If a Florida sign manufacturer pays Florida use tax on materials it later installs as a capital improvement in New York, can it get a credit against the New York use tax it owes on the same materials?

Plain-English summary

Bell Signs, Inc. manufactures signs in Florida and installs some of them, through subcontractors, at customer sites in other states, including New York. Under Florida's own rules, exterior signs that are welded, bolted, or embedded in concrete are treated as real property improvements, and Florida requires Bell Signs to pay Florida use tax on its fabrication costs for these signs even when the finished sign is shipped out of Florida and installed elsewhere. That created a real risk of double taxation: Florida use tax on fabrication, plus New York use tax on the same materials once they're installed here.

The Department confirmed New York's reciprocal-credit provision (§ 1118(7)) can prevent that double hit, but only within specific limits:

• The credit is only available for materials installed as a genuine New York capital improvement (the three-part test: substantial value-add or life-extension, material damage on removal, intended permanence). If the sign instead remains "tangible personal property" after installation (like the bolted signage discussed in the companion opinion, TSB-A-08(26)S), Bell Signs has no New York use tax liability on the materials in the first place — so there's nothing to credit against, and the customer instead owes tax on the full charge.
• Bell Signs must show the Florida tax was legally due and actually paid — an assessment by Florida that hasn't actually been paid doesn't count, and neither does an amount Florida would have refunded on request.
• If the Florida tax paid exceeds the New York use tax otherwise due, the excess is not refunded — the credit only offsets, it never generates a net refund of the foreign-state tax.
• The claim is filed on Form AU-11, either as a standalone refund/credit application or directly on the New York sales/use tax return reporting the liability, within three years of when the New York tax was payable — and Bell Signs does not need to file a separate claim for every filing period.

What this means for you

Multistate manufacturers and contractors

If you fabricate materials in one state and install them as a capital improvement in New York, always check whether you actually paid a legally-due sales or use tax to the origin state without any right to a refund there — that's the trigger for New York's reciprocal credit. Keep documentation proving actual payment (not just an assessment) since that's what the credit requires.

Sign companies and other capital-improvement contractors working across state lines

Whether your installation is a "capital improvement" or stays "tangible personal property" completely changes who owes New York tax and whether this credit is even relevant — if the installation doesn't qualify as a capital improvement, you (the contractor) owe no use tax on the materials, so there's no double-tax problem to fix with a credit; your customer instead pays sales tax on your full charge.

Accountants advising on multistate use tax

Remember the credit caps out at the New York liability — plan for the possibility of an unrecoverable excess if the origin state's tax rate or base is higher, and track the three-year Form AU-11 filing window per liability period.

Common questions

Q: Can I get a New York use tax credit for tax I was assessed by another state but haven't paid yet?
A: No. The credit requires that the tax was legally due and actually paid to the other state, without any right to a refund or credit there — an unpaid assessment doesn't qualify.

Q: What if the other state's tax I paid is higher than what I owe New York?
A: The credit only offsets your New York use tax liability; any excess amount paid to the other state is not refunded by New York.

Q: How long do I have to claim this credit?
A: Three years from the date the New York use tax was payable, using Form AU-11 — you don't need to file separately for each individual filing period.

Q: Does this credit apply if my installation isn't a capital improvement?
A: No need for it in that scenario — if your installation remains tangible personal property rather than becoming a capital improvement, you (the contractor) owe no New York use tax on the materials in the first place, so the reciprocal credit isn't relevant; your customer owes sales tax on the full charge instead.

Q: Does this ruling apply to my multistate manufacturing/installation business?
A: This is a fact-specific Advisory Opinion binding only on Bell Signs, Inc. Whether your specific materials and installation method qualify as a New York capital improvement, and whether the other state's tax was truly legally due and paid, both require case-by-case analysis.

