the towers requires deconstructing them in a process that mirrors their
construction.
The communications towers described above do not qualify as capital improvements because
they fail to satisfy the second prong of the statutory test in that they do not become part of the real
property nor are they permanently affixed to the real property so that their removal would cause
material damage to the property or to the assets themselves. Although most forms of equipment
normally require some form of affixation to real property, the test is not merely whether such
equipment is affixed to the property. Rather, the test is whether the equipment is affixed to such a
degree that it loses its separate identity and becomes part of the real property or to such a degree that
removal would cause material damage to the property or to the article itself. Material damage is not
considered to exist merely because the property in question is worth less when it is removed than it
was worth when it was installed and in operating condition (see Peek ‘N’ Peak Recreation, Inc., Adv
Op Comm T&F, July 9, 1987, TSB-A-87(24)S). The primary method of affixing the towers to the real
property is a baseplate bolted to a concrete pad. This connection can be disassembled by removing
the bolts and the towers can be removed by reversing the procedure used to install them. The mere
bolting of equipment to real property does not, in and of itself, create the degree of permanence
necessary to establish that a particular installation is a capital improvement (see Matter of Charles R.
Wood Enterprises, Inc. v. State Tax Commn., 67AD 2d 1042; Matter of West Mountain Corp. v.
Miner, 85 Misc 2d 416). Based on these facts, it is concluded that the installation of these towers on
owned or leased land cannot be considered capital improvements to real property and these assets are
therefore tangible personal property, the sale of which was subject to tax at the time of purchase by
Buyer.
With regard to the equipment buildings, these structures substantially add to the value of the
real property to which they are affixed. The equipment buildings are valuable in and of themselves,
and they facilitate Buyer’s tower management business upon the premises. Thus, the first of the three
enumerated criteria of a capital improvement as described in Section 1101(b)(9) of the Tax Law is
satisfied. However, it is not clear that the second statutory requirement is also satisfied, in that the
buildings do not necessarily become part of the real property. In Crater’s Wharf v. Valvoline Oil Co.,
204 App Div 840, removal of similar structures which were erected for a tenant’s business purposes
left the premises in substantially the same condition as at the time of the original letting. Therefore,
only if the equipment buildings cannot be removed without any damage to themselves (e.g., if they are
not modular in form, are not relocatable, or cannot be moved/transported as an entity or in separate
sections) or to the land on which they sit, will they satisfy the second prong of Section 1101(b)(9) (see

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Grumman Aerospace Corporation, Dec Tx App Trib, April 11, 1991, TSB-D-91(22)S; Hudson River
Estates, Inc., Adv Op Comm T&F, April 5, 1985, TSB-A-85(2)S).
Finally, as to the third requirement of Section 1101(b)(9), an installation made for the purpose
of conducting a business of one who is not the owner of real property, e.g., a tenant, licensee or
franchisee, is presumed not to be permanent but is made for the sole use and enjoyment of the person
who owns the business during the term of the lease, and not for the purpose of the landlord’s estate.
Such an installation is comparable to trade fixtures which are not considered capital improvements
because they are removable by the tenant without substantial injury to real property and therefore fail
to satisfy the requirement of intended permanence (Matter of 100 Park Ave. v. Boyland, 144 NYS2d
88 aff’d 309 NY 685). Moreover, where the lessee is obligated to remove the improvement at the end
of the lease term, the evidence is even stronger that the improvement is intended to be other than
permanent (Matter of Manhattan Cable Tel v. New York State Tax Commn., 137 AD2d 925, lv denied
72 NY2d 808).
Presumptions, however, may be overcome by appropriate lease terms or facts. The tenant’s
intent must be deduced from all the facts and circumstances at the time the improvement is installed
(Empire Vision Center, Inc., Dec Tx App Trib, November 7, 1991, TSB-D-91(87)S; Flah’s of
Syracuse v. Tully, 89 AD2d 729). Two of the six equipment buildings located in New York and
purchased by Buyer are located on leased land, and Buyer has assumed the Ground Leases. In Flah’s
of Syracuse, Inc., supra, the lease between the retailer and its landlord expressed a “contrary intention”
to the presumption of impermanence, whereby title to improvements made vested in the landlord
immediately upon their installation. The improvements were said to become part of and remain in the
premises, thereby establishing that they were intended as permanent installations. In Petitioner’s case,
the buildings are used for Buyer’s tower management business, and not for the benefit of the landlord.
Although Buyer may have powerful incentives to continue to renew its leases or to purchase the land
so that removal of the buildings is seldom, if ever, necessary, under the terms of the Ground Leases
Buyer has agreed that it must remove these assets upon termination of the respective leases. There is
no “contrary intention” that the buildings are to be permanent annexations to the land expressed in the
leases between Buyer and the owners of the two leased premises. Such being the case, since the
installation of these two equipment buildings fails to meet the third requirement of Section 1101(b)(9)
of the Tax Law, they cannot be classified as capital improvements. Accordingly, these assets retained
their character as tangible personal property and were subject to tax at the time of purchase by Buyer
(Glenville Cablesystems Corp. v. State Tax Commn., 142 AD2d 851).
On the other hand, in those cases where the equipment buildings are actually permanently
affixed to the underlying real property so they cannot be removed without material damage to
themselves, and were erected by or on behalf of the owner of the real property, a finding of intended
permanence arises from the mode of annexation, the relationship to the real property of the party
making the addition, and the apparent purpose for which the annexation was made (viz., for owner
to provide wireless communications or tower management services to its customers). See Beaman
Corporation, Adv Op Comm T&F, September 6, 1982, TSB-A-82(32)S). Therefore, the four

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equipment buildings located in New York on land owned by Sellers and acquired by Buyer, would
meet all of the conditions for a finding that they constitute capital improvements and therefore real
property, the sale of which is not subject to sales or use tax, provided the second statutory requirement
is also satisfied as described above.
With regard to issue “2,” Buyer’s customers pay a monthly fee to Buyer for the right to attach
their antennas to the towers and to place their transmitters/receivers in the equipment buildings
pursuant to the terms of various site usage agreements Buyer has assumed or entered into. The
physical location of the towers is the primary reason for desiring such space on them. Each customer
has free and unrestricted access to the premises during the term of the agreement to install, remove,
repair or maintain any communications equipment placed on the towers or located in the equipment
buildings. Payments received for the right to attach and house equipment owned by the customer are
not charges for the rental of or license to use tangible personal property, and are not subject to State
and local sales and use taxes (see T&K Communication Systems, Inc., Adv Op Comm T&F, December
30, 1998, TSB-A-98(87)S).

DATED: November 12, 1999

NOTE:

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

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