Does the installation of durable epoxy resin flooring systems over existing concrete floors qualify as a nontaxable capital improvement to real property, or is it treated like taxable 'floor covering' installation?

Plain-English summary

Centimark Corporation manufactures and installs four epoxy-based "flooring systems" for industrial and commercial concrete floors — Heavy Duty Resurfacing, Self-Leveling, High Build, and Tri-Coat — plus some single-component coatings similar to ordinary paint. Unlike paint (which dries by evaporation and must be applied thin), epoxy coatings harden through a chemical reaction between mixed components, don't need air contact to cure, and can be applied much thicker (up to a quarter-inch) — similar in behavior to concrete or asphalt. After shot-blasting the existing concrete to rough the surface, Centimark applies a primer coat and a main epoxy coat (sometimes with a protective/anti-static topcoat), producing a surface that can't be removed without destroying the coating and damaging the concrete underneath. Centimark asked whether installing these systems is a nontaxable capital improvement.

New York has a special carve-out for "floor covering" (carpet, linoleum, vinyl tile, and similar materials) — that category is treated as a capital improvement only when installed as the very first finished floor in new construction, and is otherwise always taxable, regardless of how permanent it seems. But "flooring" materials like concrete, wood, ceramic tile, and terrazzo aren't subject to that carve-out; they're evaluated under the ordinary three-part capital-improvement test.

The Department found Centimark's epoxy systems belong in the "flooring," not "floor covering," category — they're troweled on like terrazzo, become an integral, permanent part of the floor, and are functionally and physically distinguishable from both floor coverings and ordinary paint (which doesn't meaningfully strengthen or thicken the surface). Applying the ordinary capital-improvement test: the coatings substantially increase durability and value (resisting heavy equipment traffic, chemicals, and dissipating static electricity for sensitive manufacturing environments), become permanently bonded to the concrete such that removal destroys both, and are intended as permanent installations. So a complete epoxy flooring installation — whether over an existing floor or as the initial floor in new construction — is a capital improvement and isn't taxed, though Centimark still pays sales tax on its own materials. Centimark's single-component coatings (similar to paint) get the same treatment only when applied as part of an underlying capital-improvement project (like sealing a brand-new concrete floor); applied to an existing or already-repaired floor, they're taxable maintenance. And applying any of Centimark's systems only to patch a damaged section of an existing floor — rather than resurfacing the whole floor — is not a capital improvement and remains a taxable repair.

What this means for you

Industrial and commercial flooring contractors

Durable, chemically-cured coatings that function more like flooring than floor covering (thick, permanently bonded, damage floor on removal) can qualify as capital improvements even when applied over an existing floor — a meaningfully better result than the strict "new construction only" rule that governs carpet and vinyl tile.

Facility owners resurfacing industrial floors

Whether a resurfacing job is a taxable repair or an exempt capital improvement can turn on scope: patching a damaged section is generally a taxable repair, while resurfacing an entire floor with a new, permanent, high-strength coating is more likely to qualify as a capital improvement.

Accountants and tax professionals

The key analytical move here is classifying the material as "flooring" vs. "floor covering" before even reaching the three-part capital-improvement test — floor covering never escapes the new-construction-only limitation no matter how permanent it is, while flooring materials get the ordinary, more favorable test.

Common questions

Q: Is any resurfacing of an existing concrete floor a taxable repair?
A: Not necessarily — if the resurfacing uses a genuinely durable, permanently bonded material (like these epoxy systems) and covers the whole floor, it can meet the capital-improvement test even on an existing floor, unlike carpet or vinyl tile.

Q: Are epoxy coatings treated the same as carpet or vinyl tile for tax purposes?
A: No — epoxy flooring systems are classified as "flooring" (like concrete or terrazzo), not "floor covering" (like carpet or vinyl), so they aren't limited to the new-construction-only exemption that applies to floor covering.

