NY TSB-A-15(42)S Sales Tax 2015-11-12

Is removing and testing a piece of a building for asbestos, and reporting the results, taxable in New York?

Short answer: Yes, generally. Removing a piece of a building (brick or wall), sending it to a lab for asbestos analysis, and reporting the results is taxable as the maintenance, servicing, or repair of real property under Tax Law section 1105(c)(5). Inspection, testing, and monitoring of real property are diagnostic services that keep property in a condition of fitness, efficiency, readiness, or safety, so they are taxable. The report conveying the results is an integral component of that taxable service, so it is taxable regardless of whether the charge for it is separately stated -- and the delivery method (mail, email, or in person) makes no difference. There is one exception: if the inspection is part of a project to make a capital improvement to the real property, the service is not taxable, and the provider must timely obtain a properly completed Form ST-124 (Certificate of Capital Improvement).

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A company removes a piece of a building (a brick or part of a wall) at an architect's request, sends it to a lab to test for asbestos, and then sends the client a report of the results. It asked whether the service is taxable, and whether the delivery method of the report (mail, email, in person) matters.

The Office of Counsel concluded the service is generally taxable, and the delivery method is irrelevant:

Tax Law section 1105(c)(5) taxes services of maintaining, servicing, or repairing real property -- "all activities that relate to keeping real property in a condition of fitness, efficiency, readiness or safety" (20 NYCRR 527.7). Buildings are real property.
Taxability turns on the end result of the service. Inspection, testing, and monitoring of real property are diagnostic services that keep property fit and safe, so they're taxable (TSB-A-90(12)S; TSB-A-93(49)S; Exxon Mobil). Removing and testing a building sample for asbestos is inspecting/testing real property -> taxable.
The report conveying the results is an integral component of the taxable service, so it's taxable too -- even if separately stated, and regardless of how it's delivered (tangible or electronic).
Exception: if the inspection is part of a capital-improvement project on the real property, the service is not taxable -- the provider must timely obtain Form ST-124 (Certificate of Capital Improvement).

What this means for you

Environmental / inspection / testing firms

Inspecting, testing, or monitoring real property (asbestos, lead, mold, structural, environmental) is taxable as servicing real property. The report is part of that taxable service -- you can't make it nontaxable by itemizing it or emailing it.

Watch for the capital-improvement exception

If your testing is part of a capital-improvement project, it's not taxable -- but only if you obtain a properly completed Form ST-124 from the customer. Get the certificate at the time of the job.

Delivery format never matters

Mail, email, PDF, or hand delivery -- the form of the report doesn't change its taxability.

Common questions

Q: We just take a sample and email a lab report -- why is that taxable?
A: Inspecting and testing real property is a taxable service of servicing real property. The report is part of that service, and the delivery method doesn't matter.

Q: Can we leave the report off the tax if we bill it separately?
A: No. The report is an integral component of the taxable testing service, so it's taxable whether or not it's separately stated.

Q: When is the testing not taxable?
A: When it's part of a project to make a capital improvement to the property -- then obtain Form ST-124 from the customer.

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)(5) (services of maintaining, servicing, or repairing real property)
Tax Law section 1101(b)(9) (definition of capital improvement)
20 NYCRR 527.7 (maintaining/servicing/repairing real property; end-result test)
20 NYCRR 532.4 (Certificate of Capital Improvement, Form ST-124)

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_42s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(42)S
Sales Tax
November 12, 2015

Office of Counsel

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S150108A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTE
DREDACTED (hereinafter “Petitioner”). Petitioner asks whether the service it provides of removing a
sample of a building to be tested for asbestos and then preparing a report showing the results of the test
and sending it to the client is subject to tax. Petitioner also asks if the method by which the test results are
delivered to the client, e.g., regular mail, e-mail, or personal delivery, can affect the taxability.
We conclude that Petitioner’s service is subject to tax as the maintenance, servicing or repair of
real property. The delivery method is irrelevant.
Facts
An architect will contact Petitioner requesting an asbestos inspection so that he may obtain
permits. Petitioner will go to the real property, remove a piece of brick or a piece of a wall, and ship it to
a lab for analysis. The lab then emails Petitioner the results. Petitioner puts the results in a report and
sends it to the client.
Analysis
Tax Law § 1105(c) imposes tax upon the receipts from every sale, except for resale, of certain
enumerated services. Pursuant to Tax Law § 1105(c)(5), sales tax is imposed on services relating to
maintaining, servicing or repairing real property, property or land (collectively “real property”). Buildings
and other articles and structures are included in the definition of real property. See Real Property Tax Law
§ 102(12). “Maintaining, servicing and repairing are terms which are used to cover all activities that
relate to keeping real property in a condition of fitness, efficiency, readiness or safety or restoring it to
such condition.” 20 NYCRR § 527.7(1).
Whether a tax is imposed on services performed on real property depends on the end result of the
service. See 20 NYCRR § 527.7(4). A service is taxable where the result of the service is the repair or
maintenance of real property. See id. However, a service is not taxable where the result is a capital
improvement to the real property. See id.; Tax Law § 1105(c)(5). A capital improvement is, among other
things, an addition or alteration to real property that substantially adds value to the real property, or
appreciably prolongs the useful life of the real property and becomes part of the real property. See Tax
Law § 1101(9).

-2-

TSB-A-15(42)S
Sales Tax
November 12, 2015

Inspection services performed for the owner of real property constitute the maintenance, servicing
or repair of real property and are subject to sales tax under Tax Law § 1105(c)(5). See TSB-A-90(12)S;
TSB-A-93(49)S. Inspections are diagnostic services for the keeping of real property in a condition of
fitness, efficiency, readiness and safety. See TSB-A-93(49)S. Testing and monitoring of real property are
also included in maintaining, servicing and repairing real property pursuant to Tax Law § 1105(c)(5). See
In re Exxon Mobil Corp., Tax Appeals Tribunal, May 23, 2013, conf’d Exxon Mobil Corp. v. NY Tax
Appeals Tribunal, 126 AD3d 1059 (3d Dep’t 2015); TSB-A-96(90)S.
By removing a piece of a building to be tested for asbestos and sending it to a lab for analysis,
Petitioner is inspecting and testing real property. Therefore, Petitioner’s service constitutes the
maintenance, servicing or repair of real property, and generally is subject to tax pursuant to Tax Law §
1105(c)(5). See TSB-A-90(12)S; In re Exxon Mobil Corp., supra. However, if the architect client is
requesting an asbestos inspection because it is part of a project to create a capital improvement on the real
property, then the service performed by the Petitioner is not taxable. Petitioner must timely obtain a copy
of a properly completed Form ST-124, Certificate of Capital Improvement. See 20 NYCRR § 532.4;
TSB-A-90(16)S.
Because Petitioner’s testing service generally is taxable as the maintenance, servicing or repair of
real property, the report in which the test results are conveyed to the client is an integral component of the
taxable maintenance service. Accordingly, the report is taxable, regardless of whether the charge for it is
separately stated. Additionally, the delivery method (i.e., in tangible or electronic form) of the report is
irrelevant.

DATED: November 12, 2015

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.