I rent scaffolding, hoisting equipment, and temporary walkways to contractors for construction projects and separately charge for disassembly — is any of this taxable, and can I buy my equipment tax-free for resale?

Plain-English summary

A New York company rents scaffolding, hoisting equipment (assumed here to mean unoperated temporary elevators), safety netting, and temporary pedestrian walkways to general contractors and property owners across the state, under written agreements running from a few months to a year or more. Once its equipment is installed and approved by the relevant government agencies, the company isn't responsible for maintenance, insurance, or upkeep, and it doesn't keep workers on site — at the end of the term, its own employees dismantle and remove everything. The company asked the Department four questions.

1. Is the equipment rental taxable? Yes, under Tax Law §1105(a) — "sale" specifically includes a rental, and equipment rentals are taxable regardless of who the customer is (unless the customer itself is tax-exempt).

2. Can the rental ever qualify as an exempt part of a capital improvement project? No, never — even when the equipment is being used on a job that otherwise qualifies as a capital improvement. A rental is taxed as a sale of tangible personal property, a completely different category from the installation service exclusions that apply to capital improvements. The key factual test for whether something is a true "rental" (versus a service using the property) is whether the vendor keeps dominion and control — and here, because the company gives up responsibility for maintenance/insurance/upkeep once the equipment is installed and approved, it does not retain dominion and control, confirming this is a rental. (Separately, temporary pedestrian walkways installed as a service — not rented — can qualify for a different exclusion for "temporary facilities at construction sites" when they're a prerequisite to an actual capital improvement job, but that exclusion applies only to installation-service contracts, not equipment rental contracts.)

3. When is a disassembly charge taxable? Disassembly isn't itself an enumerated taxable service, but when done as part of an equipment rental (or as part of a taxable installation service), it's an "integral part" of that taxable transaction — so a separately stated disassembly charge is still taxable, whether it's tied to a rental or to a repair-job installation service.

4. Can the company buy equipment tax-free with a resale certificate? Yes, as long as (a) it's not a construction contractor, and (b) it uses the scaffolding/walkway components exclusively for rental (leasing) rather than sometimes performing installation services with them. If it ever uses the same components to perform a service instead of renting them out, it must pay tax on those purchases.

What this means for you

Construction equipment rental companies

Don't assume that renting equipment for a capital-improvement job gets you out of collecting sales tax — a genuine rental (where you give up dominion and control once installed) is always taxable as a sale of tangible personal property, a completely separate rule from the capital-improvement service exclusions. But the flip side is favorable: if you exclusively rent (never perform installation/service work with) your equipment, you can buy it tax-free for resale.

General contractors and property owners renting equipment

Expect sales tax on scaffolding, hoisting, safety netting, and walkway rentals regardless of whether your underlying project qualifies as a capital improvement — that exemption doesn't reach equipment rentals, only installation and repair services.

Accountants and tax professionals

This opinion is a clean four-part checklist (rental taxability; capital-improvement inapplicability to rentals; disassembly-as-integral-to-rental; resale-exemption eligibility tied to exclusivity of use) — useful any time a client's construction-equipment business mixes rental and service work, since the resale exemption is lost entirely if the same inventory is ever used to perform a service rather than purely rented out.

Common questions

Q: We rent scaffolding for a job that otherwise qualifies as a capital improvement — is our rental charge exempt too?
A: No. Rentals are always taxed as a sale of tangible personal property under Tax Law §1105(a); the capital-improvement exclusions only reach installation and repair services, a legally distinct category from equipment rentals.

Q: We charge separately for disassembling scaffolding at the end of a rental — is that taxable?
A: Yes, when disassembly is done as part of a rental (or as part of a taxable installation service), it's considered an integral part of that taxable transaction, so the separate charge is still taxable.

Q: Can we buy our own equipment tax-free using a resale certificate?
A: Yes, if you aren't a construction contractor and you use the equipment exclusively for rental (never for performing an installation or repair service). If you sometimes use the same inventory to perform services, you lose the resale exemption on those purchases.