Q: Does patching a small damaged area with the same epoxy material qualify as a capital improvement?
A: Generally no — applying the flooring system only to repair a damaged section of an existing floor is treated as a taxable repair rather than a capital improvement.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4)(i) (retail sale definition); § 1101(b)(9) (capital improvement; floor covering carve-out)
• Tax Law § 1105(c)(3), (5) (installation and maintenance/repair services)
• Tax Law § 1115(a)(15), (16) (contractor purchases for exempt organizations/farm real property)
• 20 NYCRR § 527.7 (capital improvement definition; floor covering rule)
• 20 NYCRR § 541.14 (floor covering exemption rules)

Prior rulings and cases referenced:

• Whirlwind Music Distributors, Inc., TSB-A-98(50)S
• George W. Long, TSB-A-92(56)S
• Rochester Gas and Electric v. State Tax Commn., 128 AD2d 238, affd 71 NY2d 931
• Building Contractors Association v. Tully, 87 AD2d 909

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a03_3s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(3)S
Sales Tax
January 27, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S010315A

On March 15, 2001, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Centimark Corporation, 12 Grandview Circle, Canonsburg, Pennsylvania.
Petitioner, Centimark Corporation, provided additional information pertaining to the Petition by
telephone on June 29, 2001.
The issue raised by Petitioner, Centimark Corporation, is whether installations of its various
“flooring systems” as described below may constitute capital improvements to real property.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a national contractor of roofing and flooring systems and provides sales and
service to industrial and commercial customers. Petitioner manufactures its “flooring systems”
which consist of various epoxy, urethane, and water-based polymer coatings. The epoxy coatings
consist of separate components which, when mixed together at the job site, form a substance distinct
from the components. These epoxy coatings, once the components are mixed, have a limited “pot
life” ranging from several minutes to several hours depending on the particular product. That is,
once the components are combined, the mixture will set if left unused regardless of whether it is
stirred, poured or sealed from contact with air.
Epoxy coatings differ from paint and other conventional sealers in that when paint, sealers
or other single component coatings are applied, they “dry” in place. That is, when this type of
coating is applied, elements of the coating evaporate leaving the dry coating behind. This method
of hardening limits the thickness with which such coatings can be applied. Because they need to be
in contact with the surrounding air to dry, these coatings will not dry properly if applied in other
than a very thin coat. If applied too thickly, the surface of the coat will dry first. As a result, the
underlying layer which must adhere to the surface to which it is applied will be sealed from the air
and hence unable to dry. Unused portions of these coatings may be stored for many months and still
be usable provided they are tightly sealed from contact with air. The volatile components of these
coatings may create unpleasant smells, hazardous breathing conditions, fire hazards or other hazards
as they evaporate.
Epoxy coatings, on the other hand, require that two or more components be mixed together
at the job site. This mixing of different components creates a chemical reaction between the
components causing the resultant mixture to harden or “cure.” This hardening or “curing” is not
dependent upon contact with air and no evaporation is required. This feature allows epoxy coatings
to be applied as relatively thick coatings without the concern that exists with single component
coatings (paint, etc.) that they will not properly adhere to the application surface. Epoxy coatings

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will cure underwater or in other airless environments. In this sense, epoxy coatings are similar to
concrete or asphalt which also harden by chemical reaction and are not dependent on contact with
air for curing. This feature also makes it impossible to store unused portions of the epoxy once the
components have been combined and their “pot life” is exceeded. In general, epoxies are less likely
than single component coatings to release volatile substances during curing. This characteristic
reduces the potential fire hazard, as well as health hazard where personnel need access to the area
where a coating is being applied.
Petitioner’s epoxy coatings, which are advertised to be resistant to abrasion, impact and
chemical damage, dust-free, slip-resistant and easy to clean, fall into four main categories.
•

The Centimark Heavy Duty Resurfacing System consists of a monolithic, 100% epoxy floor
topping used to resurface severely worn or damaged concrete floors. The product is applied
by Petitioner’s employees by power trowel over the entire floor to be resurfaced. It may be
topcoated with another of Petitioner’s products. It results in a coating approximately .250
inches thick which is claimed to be the equivalent strength of six inches of concrete.

•

The Centimark Self-Leveling System is a monolithic epoxy resurfacer designed to restore
moderately worn or spalled1 concrete floors. The product is applied by Petitioner’s
employees by hand troweling over the entire floor to be resurfaced and is designed to flow
into low spots in the floor leaving a level, smooth, gloss finish. It may be topcoated with
another of Petitioner’s products. Its final thickness ranges from .050 to .125 inches.

•

The Centimark High Build System is an epoxy coating designed to resurface concrete floors
which are not so heavily damaged as to warrant the use of the Heavy Duty Resurfacing
System but still require a new surface. The product is applied by Petitioner’s employees by
hand troweling over the entire floor to be resurfaced. It may be topcoated with another of
Petitioner’s products. Its final thickness ranges from .025 to .120 inches.

