Does a scaffolding company charge sales tax on a lump-sum to install, rent, and dismantle temporary pedestrian walkways used with a capital improvement?

Plain-English summary

The petitioner is a scaffolding company that installs, rents, and dismantles temporary pedestrian walkways (with scaffolding, safety netting, hoisting equipment). It usually charges a lump sum covering the rental plus all install/dismantle labor (and permits). It asked whether the lump sum is taxable, and whether separately stating the install/dismantle labor would make that part exempt. The analysis assumes the walkways are used only with a capital improvement.

The Office of Counsel's answer turns on the "temporary facility" rule. The petitioner's lump sum is primarily for the service of installing and dismantling the walkways. Under 20 NYCRR 541.8(a), installing materials and labor to provide temporary facilities at a construction site -- including temporary pedestrian walkways -- where the temporary facility is a necessary prerequisite to constructing a capital improvement to real property is not taxable. So:

• Walkway IS a temporary facility / prerequisite to a capital improvement: the entire lump sum is not taxable. But the petitioner must pay sales/use tax on the equipment and walkway components it buys to provide the service -- those are not purchased for resale.
• Walkway is NOT a prerequisite to a capital improvement: the entire lump sum is taxable (Tax Law 1105(c)(3) and (5)).
• Separately stated: if the petitioner separately states the install/dismantle service for a prerequisite-to-capital-improvement walkway (and the charge is reasonable relative to the total), that service is not taxable -- but the separately stated rental of the walkway is taxable as a rental of tangible personal property. In that case the petitioner is buying the components for resale and may give its supplier a resale certificate (20 NYCRR 541.9(b)(1)(ii)).

Refunds: the petitioner may have collected tax when not due. It can claim a refund or credit only after it has actually refunded the tax to the customer (20 NYCRR 534.6(a)(2)), with documentation, and must file within three years of when the tax was payable.

What this means for you

Scaffolding, shoring, and temporary-facility contractors

Whether your charge is taxable hinges on the temporary-facility/capital-improvement test. If the temporary structure is a necessary prerequisite to a capital improvement, a lump-sum install/rent/dismantle charge is not taxable -- but you then pay tax on your own equipment and components. If you separately state the work, the labor can be exempt while the rental becomes taxable, which flips your components to a purchase for resale (use a resale certificate). Decide your billing structure deliberately; it changes who pays tax on the materials.

If the job is not tied to a capital improvement

The whole lump sum is taxable as a service to real or tangible property.

Common questions

Q: We bill one lump sum for a walkway used on a capital-improvement job -- is it taxable?
A: Not if the walkway is a temporary facility that is a necessary prerequisite to the capital improvement. But you must then pay tax on your own equipment and components.

Q: What if we separately state the install/dismantle labor?
A: The labor can be exempt (if reasonable), but the separately stated walkway rental becomes taxable -- and you may then buy the components for resale with a resale certificate.

Q: The walkway isn't tied to a capital improvement -- now what?
A: The entire lump sum is taxable under Tax Law 1105(c)(3) and (5).

Q: We over-collected tax -- can we get it back?
A: Only after you actually refund it to your customer; then claim a refund/credit within three years, with supporting records.

Citations and references

• Tax Law section 1105(c)(3) (installing/maintaining/repairing tangible personal property)
• 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 541.9(b)(1)(ii) (purchase for resale by a contractor)
• 20 NYCRR section 534.6(a)(2) (refund only when tax actually refunded to customer)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a13_11s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-13(11)S
Sales Tax
April 11, 2013

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

PETITION NO. S120730A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name redacted (Petitioner). Petitioner asks whether it must collect sales and use tax on the
installation, rental, and dismantling of temporary pedestrian walkways for use with capital
improvements when the price charged is a lump sum for all services and the rental.
We conclude that the lump sum of the rental and the service of installing scaffolding, safety
netting, hoisting equipment, and temporary pedestrian walkways is subject to sales tax 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 the temporary pedestrian walkway is a
“temporary facility” at a construction site that is a necessary prerequisite to the construction of a
capital improvement to real property, the lump sum of the rental and services would not be taxable.
If the rental of the temporary pedestrian walkway is separately charged, that charge would be
subject to sales tax as a rental of tangible personal property.
Facts
Petitioner is a scaffolding company that installs, rents, and then dismantles temporary
pedestrian walkways for its customers. Petitioner typically enters into a contract that includes a
charge for rental of the temporary pedestrian walkway and all labor to install and disassemble the
walkway. Petitioner’s contracts provide for a lump sum amount due, and the invoices state that the
amounts due are for installation and dismantling and the rental and permits. Petitioner collects sales
tax on the lump sum for the services, rental and permits.
The Petitioner asks two questions. First, it asks whether it must collect sales tax on the
charges for permits, and the installation, rental, and dismantling of temporary pedestrian walkways
for use with capital improvements when the price charged is a lump sum. Second, it asks whether
the services of installation and dismantling of the temporary pedestrian walkways would be exempt
from sales tax if they were separately stated on the invoice.
Analysis
This analysis relies on the Petitioner’s representation that the underlying work for which the
temporary pedestrian walkways are rented, installed, and dismantled are only for use with a capital
improvement.
Petitioner’s lump sum charge is primarily for the provision of the service of installing and
dismantling temporary pedestrian walkways for its customers. The installation of materials and

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TSB-A-13(11)S
Sales Tax
April 11, 2013

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 is not subject to sales tax. See 20 NYCRR § 541.8(a). In such case, the total lump
sum would not be subject to sales tax. Under this scenario, the Petitioner would have to pay sales or
use tax on the equipment it obtained to provide the service or rental to its customers (including the
components of the temporary pedestrian walkway) because the purchase of the equipment would
not qualify as a purchase for resale.
If the temporary facility is not a prerequisite to the construction of a capital improvement to
real property, then the complete lump sum is subject to sales and use tax. See Tax Law § 1105(c)(3)
and (5).
If Petitioner decides to separately state the charge for the service of installation and
dismantling of the temporary pedestrian walkway that is a necessary prerequisite to a capital
improvement, that charge will not be subject to sales tax if the separately stated charges are
reasonable in relation to the total price. However, the separate charge for the rental of the
temporary pedestrian walkway would be subject to sales tax. In this case, when Petitioner
purchases the components of the temporary pedestrian walkway, it would be purchasing them for
resale and it would be eligible to provide its supplier with a resale certificate in order to purchase
the components without payment of sales tax. See 20 NYCRR § 541.9(b)(1)(ii).
Based upon the representations made by Petitioner, it may have collected sales or use tax in
certain cases when not due as stated above. Petitioner can claim a refund or credit for any sales tax
it has refunded to its customers. It should be noted that Petitioner may file the claim for refund or
credit in a case only when the tax has actually been refunded to the customer. See 20 NYCRR
§534.6(a)(2). Petitioner should maintain adequate documentation to support its refund claim(s).
Those refund claims must be filed within three years after the date when the tax was payable by the
Petitioner to the Department.

DATED: April 11, 2013

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.