Q: What's the difference between a taxable rental and a nontaxable temporary-facility installation service?
A: A rental is judged by whether the vendor keeps dominion and control over the property (if not, it's a genuine rental, always taxable). A different exclusion under 20 NYCRR §541.8(a) can apply to the installation service of temporary construction facilities like walkways — but only when that's structured as a service contract, not an equipment rental, and only when the underlying job is itself a capital improvement.

Q: Can any equipment rental company rely on this exact opinion?
A: No. An advisory opinion binds the Department only as to the taxpayer who requested it and the facts described — particularly whether the company retains dominion and control (a fact question) and whether it exclusively rents versus sometimes providing installation services.

Citations and references

Statutes and regulations:

• Tax Law §1105(a) (tax on tangible personal property, including rentals); §1101(b)(5) (sale includes rental)
• Tax Law §1101(b)(3) (integral-component charges taxable)
• Tax Law §1105(c)(3)(iii), (c)(5) (capital improvement exclusions, applicable to services only)
• 20 NYCRR §541.9(c)(1)(ii), (iv) (dominion and control test; disassembly integral to rental)
• 20 NYCRR §541.8(a), (b) (temporary construction facilities service exclusion)
• 20 NYCRR §541.9(a), (b)(1)(ii) (resale exclusion for exclusive-rental, non-contractor businesses)

Cited cases:

• Penfold v. State Tax Commission, 114 AD2d 696 (1985) (integral-component charges)
• Micheli Contracting Corp. v. New York State Tax Com'n, 109 A.D.2d 957 (1985) (resale exclusivity requirement)

Source

• Landing page: NY Sales Tax Advisory Opinions, 2009
• Original opinion: TSB-A-09(9)S

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(9)S
Sales Tax
February 26, 2009

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S080814A

Petitioner, Petitioner’s name redacted requests an advisory opinion regarding the following questions:

1. Is the rental of scaffolding, hoisting equipment, safety netting, and temporary pedestrian walkways (specified
   construction equipment) subject to tax?
2. Is the rental of the specified construction equipment ever considered a component of a capital improvement
   project, and therefore not a taxable sale?
3. Under what circumstances is a charge for disassembling scaffolding or temporary pedestrian walkways taxable?
4. Do petitioner’s purchases of the specified construction equipment qualify for the resale exclusion from sales and
   use tax?
   We conclude that: (1) petitioner’s rental of the specified construction equipment is subject to tax under Tax Law
   section 1105(a); (2) a rental of the specified construction equipment does not qualify as a component part of a capital
   improvement because a rental is taxable as a sale of tangible personal property, not as a Tax Law section 1105(c)(3)
   installation service or a section 1105(c)(5) service to real property that qualifies for the capital improvement exclusion;
   (3) a separate charge for disassembly done in conjunction with a rental or a taxable installation is taxable; and (4)
   petitioner’s purchases of the specified construction equipment qualify for the resale exclusion because petitioner is not
   a construction contractor and is purchasing the property exclusively for resale.
   Facts
   Petitioner is a New York corporation located in Bronx County, in the City of New York. Petitioner is in the
   business of renting the specified construction equipment to both general contractors and property owners located in
   various counties throughout the State of New York. All transactions are governed by written rental agreements, which
   have terms ranging from a few months to one or more years. All rental agreements set forth a monthly rental fee as
   well as certain additional fees associated with the rental of the particular equipment. The rental agreements specifically
   provide that petitioner is not responsible for the maintenance, insurance or upkeep of the equipment once the
   equipment has been installed and approved by the appropriate governmental agencies. Petitioner does not maintain
   workers at the subject site once the equipment has been installed or erected. This Advisory Opinion assumes that
   “hoisting equipment” refers to temporary elevators that have no operators.
   Petitioner's customers are most often general contractors involved in some form of building construction or
   capital improvement relating to the exterior of the subject premises. In other instances, petitioner's customers are
   private property owners or governmental agencies. At the end of the term of the rental agreement, petitioner's
   employees dismantle and remove all equipment and related items from the job site.