•

The Centimark Tri-Coat System is a multi-coat, roller applied epoxy coating system which
provides good impact and chemical resistance and an attractive appearance and is meant to
be applied over undamaged concrete floors. It may be used as a topcoat with another of
Petitioner’s products.

Petitioner’s remaining single component products are similar to conventional paint or sealing
products.
In all cases, the existing floor is prepared by means of vacuum shot-blasting. This process
roughens the existing concrete surface to provide better adherence for the initial epoxy primer coat
1

surface.

Spalled concrete floors refers to floors where the masonry surface flakes off leaving a rough and uneven

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by blasting the surface of the floor with steel beads (shot). After completing the shot-blast
preparation and application of epoxy primer, an additional main coat of epoxy is applied.
Depending on the type of coating used, the thickness of the main coat ranges from .025 inches to
.250 inches. Generally, these two coats are completed by applying a top coat which serves to protect
the floors’ coloring from damage caused by ambient ultraviolet light, and, depending on customers’
requirements, dissipate static electric charges. The High Build System and the Tri-Coat System also
serve to dissipate static electric charges. The resulting epoxy surfaces cannot be removed without
destroying the flooring and damaging the concrete substrate.
Where an installed floor has sustained damage, repair procedures are similar to those
conventionally used to repair damaged concrete, asphalt or plaster. The floors take eight to ten
hours to cure for traffic and are fully cured in seven days. All floors have a two year warranty.
Applicable Law and Regulations
Section 1101(b)(4)(i) of the Tax Law defines the term retail sale, in part, as:
A sale of tangible personal property to any person for any purpose, other than
(A) for resale as such or as a physical component part of tangible personal property,
or (B) for use by that person in performing the services subject to tax under
paragraphs (1), (2), (3), (5), (7) and (8) of subdivision (c) of section eleven hundred
five where the property so sold becomes a physical component part of the property
upon which the services are performed or where the property so sold is later actually
transferred to the purchaser of the service in conjunction with the performance of
the service subject to tax. Notwithstanding the preceding provisions of this
subparagraph, a sale of any tangible personal property to a contractor, subcontractor
or repairman for use or consumption in erecting structures or buildings, or building
on, or otherwise adding to, altering, improving, maintaining, servicing or repairing
real property, property or land, as the terms real property, property or land are
defined in the real property tax law, is deemed to be a retail sale regardless of
whether the tangible personal property is to be resold as such before it is so used or
consumed, except that a sale of a new mobile home to a contractor, subcontractor or
repairman who, in such capacity, installs such property is not a retail sale. . . .
Section 1101(b)(9) of the Tax Law defines the term capital improvement, in part, 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

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(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.
*

*

*

(iii) Notwithstanding the provisions of subparagraph (i) of this paragraph:
(A) Floor covering, such as carpet, carpet padding, linoleum and
vinyl roll flooring, carpet tile, linoleum tile and vinyl tile, installed as
the initial finished floor covering in new construction or a new
addition to or total reconstruction of existing construction shall
constitute an addition or capital improvement to real property,
property or land; and
(B) Floor covering, such as carpet, carpet padding, linoleum and
vinyl roll flooring, carpet tile, linoleum tile and vinyl tile, installed
other than as described in clause (A) of this subparagraph shall not
constitute an addition or capital improvement to real property,
property or land.
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax- . . . there is hereby imposed and there shall be paid
a tax . . . upon:
*

*

*

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

*

*

(3) Installing tangible personal property . . . or maintaining, servicing or
repairing tangible personal property . . . except:
*

*

*

(iii) for installing property which, when installed, will constitute an addition
or capital improvement to real property, property or land, as the terms real property,
property or land are defined in the real property tax law as such term capital

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improvement is defined in paragraph nine of subdivision (b) of section eleven
hundred one of this chapter. . . .
*

*

*

(5) Maintaining, servicing or repairing real property, property or land, as such
terms are defined in the real property tax law, whether the services are performed in
or outside of a building, as distinguished from adding to or improving such real
property, property or land, by a capital improvement as such term capital
improvement is defined in paragraph nine of subdivision (b) of section eleven
hundred one of this article . . . .
Section 1115(a) of the Tax Law provides, in part:
Receipts from the following shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating
use tax imposed under section eleven hundred ten:
*