Citations and references

• Tax Law § 1101(b)(4)(i), (9)(i) (contractor retail sale; capital improvement definition)
• Tax Law § 1105(a), (c)(3) (imposition of sales tax; installation services)
• Tax Law § 1110 (use tax; manufactured/processed/assembled property)
• Tax Law § 1115(a)(17) (exemption for capital improvement materials)
• Tax Law § 1118(7) (reciprocal credit for tax paid to another state)
• Tax Law § 1119(c) (contractor refund/credit for resale)
• Tax Law § 1139(a) (three-year refund/credit filing period)
• 20 NYCRR § 531.3(b) (use tax on manufactured/processed/assembled property)
• 20 NYCRR § 541.5(b) (capital improvement contracts)
• Publication 39, A Guide to New York State Reciprocal Credits for Sales Taxes Paid to Other States (8/04)
• Form AU-11, Application for Credit or Refund of Sales or Use Tax
• Form ST-124, Certificate of Capital Improvement
• Form ST-120.1, Contractor Exempt Purchase Certificate

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a08_21s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-08(21)S
Sales Tax
April 30, 2008

Office of Tax Policy Analysis
Taxpayer Guidance Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S070320A

On March 20, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Bell Signs, Inc., 1200 Bell Avenue, Panama City, Florida 32401.
The issues raised by Petitioner, Bell Signs, Inc., are:

1. Whether a credit or refund of New York State and local use tax is available for sales
   or use tax paid or required to be paid to the state of Florida in the circumstances
   described below.
2. Whether New York State requires actual payment of the use tax to the state of Florida
   or whether it will allow a credit or refund based on an audit assessment issued by the
   state of Florida.
3. By what procedure might Petitioner obtain a credit or refund of New York State and
   local sales or use tax against the tax paid to Florida?
4. What is the oldest period for which a credit or refund request can be made?
5. Whether Petitioner can file a single application for credit or refund or whether it
   needs to file a claim for each filing period.
   Petitioner submitted the following facts as the basis for this Advisory Opinion.
   Petitioner is a Florida S Corporation that manufactures signs in Florida. Petitioner
   installs some of these signs out-of-state for non-Florida purchasers. Petitioner has the signs
   installed at the out-of-state locations by subcontractors. Petitioner contracts with and pays the
   subcontractors for installing the signs, bills the customers for the signs and installation costs, and
   collects and pays sales and use taxes on the transactions in accordance with the laws of the states
   where the signs are delivered and installed. The sales tax is then remitted to the taxing authorities
   in the states where the signs are installed.
   Although Petitioner sells to out-of-state customers, it is treated as a real property
   contractor under the Florida statutes and is liable for paying use tax to the state of Florida on its
   fabrication costs on all manufactured signs, regardless of whether the signs are installed in
   Florida or a site not in Florida. According to Florida Rule 12A-1.051, exterior signs that are
   welded or bolted, channel letters that are lighted and directly wired, or signs that are embedded
   in concrete foundations are, based on the method of attachment, classified as real property.
   Petitioner must pay use tax to Florida on the materials and supplies used to fabricate and install
   these signs even if the sign is installed in another state.

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Applicable law and regulations
Section 1101(b)(4)(i) of the Tax Law provides, in part:
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, . . .
Section 1101(b)(9)(i) of the Tax Law defines the term capital improvement to mean:
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 upon the receipts from every
retail sale of tangible personal property, except as otherwise provided.
Section 1105(c)(3) of the Tax Law imposes a tax on the receipts from every sale, except
for resale, of the following services:
*

*

*

Installing tangible personal property, excluding a mobile home, or maintaining,
servicing or repairing tangible personal property, including a mobile home, not held for
sale in the regular course of business, whether or not the services are performed directly
or by means of coin-operated equipment or by any other means, and whether or not any
tangible personal property is transferred in conjunction therewith, 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 improvement
is defined in paragraph nine of subdivision (b) of section eleven hundred one of this
chapter; . . .

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Section 1110 of the Tax Law provides, in part:
(a) Except to the extent that property or services have already been or will be
subject to the sales tax under this article, there is hereby imposed on every person a use
tax for the use within this state on and after June first, nineteen hundred seventy-one
except as otherwise exempted under this article, (A) of any tangible personal property
purchased at retail, (B) of any tangible personal property (other than computer software
used by the author or other creator) manufactured, processed or assembled by the user, (i)
if items of the same kind of tangible personal property are offered for sale by him in the
regular course of business or (ii) if items are used as such or incorporated into a structure,
building or real property by a contractor, subcontractor or repairman 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, if items of the same
kind are not offered for sale as such by such contractor, subcontractor or repairman or
other user in the regular course of business, . . .
*

