Is installing window film a taxable service or a nontaxable capital improvement in NY?

Plain-English summary

The petitioner installs window film (an adhesive film that strengthens glass and protects against breakage; removable only by scraping). It asked whether installing it is taxable. The answer turns on a single distinction: new/replacement window vs. existing window.

The framework:
- A capital improvement (Tax Law 1101(b)(9)(i)) is an addition/alteration that substantially adds value or prolongs useful life, becomes part of/permanently affixed to real property (removal causes material damage), and is intended to be permanent. Charges for capital improvements aren't taxable.
- Services to real property are taxed by the end result (20 NYCRR 527.7(b)(4)): a repair/maintenance result is taxable (1105(c)(5)); a capital-improvement result isn't.

The Office of Counsel concluded:

• Film with a new or fully replaced window = capital improvement (not taxable). Applying the film in connection with the original installation or complete replacement of a window is a capital improvement, so the installer doesn't collect tax on its charge -- provided it gets a Certificate of Capital Improvement (Form ST-124) from the customer (within 90 days). The installer must pay sales/use tax on its own purchase of the film (it's the consumer for a capital improvement).
• Film on an existing window = taxable real-property service. Applying film to an existing window is the servicing of real property, taxable under 1105(c)(5). For that work, the installer's film purchase qualifies for the resale exclusion -- but as a contractor it must pay tax when it buys the film and then claim a refund or credit after installation (1119(c)), and only if it collected tax from the customer or the customer is an exempt organization that gave it an exempt-organization certificate.

What this means for you

Window-film, coating, and similar installers

The same product lands on opposite sides of the tax line depending on the job. New build or full window replacement → capital improvement, no tax on your charge, but you eat the tax on the film. Retrofitting film onto existing windows → taxable service, collect tax from the customer (and recover the tax you paid on the film via refund/credit). Get an ST-124 on every capital-improvement job to be relieved of the duty to collect.

Customers

Expect no sales tax when film goes in with a new/replacement window (you'll sign a capital-improvement certificate), and sales tax when film is applied to your existing windows.

Common questions

Q: Is window film taxable to install?
A: Only when applied to an existing window (a taxable real-property service). With a new or fully replaced window it's a nontaxable capital improvement.

Q: What paperwork do I need for the capital-improvement jobs?
A: A Certificate of Capital Improvement (Form ST-124) from the customer within 90 days; keep it in your records.

Q: Who pays tax on the film itself?
A: On capital-improvement jobs, the installer pays tax on its own film purchase. On taxable existing-window jobs, the installer buys for resale but, as a contractor, pays at purchase and claims a refund/credit after installation.

Citations and references

• Tax Law section 1101(b)(9)(i) (definition of capital improvement)
• Tax Law section 1105(c)(5) (tax on servicing real property)
• Tax Law section 1101(b)(4)(i) (contractor's purchases are retail)
• Tax Law section 1119(c) (refund/credit for property installed)
• Tax Law section 1132(c) (capital improvement certificate relieves collection duty)
• 20 NYCRR section 527.7(b)(4) (end-result test for services to real property)
• 20 NYCRR section 541.5 (contractors)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2010.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a10_37s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(37)S
Sales Tax
August 10, 2010

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

PETITION NO. S100614A

On June 14, 2010, the Department of Taxation and Finance received a Petition for Advisory Opinion
from name and address redacted. Petitioner asks whether its installation of window film is subject to sales
tax.
We conclude that the installation of window film in connection with the original installation or
complete replacement of a window constitutes a capital improvement. Petitioner’s receipts for such an
installation would not be subject to sales tax. The application of window film to an existing window would
constitute the servicing of real property. Petitioner’s receipts for such an installation would be subject to
sales tax.
Facts
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is in the business of installing window film. The film has adhesive, which allows the film
to stick to glass. Installed film adds strength to the window and protects against breakage of the glass. The
installed window film can be removed only by scraping the film off, a process similar in result to the removal
of a motor vehicle registration sticker from a car windshield.
Analysis
Tax Law section 1101(b)(9)(i) defines the term “capital improvement” as:
An addition or alteration to real property which:
(A) Substantially adds to the value of the real property, or appreciably prolongs the useful
life of the real property; and
(B) Becomes part of the real property or is permanently affixed to the real property so that
removal would cause material damage to the property or article itself; and
(C) Is intended to become a permanent installation.
Sales tax regulation section 527.7(b)(4) provides:
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 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.

-2-

TSB-A-10(37)S
Sales Tax
August 10, 2010

The application of window film or coating in connection with the original installation or complete
replacement of a window is a capital improvement; the application of window film to an existing window is
a taxable service to real property under Tax Law section 1105(c)(5). Sales and Use Tax Classifications of
Capital Improvements and Repairs to Real Property, Publication 862 (4/01), at 25.
Because charges for the installation of a capital improvement are not subject to sales tax, Petitioner is
not required to collect sales tax from its customer on its charge for installing window film on new or
replacement windows, as long as Petitioner receives a capital improvement certificate from the customer, as
described in the next paragraph. However, it must pay sales or use tax on its purchase of the window film
that is installed as part of a capital improvement. Tax Law section 1101(b)(4)(i), 20 NYCRR 541.5(b)(1).
Petitioner will be required to collect sales tax on its charges for installing window film on an existing
window. While its purchase of window film that is applied to an existing window would qualify for the
resale exclusion, Petitioner must, as a contractor, pay sales and use tax at the time of its purchase of the film
and then apply for a refund or credit after the film is installed. Petitioner may only claim a refund or credit if
it has collected sales tax from its customer or the customer is an exempt organization described in section
1116(a) of the Tax Law and it gives Petitioner its properly completed exempt organization purchase
certificate. Tax Law, section 1119(c), 20 NYCRR 541.5(d)(3).
If Petitioner is performing capital improvement work, it must obtain a Certificate of Capital
Improvement (Form ST-124) from the customer within 90 days of the completion of the work and retain the
certificate as part of its records. 20 NYCRR 541.5(b)(4). Petitioner‘s timely receipt of a capital improvement
certificate in good faith releases it from the obligation to collect sales tax from its customer. Tax Law,
section 1132(c). If Petitioner does not receive a properly completed capital improvement certificate from the
customer, then it must collect tax on its charges to the customer.

DATED: August 10, 2010

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.