*

*

(15) Tangible personal property sold to a contractor, subcontractor or
repairman for use in (i) erecting a structure or building (A) of an organization
described in subdivision (a) of section eleven hundred sixteen or (B) used
predominantly either in the production phase of farming or in a commercial horse
boarding operation, or in both, or (ii) adding to, altering or improving real property,
property or land (A) of such an organization or (B) used predominantly either in the
production phase of farming or in a commercial horse boarding operation, or in both,
as the terms real property, property or land are defined in the real property tax law;
provided, however, no exemption shall exist under this paragraph unless such
tangible personal property is to become an integral component part of such structure,
building or real property.
(16) Tangible personal property sold to a contractor, subcontractor or
repairman for use in maintaining, servicing or repairing real property, property or
land (i) of an organization described in subdivision (a) of section eleven hundred
sixteen or (ii) used predominantly either in the production phase of farming or in a
commercial horse boarding operation, or in both, as the terms real property, property
or land are defined in the real property tax law; provided, however, no exemption
shall exist under this paragraph unless such tangible personal property is to become
an integral component part of such structure, building or real property.
Section 527.7 of the Sales and Use Tax Regulations provides, in part:

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(a) Definitions.
(1) Maintaining, servicing and repairing are terms which are used to cover
all activities that relate to keeping real property in a condition of fitness, efficiency,
readiness or safety or restoring it to such condition. Among the services included are
services on a building itself such as painting; services to the grounds, such as lawn
services, tree removal and spraying; trash and garbage removal and sewerage service
and snow removal.
*

*

*

(3)(i) A capital improvement is an addition or alteration to real property:
(a) which substantially adds to the value of the real property, or appreciably
prolongs the useful life of the real property;
(b) 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
(c) is intended to become a permanent installation.
(ii) (a) Floor covering is a capital improvement only when it is installed as
the initial finished floor covering in new construction, in a new addition to existing
construction or in a total reconstruction of existing construction.
(b) The term floor covering includes carpet, carpet tile, carpet padding,
linoleum and vinyl roll floor covering, linoleum tile, vinyl tile and other similar floor
coverings. For a detailed discussion and description, see section 541.14 of this Title.
*

*

*

(b) Imposition.
(1) The tax is imposed on receipts from every sale of the services of
maintaining, servicing or repairing real property, whether inside or outside of a
building.
*

*

*

(4) The imposition of tax on services performed on real property depends on
the end result of such service. If the end result of the services is the repair or

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maintenance of real property, such services are taxable. If the end result of the same
service is a capital improvement to the real property, such services are not taxable.
Example 9: The replacement of some shingles or patching of a roof is a
repair, but a new asphalt shingle roof is a capital improvement.
Section 541.14 of the Sales and Use Tax Regulations provides, in part:
Floor Covering. (a)(l) The installation of floor covering is subject to sales
tax, regardless of the method of installation or the surface over which the floor
covering is installed, unless the installation qualifies for exemption under subdivision
(b) of this section.
(2)(i) The term floor covering includes carpet, carpet tile, carpet padding,
linoleum and vinyl roll floor covering, linoleum tile, vinyl tile and other similar floor
coverings but not area rugs and the like.
(ii) The term floor covering does not include flooring such as wood flooring,
ceramic tile, terrazzo, marble, concrete or other similar flooring. Accordingly, the
provisions of this section do not apply to the installation of flooring. See section
527.7 of this Title for the rules to determine whether such flooring qualifies as a
capital improvement.
Opinion
Whether certain installations of Petitioner’s epoxy type flooring systems constitute capital
improvements to real property or maintenance service depends on whether the materials used in the
flooring systems are distinguishable from floor coverings and ordinary paint or similar coatings.
Flooring materials are distinguishable from floor coverings by their degree of permanence.
See Section 1101(b)(9)(iii) of the Tax Law and Section 541.14 of the Sales and Use Tax
Regulations. Flooring materials such as concrete, wood, ceramic tile and terrazzo are materials
which are more durable and, therefore, more permanent than floor covering materials such as
carpeting, linoleum and vinyl tile.
Petitioner’s epoxy flooring systems are troweled onto the concrete surface of a floor in a
manner similar to the application of terrazzo. The resulting epoxy surface cannot be removed
without destroying the flooring and damaging the concrete substrate. The installation of each of
Petitioner’s epoxy flooring systems results in a new and different surface to the floor which becomes
an integral part of the floor. Petitioner’s flooring systems are indistinguishable from the epoxy
floors described in Whirlwind Music Distributors, Inc., Adv Op Comm T & F July 31, 1998,

