Is the service of installing and dismantling scaffolding, safety netting, hoisting equipment, and temporary pedestrian walkways subject to NY sales tax?

Plain-English summary

The petitioner installs and dismantles scaffolding, safety netting, hoisting equipment, and temporary pedestrian walkways at construction sites; about 90% of its jobs are capital-improvement projects. It planned to operate strictly as a subcontractor performing installation/dismantling, while an affiliate (common ownership) rents out the actual equipment under separate contracts. It asked whether its installation and dismantling charges are taxable.

The Office of Counsel concluded:

• Installation -- taxable, with a capital-improvement carve-out. Installing tangible personal property is taxable under 1105(c)(3) (and real-property work under 1105(c)(5)). But 541.8(a) excludes the installation of a temporary facility at a construction site that is a necessary prerequisite to a capital improvement. So the taxability turns on the nature of the underlying job: if it's a capital improvement, installing the temporary facility isn't taxed; if it's a repair, the installation is taxable.
• What counts as a temporary facility. Safety netting, temporary pedestrian walkways, and fixed scaffolding qualify as temporary facilities. Movable (wheeled) scaffolding, cranes, and similar hoisting equipment are construction equipment, not temporary facilities -- so installing them is taxable even on a capital-improvement job. (Only hoisting like elevators/conveyances found in permanent structures would qualify.)
• Dismantling -- not taxable. Dismantling is not one of the services taxed under 1105(c). So a dismantling charge isn't taxable if it is reasonable relative to the other charges, can be bought separately, and is separately stated (TSB-A-09(9)S).
• Materials are still taxable; entities are distinct. The exclusion covers only the installation labor. The affiliate's lease of the equipment is a taxable sale of tangible personal property. Because a customer can buy the petitioner's installation without leasing from the affiliate, and vice versa, the transactions are distinct for sales-tax purposes.
• Get the certificate. When installing a temporary facility that is a prerequisite to a capital improvement, the petitioner should obtain a copy of the contractor's Certificate of Capital Improvement (20 NYCRR 541.5(a)(4)).

What this means for you

Scaffolding, shoring, netting, and hoisting contractors

Whether your installation is taxable depends on two questions: is the item a temporary facility, and is the underlying job a capital improvement? Safety netting, temporary walkways, and fixed scaffolding can ride the capital-improvement exclusion; wheeled scaffolding, cranes, and hoists cannot -- their installation is taxable even on a capital-improvement project. Dismantling is never a taxable service when it's reasonably priced, separately available, and separately stated. And splitting the rental into an affiliate doesn't make the rental tax-free -- leasing the equipment stays taxable. Collect the contractor's Certificate of Capital Improvement to support any exclusion.

Common questions

Q: Is installing scaffolding taxable?
A: Fixed scaffolding installed as a temporary facility prerequisite to a capital improvement isn't taxed. Movable/wheeled scaffolding is construction equipment, so its installation is taxable even on a capital-improvement job.

Q: Are cranes and hoisting equipment covered by the temporary-facility exclusion?
A: No. Cranes and similar hoisting are construction equipment, so installing them is taxable even on a capital-improvement project.

Q: Do we charge tax to dismantle?
A: No -- dismantling isn't a taxable service, provided the charge is reasonable, separately available, and separately stated.

Q: Does running the equipment rental through an affiliate make it tax-free?
A: No. The affiliate's lease of the equipment is a taxable sale of tangible personal property; only the installation labor can qualify for the capital-improvement exclusion.

Citations and references

• Tax Law section 1105(c)(3) (installing/maintaining/servicing/repairing tangible personal property)
• Tax Law section 1105(c)(3)(iii) (capital improvement excluded from installation tax)
• Tax Law section 1105(c)(5) (maintaining/servicing/repairing real property)
• 20 NYCRR section 541.8(a) (temporary facilities at construction sites)
• 20 NYCRR section 541.5(a)(4) (Certificate of Capital Improvement)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a12_18s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-12(18)S
Sales Tax
August 3, 2012

