Is installing, repairing, and inspecting fire alarm and suppression equipment subject to New York sales tax?

Plain-English summary

A company installs, inspects, maintains, and repairs fire alarm systems, kitchen/gas-station suppression systems, sprinklers, and portable extinguishers for commercial and residential customers. Some inspections are mandated by the NY Fire Code; others are done for an insurer or the customer. It asked which charges are taxable.

The Office of Counsel concluded:

• Installation -- taxable unless a capital improvement. Installing tangible personal property is taxable (Tax Law section 1105(c)(3)); if it isn't a capital improvement (section 1101(b)(9)), the installer collects tax on both equipment and installation (and may credit tax it paid on the equipment). If the install is a capital improvement, the installation charge is exempt -- get a properly completed Form ST-124 within 90 days -- but the installer pays tax on the materials it buys.
• Maintenance and repair -- always taxable. Keeping fire equipment in a condition of fitness, efficiency, readiness, or safety is taxable servicing (section 1105(c)(3)/(5)), even when required by the Fire Code.
• Inspections -- taxable, except government-mandated ones. A diagnostic inspection that tests equipment function is a taxable maintenance service even if no repair follows. But inspections that are government-mandated for code compliance are not taxable; inspections requested by a customer or insurer are taxable.
• "Required by law" doesn't equal exempt. The fact that the Fire Code requires the equipment or the work doesn't, by itself, exempt the charges.

What this means for you

Fire-protection / life-safety contractors

Bill it by type of work: installs ride on the capital-improvement question (get ST-124 or charge tax); repairs and maintenance are always taxable; inspections are taxable unless they're the code-mandated kind.

The code-mandated inspection carve-out is narrow

Only inspections the government mandates for code compliance are exempt. An insurance-driven or customer-requested inspection is taxable, even on the same equipment.

"The law requires it" is not an exemption

Mandatory equipment and mandatory service are still taxable (other than the specific mandated-inspection carve-out). Don't treat "the Fire Code made me" as tax-exempt.

Common questions

Q: We installed a sprinkler system -- do we charge tax?
A: Yes, unless it's a capital improvement. If it is, get Form ST-124 within 90 days for the installation charge, but pay tax on the materials you buy.

Q: The Fire Code requires this repair -- is it still taxable?
A: Yes. Repairs and maintenance that keep fire equipment ready and safe are taxable regardless of any legal mandate.

Q: Which inspections are tax-free?
A: Only inspections government-mandated for code compliance. Inspections for an insurer or at the customer's request are taxable.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(c)(3) (installing, maintaining, servicing, or repairing tangible personal property)
• Tax Law section 1105(c)(5) (maintaining, servicing, or repairing real property)
• Tax Law section 1101(b)(9) (definition of capital improvement)
• 20 NYCRR 527.5, 527.7 (installation/maintenance services; diagnostic inspections)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_32s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(32)S
Sales Tax
July 17, 2015

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

PETITION NO. S140512A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTED “Petitioner”. Petitioner asks
whether receipts from the sale of the services of installing, inspecting, maintaining or repairing
fire alarm systems, kitchen fire suppression systems, gas station fire suppression systems, fire
sprinklers and fire extinguishers are exempt from New York State and local sales and use tax.
We conclude that (a) receipts received from the installation of fire alarm or suppression
equipment are subject to sales tax, unless the installation qualifies as a capital improvement; (b)
maintenance or repair work carried out to keep equipment in a condition of fitness, efficiency,
readiness or safety or restoring it to such a condition is subject to sales tax; and (c) the
inspection of such equipment constitutes a repair or maintenance service that is subject to sales
tax, unless the inspection is government-mandated for code compliance.
Facts
Petitioner operates a business that provides installation, repair and maintenance of fire
alarms and fire suppression equipment to both commercial and residential customers. Petitioner
installs fire alarm systems, kitchen fire suppression systems, gas station fire suppression systems,
and fire sprinkler systems, and provides portable fire extinguishers (collectively, “fire
equipment”). Petitioner also inspects fire equipment. Some inspections are mandated by the
New York State Fire Code (“Fire Code”), while other inspections are conducted at the behest of
an insurance company or Petitioner’s customer. Additionally, Petitioner conducts maintenance or
repair work on fire equipment following an inspection or as a result of damage due to various
causes.
Analysis
Tax Law § 1105(c)(3) imposes sales tax on receipts from every sale of the installation of
tangible personal property, except for the installation of property that constitutes a capital
improvement to real property. See Tax Law § 1101(b)(9)(i). A capital improvement is defined as
an addition or alteration to real property that: (A) substantially adds to the value of the real
property, or appreciably prolongs the useful life of the real property; (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.
See 20 NYCRR § 527.7(a)(3).
If the installation of the fire equipment by Petitioner does not result in a capital
improvement, Petitioner must collect sales tax from the customer on the charges for both the
equipment and the installation. However, Petitioner may take a credit on its sales tax return for

-2-

TSB-A-15(32)S
Sales Tax
July 17, 2015

tax it paid on its purchase of the equipment.
If the installation qualifies as a capital
improvement, charges to the customer for installation of the equipment will not be subject to
sales tax. In those situations, Petitioner will not be required to collect sales tax if it receives a
properly completed Certificate of Capital Improvement (ST-124) within 90 days of the date the
installation is perfomed.
See TSB-A-03(23)S. However, Petitioner must pay tax on the
materials that are installed as part of the capital improvement at the time of purchase. See Tax
Law § 1101(b)(4). The fact that the installation of the equipment may be required by the Fire
Code or other law or regulation does not affect whether the charges for the equipment or its
installation are subject to sales tax.
Tax Law § 1105(c)(3) and (5) also impose sales tax on receipts from the services of
“maintaining, servicing or repairing” tangible personal property and real property, respectively.
See TSB-A-13(39)S. These services include all activities that relate to keeping property in a
condition of fitness, efficiency, readiness or safety, or restoring it to such condition. 20 NYCRR
§§ 527.5 (a)(3), 527.7(a)(1).
Petitioner states that it conducts maintenance and repair work on fire equipment
following an inspection, or when it is damaged by fire or some other cause. The services of
maintenance and repair of fire equipment are subject to tax because these services keep the
equipment in a condition of fitness, efficiency, readiness or safety. Consequently, Petitioner’s
receipts from repair and maintenance services are subject to sales tax, regardless of whether they
are required by the Fire Code or other law or regulation.
Petitioner also provides the service of inspecting fire equipment. A diagnostic service
that tests the function of a piece of equipment is generally considered a taxable maintenance
service, even if no repair is performed. 20 NYCRR § 527.5(a)(3), Example 6. However,
inspections that are government-mandated for code compliance are not subject to sales tax. See
TSB-A-05(11)S; TSB-A-96(67)S. Petitioner states that some of the inspections it performs on
the fire equipment are mandated by the Fire Code. Charges for these inspections would not be
subject to sales tax. However, inspections that are not government-mandated, but rather are
performed at the request of a customer or third party, are subject to tax under Tax Law § 1105(c).

DATED: July 17, 2015

NOTE:

/S/
DEBORAH 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.