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TSB-A-98(50)S. Therefore, Petitioner’s epoxy flooring systems constitute flooring and not floor
covering for purposes of Article 28 of the Tax Law.
Petitioner’s epoxy flooring systems are also distinguishable from ordinary paint or similar
coatings. These flooring systems are troweled onto the underlying surface, and result in a thicker
coating than ordinary paint. Unlike paint or similar coatings, Petitioner’s epoxy flooring systems
significantly improve the strength and durability of existing surfaces.
Petitioner’s epoxy flooring systems appear to meet the requirements for a capital
improvement contained in Section 1101(b)(9)(i) of the Tax Law. First, the installation of
Petitioner’s epoxy flooring systems substantially adds to the value of the real property, or
appreciably prolongs the useful life of the real property. Petitioner’s epoxy flooring systems are
designed to substantially increase the strength and durability of concrete floors and eliminate cracks
and joints. In an industrial or commercial setting where heavy forklift or steel-wheeled dolly traffic
would severely damage a concrete floor, the application of Petitioner’s epoxy flooring systems
would prevent or dramatically reduce such damage. Furthermore, Petitioner’s epoxy flooring
systems are resistant to chemicals which would quickly damage concrete or painted concrete, and
the flooring systems can be made to dissipate static electric charges which is a critical feature in the
manufacture of electronic and computer components and in the handling of flammable substances.
Second, Petitioner’s epoxy flooring system becomes part of the real property or becomes
permanently affixed to the real property so that removal would cause material damage to the
property or article itself. Petitioner’s epoxy flooring systems are bonded to the underlying concrete
floor by an epoxy primer and become an integral part of the floor. Removal would destroy the
epoxy coating and damage the underlying concrete.
Third, it appears that Petitioner’s epoxy flooring systems are generally intended to become
a permanent installation. The epoxy flooring system itself is as permanent an installation as the
underlying concrete floor.
Petitioner’s epoxy flooring systems, therefore, will constitute a capital improvement when
installed as a complete flooring system over an existing floor, as well as when installed as the initial
floor in new construction or a new addition to or total reconstruction of existing construction.
Petitioner’s receipts from charges to a customer for installing a complete flooring system will not
be subject to the tax imposed under either Section 1105(c)(3) or 1105(c)(5) of the Tax Law. If,
however, Petitioner’s epoxy flooring system is only applied to a portion of an existing floor in order
to repair damaged areas, such application of the flooring system will generally not be considered a
capital improvement. The application of the flooring system in such case will be subject to tax
under Section 1105(c).
Petitioner’s non-epoxy (single component) floor coatings such as urethane sealers are similar
to paint. When these coatings are applied as part of other work which constitutes a capital

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improvement to real property, they are considered to result in a capital improvement. For example,
when these coatings are to be used as a primer coat or topcoat with the installation of an epoxy
flooring system, or, where they are used to seal a new concrete floor, the application of such
coatings will be considered as part of the underlying capital improvement project. However, when
these coatings are applied to an existing floor or other surface, or, on a repaired section of flooring,
the charge for such application is a charge for maintaining or repairing real property subject to sales
tax.
A determination as to whether a given installation of Petitioner’s flooring systems constitutes
a capital improvement is a question of fact based on the circumstances in each instance and cannot
be made in an Advisory Opinion. See George W. Long, Adv Op Comm T& F, July 24, 1992,
TSB-A-92(56)S. However, to the extent that an installation satisfies each of the three statutory
conditions of a capital improvement, or to the extent that the completion of a capital improvement
project cannot be accomplished without the installation of the flooring system, receipts from the
sale of such an installation are not subject to sales tax. (See Rochester Gas and Electric v
State Tax Commn, 128AD2d 238, affd 71 NY2d 931; Building Contractors Association v Tully,
87 AD2d 909.) Where an installation is found to constitute a capital improvement, Petitioner’s
purchases of the materials incorporated into the capital improvement are subject to sales or
compensating use tax, unless the capital improvement is made to property of an exempt
organization. See Sections 1101(b)(4)(i) and 1115(a)(15) and (16) of the Tax Law.

DATED: January 27, 2003

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

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