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

PETITION NO. S110624A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
Name Redacted (Petitioner). Petitioner asks whether a firm that does not sell or rent out tangible
personal property must collect sales tax on the services of installing and dismantling scaffolding,
safety netting, hoisting equipment, and temporary pedestrian walkways.
We conclude that the service of installing scaffolding, safety netting, hoisting equipment,
and temporary pedestrian walkways is subject to sales tax under either Tax Law sections
1105(c)(3) or 1105(c)(5) when the installation is not a temporary facility at a construction site
that is a necessary prerequisite to the construction of a capital improvement to real property. If
installation is a temporary facility at a construction site that is a necessary prerequisite to the
construction of a capital improvement to real property, the installation service would not be
subject to sales tax. Safety netting and temporary pedestrian walkways qualify as temporary
facilities. However, mobile scaffolding, cranes and similar hoisting equipment do not qualify as
temporary facilities because they constitute construction equipment; therefore, the installation of
such equipment would be subject to sales tax even when the installation is done at a capital
improvement project. The service of dismantling scaffolding, safety netting, hoisting equipment,
and temporary pedestrian walkways is not subject to sales tax.
Facts
Petitioner is currently in the business of providing and installing construction equipment
including scaffolding, safety netting, hoisting equipment, and temporary pedestrian walkways for
general contractors and property owners at construction sites. Currently, Petitioner provides its
services under agreements that include a charge for rental of equipment and all labor to install
and dismantle the equipment. Petitioner estimates that 90 percent of the jobs at which it supplies
and installs equipment are projects for capital improvements to real property.
A separate company affiliated with the Petitioner (the businesses have common
ownership) currently operates a store-front rental business in the same facility in which
Petitioner now runs its equipment rental/installation business. The affiliate provides the same
equipment as Petitioner, but does not install or dismantle equipment.
Petitioner plans to change its contracting method so that it will operate strictly as a subcontractor performing installation and related services, i.e., it will no longer rent out any
equipment. Under this plan, the affiliate would rent equipment but not offer any services. If a

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Sales Tax
August 3, 2012

customer of the affiliate were to need installation and related services, it would have to contract
with a firm offering those services. The customer would be free to contract with any firm
offering those services. The customer of the affiliate would not be required to contract with
Petitioner.
A customer renting equipment from the affiliate would sign a contract with just the
affiliate and sign a contract with Petitioner only if Petitioner was hired to perform services.
The affiliate and Petitioner will issue separate invoices if a customer contracts with both
entities.
The affiliate and Petitioner will maintain separate books, file separate income tax returns
and have separate sales tax registrations.
Analysis
Installing tangible personal property is subject to sales tax under Tax Law section
1105(c)(3). However, the dismantling of tangible personal property is not one of the services
taxed under section 1105(c) of the Tax Law. Therefore, Petitioner's charge for dismantling
construction equipment such as scaffolding and netting will not be subject to sales tax if the
charge is reasonable in relation to the charges for other services provided, the dismantling
service may be purchased from Petitioner separately from the other services provided, and the
charge is shown separately on the invoice or receipt given to Petitioner's customer. See
TSB-A-09(9)S.
Tax Law section 1105(c)(3)(iii) excludes the installation of a capital improvement from
the sales tax imposed on the receipts for the installation or maintenance of tangible personal
property. Likewise, section 1105(c)(5) of the Tax Law also excludes the installation of a capital
improvement from the tax on the services of maintaining, servicing, repairing or altering real
property.
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 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 of the temporary facility is
not subject to tax; conversely, if the underlying construction project is a repair to real property,
then the charges for the installation of the temporary facility is taxable.
Installed safety netting and temporary pedestrian walkways constitute temporary
facilities. Scaffolding that is a fixed structure is a temporary facility. Cf Matter of L & L
Painting Co. Inc., Tax Appeals Tribunal, June 2, 2011. However, movable scaffolding (i.e.,
scaffolding that can be readily moved within a construction site such as scaffolding with wheels)

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August 3, 2012

constitute construction equipment and, thus, would not qualify as a temporary facility. The only
types of hoisting systems that would qualify as temporary facilities would be those similar to
elevators and other conveyances found in permanent structures. Cranes do not qualify as
temporary facilities under this test; they are construction equipment.
The exclusion from sales tax pertaining to temporary facilities only applies to the
installation services. The sale or lease of material that is used to construct a temporary facility is
subject to sales and use tax as the sale of tangible personal property at retail. See TSB-A-09(9)S.
Therefore, the leasing of tangible personal property by Petitioner’s affiliate would be subject to
sales tax. Because a customer may purchase Petitioner’s installation service without leasing
tangible personal property from the affiliate and a customer may lease tangible personal property
from the affiliate without purchasing Petitioner’s installation service, the transactions are distinct
for purposes of sales tax. Cf. Matter of C.I.D. Refuse Service, Inc., Tax Appeals Tribunal,
August 31, 1995.
If Petitioner is installing a temporary facility that is a necessary prerequisite to the
construction of a capital improvement to real property, it should obtain from the contractor a
copy of the Certificate of Capital Improvement that was issued by the contractor’s customer. See
20 NYCRR § 541.5(a)(4).

DATED: August 3, 2012

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy 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. The information provided in this document does
not cover every situation and is not intended to replace the law or change its meaning.