*

*

(c) For purposes of subclause (i) of clause (B) of subdivision (a) of this section,
the tax shall be at the rate of four percent of the price at which items of the same kind of
tangible personal property are offered for sale by the user, and the mere storage, keeping,
retention or withdrawal from storage of tangible personal property by the person who
manufactured, processed or assembled such property shall not be deemed a taxable use
by him; . . .
(d) For purposes of subclause (ii) of clause (B) of subdivision (a) of this section,
the tax shall be at the rate of four percent of the consideration given or contracted to be
given for the tangible personal property manufactured, processed or assembled into the
tangible personal property the use of which is subject to tax, including any charges for
shipping or delivery as described in paragraph three of subdivision (b) of section eleven
hundred one.
(e) Notwithstanding the foregoing, provisions of this section, for purposes of
clause (B) of subdivision (a) of this section, there shall be no tax on any portion of such
price which represents the value added by the user to tangible personal property which he
fabricates and installs to the specifications of 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, over and above the prevailing normal purchase price prior to such
fabrication of such tangible personal property which a manufacturer, producer or
assembler would charge an unrelated contractor who similarly fabricated and installed
such tangible personal property to the specifications of an addition or capital
improvement to such real property, property or land.

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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:
*

*

*

(17) Tangible personal property sold by a contractor, subcontractor or repairman
to a person other than an organization described in subdivision (a) of section eleven
hundred sixteen, for whom he is adding to, or improving real property, property or land
by a capital improvement, or for whom he is about to do any of the foregoing, if such
tangible personal property is to become an integral component part of such structure,
building or real property; provided, however, that if such sale is made pursuant to a
contract irrevocably entered into before September first, nineteen hundred sixty-nine, no
exemption shall exist under this paragraph.
Section 1118 of the Tax Law provides, in part:
The following uses of property and services shall not be subject to the
compensating use tax imposed under this article:
*

*

*

(7)(a) In respect to the use of property or services to the extent that a retail sales
or use tax was legally due and paid thereon, without any right to a refund or credit
thereof, to any other state or jurisdiction within any other state but only when it is shown
that such other state or jurisdiction allows a corresponding exemption with respect to the
sale or use of tangible personal property or services upon which such a sales tax or
compensating use tax was paid to this state. To the extent that the tax imposed by this
article is at a higher rate than the rate of tax in the first taxing jurisdiction, this exemption
shall be inapplicable and the tax imposed by section eleven hundred ten of this chapter
shall apply to the extent of the difference in such rates, except as provided in paragraph
(b) of this subdivision.
(b) To the extent that the compensating use tax imposed by this article and a
compensating use tax imposed pursuant to article twenty-nine are at a higher aggregate
rate than the rate of tax imposed in the first taxing jurisdiction, the exemption provided in
paragraph (a) of this subdivision shall be inapplicable and the taxes imposed by this
article and pursuant to article twenty-nine shall apply to the extent of the difference
between such aggregate rate and the rate paid in the first taxing jurisdiction. In such
event, the amount payable shall be allocated between the tax imposed by this article and
the tax imposed pursuant to article twenty-nine in proportion to the respective rates of
such taxes.