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TSB-A-09(9)S
Sales Tax
February 26, 2009

Analysis
Question 1: Is the rental of specified construction equipment subject to tax?
Yes, except when the sale is to an entity exempt under Tax Law section 1116. Sales tax is imposed on the
retail sale of tangible personal property delivered in New York (Tax Law section 1105(a)). The term “sale” includes a
rental (Tax Law § 1101(b)(5)).
Question 2: Is the rental of the specified construction equipment ever considered a component of a capital
improvement project and therefore not a taxable sale?
Tax Law section 1105(c)(3)(iii) excludes the installation of a capital improvement from the tax on the
installation or maintenance of tangible personal property. Likewise, section 1105(c)(5) of the Tax Law also excludes
the performance of a capital improvement from the tax on the services of maintaining, servicing, repairing or altering
real property. An equipment rental subject to tax pursuant to section 1105(a) of the Tax Law is not a service to
tangible personal property under section 1105(c)(3) or to realty under section 1105(c)(5). Thus, a contract for the
rental of the specified construction equipment would never be exempt as a component of a capital improvement. In
deciding whether a contract qualifies as a rental of tangible personal property, as distinguished from a contract to
provide a service using the property, the determinative factor is whether the vendor maintains dominion and control of
the property (Sales Tax Reg. section 541.9(c)(1)(ii)). While the issue of dominion and control is a question of fact
that cannot be determined in the context of an Advisory Opinion, it appears here that petitioner does not maintain
dominion and control of the specified construction equipment it transfers to its contractor customers, because
petitioner’s rental contracts provide that petitioner is not responsible for the maintenance, insurance, or upkeep of the
equipment once the equipment has been installed and approved by the appropriate governmental agencies.
Section 541.8(a) of the Sales and Use Tax Regulations provides an exclusion from tax for charges for “the
installation of materials and the labor” to provide “temporary facilities at construction sites,” including temporary
pedestrian walkways, where the temporary facility is a necessary prerequisite to the construction of a capital
improvement to real property. The taxability of the installation or disassembly of a temporary facility depends on the
nature of the job being performed at the construction site where the facility is installed. Thus, under that regulation, if
the job is a capital improvement, then the charges for the installation and disassembly of the temporary pedestrian
walkway are not subject to tax; conversely, if the underlying construction project is a repair to real property, then the
charges for the installation and disassembly of the temporary pedestrian walkway are taxable. The provisions of Sales
Tax Reg. § 541.8(a) apply to contracts for the performance of a service of the installation of temporary facilities at a
construction site, and do not apply to contracts for the rental of tangible personal property.
Question 3: Under what circumstances is a charge for disassembly of scaffolding or temporary pedestrian
walkways taxable?
Disassembly is not one of the enumerated services subject to tax under Tax Law section 1105(c). However,
when disassembly is done as part of a rental of scaffolding or a temporary pedestrian walkway, it is an integral part of
that rental, and therefore a separate charge for disassembly is taxable (Tax Law section 1101[b][3]; Penfold v. State
Tax Commission, 114 AD2d 696 [1985]; Sales Tax Reg. section 541.9[c][1][iv]).
Similarly, when a
subcontractor provides the service of installing and disassembling a temporary pedestrian walkway at a construction

TSB-A-09(9)S
Sales Tax
February 26, 2009

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site where the work being performed is a repair to real property, a charge for disassembly is considered part of the
repair and is taxable.
Question 4: Is petitioner entitled to provide its suppliers with resale certificates (Form ST-120) in order to
purchase the components of the scaffolding and temporary pedestrian walkways exempt from tax?
Petitioner’s purchases of scaffolding and walkway components qualify for the resale exclusion from sales and
use tax only if petitioner is not a construction contractor and it uses the components exclusively for resale (Sales Tax
Reg. sections 541.9[a] and [b][1][ii]; Micheli Contracting Corp. v. New York State Tax Com'n, 109 A.D.2d 957
[1985]). Thus, if, as appears to be the case here, petitioner exclusively uses the scaffolding and temporary pedestrian
walkway components to lease them, then the exclusivity requirement is met and petitioner may provide its suppliers
with a resale certificate and purchase those materials without paying sales and use tax. However, if petitioner
sometimes uses the scaffolding and temporary pedestrian walkway components to perform a service, petitioner must
pay tax on the purchase of the components (Sales Tax Reg. sections 541.8[b]; 541.9[b][1]).
These conclusions represent the current position of the Department and supersede any contrary advice.

DATED: February 26, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

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.