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Section 1119(c) of the Tax Law provides, in part:
A refund or credit equal to the amount of sales or compensating use tax imposed
by this article and pursuant to the authority of article twenty nine, and paid on the sale or
use of tangible personal property, shall be allowed . . . if a contractor, subcontractor or
repairman purchases tangible personal property and later makes a retail sale of such
tangible personal property, the acquisition of which would not have been a sale at retail to
him but for the second to last sentence of subparagraph (i) of paragraph (4) of subdivision
(b) of section eleven hundred one. An application for the refund or credit provided for
herein must be filed with the commissioner of taxation and finance within the time
provided by subdivision (a) of section eleven hundred thirty nine. Such application shall
be in such form as the commissioner may prescribe. Where an application for credit has
been filed, the applicant may immediately take such credit on the return which is due
coincident with or immediately subsequent to the time that he files his application for
credit. However, the taking of the credit on the return shall be deemed to be part of the
application for credit. The procedure for granting or denying such applications for refund
or credit and review of such determinations shall be as provided in subdivision (e) of
section eleven hundred thirty nine.
Section 1139(a) of the Tax Law provides, in part:
In the manner provided in this section the tax commission shall refund or credit
any tax, penalty or interest erroneously, illegally or unconstitutionally collected or paid
if application therefor shall be filed with the tax commission (i) in the case of tax paid by
the applicant to a person required to collect tax, within three years after the date when the
tax was payable by such person to the tax commission as provided in section eleven
hundred thirty-seven, or (ii) in the case of a tax, penalty or interest paid by the applicant
to the tax commission, within three years after the date when such amount was payable
under this article, or (iii) in the case of a tax due from the seller, transferor or assignor
and paid by the applicant to the tax commission where the applicant is a purchaser,
transferee or assignee liable for such tax pursuant to the provisions of subdivision (c) of
section eleven hundred forty-one of this chapter, within two years after the giving of
notice by the tax commission to such purchaser, transferee or assignee of the total amount
of any tax or taxes which the state claims to be due from the seller, transferor or assignor.
Such application shall be in such form as the tax commission shall prescribe. No refund
or credit shall be made to any person of tax which he collected from a customer until he
shall first establish to the satisfaction of the tax commission, under such regulations as it
may prescribe, that he has repaid such tax to the customer. . . .
Section 525.2(a)(3) of the Sales and Use Tax Regulations provides:
Except as specifically provided otherwise, the sales tax is a “destination tax.” The
point of delivery or point at which possession is transferred by the vendor to the
purchaser, or the purchaser’s designee, controls both the tax incidence and the tax rate.

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Section 531.3(b) of the Sales and Use Tax Regulations provides, in part:
Tangible personal property manufactured, processed or assembled by the user.
(1) A compensating use tax is imposed when a manufacturer, processor or
assembler uses its product as such in New York State or incorporates the product into real
property in New York State. This is so whether or not it offers items of the same kind for
sale in the regular course of business and whether the product was manufactured,
processed or assembled inside or outside New York State. The basis on which
compensating use tax is computed, however, depends on whether the user offers items of
the same kind for sale in the regular course of business. A compensating use tax is not
imposed, however, to the extent the user was required to pay sales tax without a right to a
refund or credit upon the purchase of the ingredients, parts or materials manufactured,
processed or assembled into the product the use of which is subject to tax.
Example 1: Company A, located in Suffolk County, manufactures
and sells its own brand of garage doors. Approximately 80 percent of the
doors are installed by Company A; the balance of the doors are installed
by the purchaser.
Company A pays sales tax to its New York State suppliers of wood
and glass that become part of the doors. When determining the amount of
use tax it owes Company A may take credit for the New York State and
local sales taxes paid on these materials.
(i) If the user offers items of the same kind for sale in the regular course of
business, the basis on which use tax is computed is the price at which items of the same
kind of tangible personal property are offered for sale by the user. The price at which
items are offered for sale is evidenced by a price list, catalog price or record of sales. In
the absence of a catalog price or price list, the average of the prices charged various
customers will be deemed to be the price at which the user would sell such item during
the regular course of business.
(a) Items of the same kind mean that items belong to an identifiable class, but
need not be identical.
Example 2: Windows are items of the same kind when they are a
standard size and materials whether or not they are sold from inventory or
produced to order from a catalog description. A manufacturer of windows
produces from a catalog description square, round and hexagon shaped
windows from various materials. The windows regardless of shape, size or
materials are considered to be items of the same kind.

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When items which are not standard or cataloged are made to the
specifications of a particular job, these will not be considered items of the
same kind with catalog or inventory sales.
Items made to the specifications of a particular job will not be
considered items of the same kind as items made to the specifications of
another particular job.
*

*

*

(b) Offered for sale in the regular course of business means that a person sells in
excess of 10 percent of his product for each 12 month period beginning
December 1st, measured by weight, volume, size or other unit on which the
price is based, to persons other than organizations exempt under section
1116(a) of the Tax Law. For the purpose of this calculation, the amount of
product sold to all persons except exempt organizations will constitute the
numerator of the fraction and the total amount of the product sold and used in
performing work for others, with the exclusion of products sold to or used in
performing work for exempt organizations, will constitute the denominator.
When it is determined that a person is selling in excess of 10 percent of his
product in the regular course of business as defined herein, he will be
considered a person required to pay compensating use tax on the basis set
forth in subparagraph (i) of this paragraph. The formula to be used in
determining whether the product is being sold in the regular course of
business is:
(c)
Tot. amt. sold minus amt. sold to exempt organizations
Tot. amt. sold and used minus (amt. sold to plus amt. used for ex. organ.)
*

*

*

(d) The mere storage, keeping, retention or withdrawal from storage of tangible
personal property by the person who manufactured, processed or assembled it
is not a taxable use for purposes of this subparagraph.
(ii) If the user does not offer items of the same kind for sale in the regular course
of business as described in subparagraph (i) of this paragraph, the basis on which use tax
is computed is the consideration given or contracted to be given for the tangible personal
property manufactured, processed or assembled into the tangible personal property the
use of which is subject to tax, including any charges by the user's seller to the user for
shipping or delivery of that property to the user.

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Example 11: An asphalt company, located in Ohio, produces
paving compounds for its own use in performing capital improvement
contracts and repairs for others. It sells none of its product to others. It
purchased aggregate and petroleum base materials in Ohio from other
vendors. It will be required to pay a use tax on the cost of those materials
to the extent not used on exempt organization jobs. The tax rate applicable
is the rate in effect in New York State where the asphalt is installed.
Example 12: Company A produces factory manufactured homes at
its plant in Vermont. The components are manufactured in Vermont and
the homes are shipped in sections to customer prepared sites where
Company A erects the home. Company A only sells its product on an
installed basis. It does not sell the individual components.
Company A owes use tax on the individual building components
manufactured at its plant in Vermont which were used in erecting homes
of customers in New York. The use tax is based on the cost to Company A
of the raw materials it used to manufacture the building components. The
tax due is computed by multiplying the cost of the raw materials by the tax
rate in effect at the site in New York where the home is erected.
(2)(i) Where a manufacturer, processor or assembler fabricates its manufactured,
processed or assembled product and installs it to the specifications of a capital
improvement to real property, the value added by this fabrication is not included in the
basis on which compensating use tax is computed. However, the installation by the
manufacturer, processor or assembler of its fabricated product to the specifications of a
capital improvement to real property is a use of the product subject to compensating use
tax. The basis on which the use tax is computed depends on whether the manufacturer,
processor or assembler offers its fabricated product for sale in the regular course of
business.
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*

*

(3) The compensating use tax computed to be due shall be paid on each quarterly
or part quarterly return based on the experience in the period for which the return is due.
A schedule shall be attached to the return for the quarter ending November 30th of each
year for the year beginning the prior December 1st, for the purpose of determining
whether, on an annual basis, the user offered his product for sale in the regular course of
business, as defined in clause (b) of subparagraph (i) of paragraph (1) of this subdivision.
An adjustment shall be made on such return for the tax due for the year ending November
30th, together with the appropriate payment or request for refund or credit.
Section 541.2(d) of the Sales and Use Tax Regulations provides:

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A construction contractor means any person who engages in erecting,
constructing, adding to, altering, improving, repairing, servicing, maintaining,
demolishing or excavating any building or other structure, property, development, or
other improvement on or to real property, property or land.
Section 541.5 of the Sales and Use Tax Regulations provides, in part:
Contracts with customers other than exempt organizations.
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*

(b) Capital improvements contracts. (1) Purchases. All purchases of tangible
personal property (excluding qualifying production machinery and equipment exempt
under section 1115(a)(12) of the Tax Law) which are incorporated into and become part
of the realty or are used or consumed in performing the contract are subject to tax at the
time of purchase by the contractor or any other purchaser. A certificate of capital
improvement may not be validly given by any person or accepted by a supplier to exempt
the purchase of these materials.
(2) Labor and material charges. All charges by a contractor to the customer for
adding to or improving real property by a capital improvement are not subject to tax
provided the customer supplies the contractor with a properly completed certificate of
capital improvement.
*

*

*

(4) Documents; capital improvement contracts.
(i) When a properly completed certificate of capital improvement has been
furnished to the contractor, the burden of proving the job or transaction is not taxable and
the liability for the tax rests solely upon the customer.
(a) The prime contractor should obtain a certificate of capital improvement from
the customer and retain it as part of his records. Copies of such certificate must be
furnished to all subcontractors on the job and retained as part of their records.
(b) A certificate of capital improvement may not be issued by a contractor,
subcontractor or any other person to a supplier on the purchase of tangible personal
property.
*

*

*

(iii) If a contract includes the sale of tangible personal property which remains
tangible personal property after installation, the contractor must collect the appropriate

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New York State and local taxes from the customer on the selling price, including any
charge for installation, of the tangible personal property unless a properly completed
exemption certificate is issued by the customer. The contractor may apply for a credit or
refund of taxes he has paid on purchases of the tangible personal property that remain
tangible personal property after installation.
Example 1: A contractor sells a building he has constructed and, as a part of the
sale agreement, installs free standing water fountains which remain tangible personal
property when installed. The contractor's billing to his customer must separately state all
charges for tangible personal property included in the sales agreement. The New York
State and applicable local tax rate must be collected on the total charges for the water
fountains including any installation charges. In this instance, the contractor may
purchase the water fountains tax-free using a contractor exempt purchase certificate. If
he pays the tax to his supplier, he is entitled to a refund or credit of the tax paid on the
purchase of the water fountains.
Opinion
Petitioner manufactures its signs outside New York State and erects or installs some of
them in New York State. Petitioner's installations are either capital improvements to real
property or installations of tangible personal property that remain tangible personal property after
installation.
If Petitioner installs a sign that qualifies as a capital improvement to real property,
Petitioner is not required to collect sales tax from its customer.
Petitioner should obtain a
properly completed Certificate of Capital Improvement (Form ST-124) from its customer.
Petitioner is, however, considered to be a construction contractor for New York State and local
sales tax purposes. See section 541.2(d) of the Sales and Use Tax Regulations. Purchases by
Petitioner of components and materials used to construct its signs that qualify as capital
improvements upon installation are subject to New York sales tax as a retail purchase of tangible
personal property when such property is delivered to Petitioner in New York State. See section
1101(b)(4)(i) of the Tax Law and section 541.5(b) of the Sales and Use Tax Regulations.
Petitioner as a construction contractor may not issue a resale certificate to purchase such items
without the payment of sales tax.
If signs manufactured by Petitioner in Florida are installed by Petitioner in New York
State as capital improvements, Petitioner's use of such signs in New York is subject to New York
State and local use tax under section 1110(a)(B) of the Tax Law. Further, as a manufacturer, if
Petitioner sells in excess of 10% of its signs at retail (i.e., without installation) and the signs are
of the same kind as the sign being installed in New York, Petitioner is required to compute the
use tax based on its selling price for the sign. Otherwise, use tax on the signs installed in
New York is based on the consideration paid for the tangible personal property that is
manufactured, processed, or assembled into the sign. See section 1110(c) and (d) of the Tax
Law and section 531.3(b) of the Sales and Use Tax Regulations. If Petitioner fabricates the signs

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to the specifications of a capital improvement project, the value added by this fabrication is not
included in the basis on which use tax is computed. See section 1110(e) of the Tax Law and
section 531.3(b)(2) of the Sales and Use Tax Regulations.
If Petitioner installs a sign that does not meet the conditions to qualify as a capital
improvement to real property and, therefore, the sign remains tangible personal property after its
installation, Petitioner must collect New York State and local sales tax on its entire charge for the
sign, including installation, from its customer. See section 1105(a) of the Tax Law, which
imposes sales tax on sales of tangible personal property, and section 1105(c)(3) of the Tax Law,
which imposes sales tax on installing, maintaining, servicing, or repairing tangible personal
property. Petitioner is entitled to a credit or refund of any New York State and local sales and
use tax Petitioner paid on its purchase of tangible personal property used in such installation and
actually transferred to the customer as a component part of the installed sign. Alternatively, in
lieu of paying the sales tax, Petitioner may issue a Contractor Exempt Purchase Certificate
(Form ST-120.1) to its vendor for purchases of materials that it will incorporate into the installed
sign that will remain tangible personal property after installation. See section 1119(c) of the Tax
Law and section 541.5(b)(4)(iii), Example 1 of the Sales and Use Tax Regulations.
Petitioner also makes sales of signs without installation. Such sales are retail sales of
tangible personal property subject to New York State and local sales tax under section 1105(a) of
the Tax Law to be collected from Petitioner’s customer at the rate in effect where the sign is
delivered to Petitioner's customer or its designee. See section 525.2(a)(3) of the Sales and Use
Tax Regulations.
Issue 1 - Petitioner asks whether a credit is allowed against its liability for New York
State and local use tax for the tax it paid or was required to pay to the state of Florida on
materials manufactured in Florida and used in its installation of signage in New York State.
When Petitioner makes an installation of signage that qualifies as a capital improvement
to real property under section 1101(b)(9)(i) of the Tax Law, Petitioner is liable for the New York
State and local use tax on its use of signage or other materials that were manufactured or
purchased in Florida and incorporated into such installation in New York. Such tax is computed
based on the rate in effect where the capital improvement installation occurs. Section 1118(7) of
the Tax Law provides for an exemption from New York State and local use tax imposed on the
use of tangible personal property or services to the extent that a retail sales or use tax was legally
due and paid on such property or services, without any right to a refund or credit, to any other
state or jurisdiction within any other state but only when such other state or jurisdiction allows a
corresponding exemption with respect to sales or use tax paid to New York State. If Petitioner
has already paid a sales or use tax to the state of Florida on signage and other materials installed
as a capital improvement in New York without any right to a refund or credit, under section
1118(7) of the Tax Law, Petitioner may take a credit against the use tax Petitioner is required to
pay to New York for the tax paid to Florida on those materials. See A Guide to New York State
Reciprocal Credits for Sales Taxes Paid to Other States, Publication 39 (8/04), for information
about computing the applicable amount of the credit and a listing of the reciprocal credits

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allowed for taxes paid to other states. If the total tax paid in Florida exceeds the total use tax due
in New York, the excess amount will not be refunded.
However, when Petitioner makes an installation that does not qualify as a capital
improvement to real property under section 1101(b)(9)(i) of the Tax Law, Petitioner is not liable
for any New York State or local sales or use tax on its purchase or use of the signage and
materials incorporated into such installation. Therefore, in such case, Petitioner has no New
York use tax liability against which Petitioner might credit any sales or use tax Petitioner paid to
Florida or any other taxing jurisdiction. Petitioner's customer is liable for sales tax on the full
price of such property, including installation, and Petitioner is required to collect the New York
State and local tax from its customer.
Issue 2 - Petitioner asks whether New York State requires actual payment of tax to the
state of Florida or whether it will allow a credit or refund based on an audit assessment issued by
the state of Florida.
Section 1118(7)(a) of the Tax Law requires that in order to receive a credit from
New York State for taxes paid to another state, certain conditions must be met. Among these is
the condition that a retail sales or use tax was legally due and paid on the purchase, without any
right to a refund or credit of tax from the other state. Accordingly, a credit may only be granted
where Petitioner can show that the tax was legally due and paid to Florida. A credit may not be
taken for taxes that have been assessed against Petitioner by Florida but have not been paid by
Petitioner. As previously noted, Petitioner is only eligible for a credit for taxes Petitioner has
paid to Florida against use tax Petitioner may owe on materials Petitioner incorporates into
installations of signs in New York that constitute capital improvements in New York.
Issue 3 - Petitioner asks by what procedure it might obtain a credit or refund of New
York State and local sales or use tax against the tax paid to Florida.
Petitioner may use an Application for Credit or Refund of Sales or Use Tax, Form AU­
11, to apply for a credit or refund of use tax previously paid to New York State on the use of
materials incorporated into a capital improvement project in New York if Florida sales or use tax
was legally due and paid to Florida without any right to a refund or credit of such tax from
Florida. Petitioner must substantiate that it paid the tax to Florida without any right to a refund
or credit and that it also paid the use tax to New York.
Alternatively, if the New York State and local use tax has not previously been paid by
Petitioner to New York and provided that Petitioner can substantiate that it paid the tax to
Florida, without any right to a refund or credit, Petitioner may take the credit for the Florida tax
when reporting its New York State and local use tax liability on its New York State and local
sales and use tax return.
Issues 4 and 5 – Petitioner asks what is the oldest period for which a credit or refund can
be requested; and whether it can file a single application to cover all filing periods.

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Petitioner may apply for a credit or refund of New York use tax using Form AU-11
within three years of the date that the tax was payable to New York. See section 1139(a) of the
Tax Law. Petitioner need not file a separate claim for each filing period.

DATED: April 30, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the
person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.