Do large operable wall partitions installed in hotels and convention centers qualify as a capital improvement, so the installation is exempt from sales tax?

Plain-English summary

A company installs large operable wall partitions — the kind used to divide hotel ballrooms, convention centers, and big commercial spaces — and asked whether installing them is a capital improvement (which would make the installation exempt from sales tax). The partitions it described are serious building elements: steel-framed, track-mounted above finished ceilings, up to forty feet tall, engineered to withstand 250 pounds of force, some fire-rated, some electrically retracting into the ceiling. Installing them requires a structural plan, and removing them would require an engineer or architect and would leave the partitions inoperable, fit only for disposal as demolition debris.

The Office of Counsel concluded the partitions are capital improvements, so their installation is exempt from sales tax. New York's three-part test (Tax Law § 1101(b)(9)) asks whether the addition (A) substantially adds to the value of the real property, (B) becomes part of, or is permanently affixed to, the real property so that removal would cause material damage, and (C) is intended to be permanent. These partitions effectively replace traditional walls, can't be removed without material damage, and are built to stay — so they qualify. The installer should still obtain a Certificate of Capital Improvement (Form ST-124) for each job (Tax Law § 1132(c); 20 NYCRR 532.4).

What this means for you

Partition, glass-wall, and specialty-installation contractors

Heavy, permanently affixed, wall-replacing systems whose removal causes material damage generally qualify as capital improvements — installation labor is then exempt. The decisive facts are permanence and material damage on removal, not whether the product is "operable" or movable in normal use. Collect a Form ST-124 from the customer to document the exemption.

Don't confuse "operable" with "temporary/removable"

These partitions move in daily use (they open and fold), but that didn't disqualify them — what mattered is that uninstalling them causes material damage and renders them debris. Contrast lightweight, snap-out items (e.g., removable storm-window inserts in TSB-A-24(16)S) that fail the permanence prong and stay taxable.

Materials are still taxable to the contractor

Even on an exempt capital-improvement installation, the contractor owes sales tax on the partitions and materials it buys (it's the consumer of those materials). The exemption is on the installation charge to the customer, documented by ST-124.

Common questions

Q: Is installing operable wall partitions taxable in New York?
A: Not when they qualify as a capital improvement. Large, permanently affixed partitions whose removal causes material damage are capital improvements, so the installation is exempt; get a Form ST-124.

Q: They move and fold — doesn't that make them temporary?
A: No. Moving in normal use isn't the test. Because removing/uninstalling them causes material damage and renders them inoperable debris, they meet the permanence requirement.

Q: What paperwork do I need?
A: A Certificate of Capital Improvement (Form ST-124) from the customer for each qualifying installation (Tax Law § 1132(c); 20 NYCRR 532.4).

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner, and the result is fact-specific to the partitions described. Confirm your own product's specifications.

Citations and references

Statutes and regulations:
- Tax Law § 1105(c)(3) (installing TPP; capital-improvement exception)
- Tax Law § 1101(b)(9) (three-part capital-improvement test)
- Tax Law § 1132(c) (Certificate of Capital Improvement); 20 NYCRR 532.4 (certificate procedures)

Guidance cited:
- TSB-A-11(24)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-6s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(6)S
Sales Tax
May 26, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

The Department of Taxation and Finance received a Petition for Advisory Opinion from
[ REDACTED ] (Petitioner) seeking guidance on whether its installation of certain partitions
qualifies as a capital improvement under Tax Law § 1101(b)(9). We conclude that the
installations described by Petitioner are capital improvements and are exempt from sales tax
pursuant to Tax Law § 1105(c)(3).
Facts
Petitioner installs different types of wall partitions. The partitions offer flexibility in room
definition and are popular choices for hotel meeting rooms, convention centers, and commercial
facilities. Petitioner questions whether some of its partitions and their enclosures could meet the
criteria of capital improvements as set forth in Tax Law § 1101(b)(9). In particular, Petitioner
submitted shop drawings and manufacturer specifications for: (1) individual, omni-directional
panel partitions; (2) paired panel partitions; (3) firewall strength, paired panel partitions; (4)
electrically operated, lift panel partitions; (5) vertical folding door partitions; and (6) pocket door
enclosures to hide unused partitions in a room.
The specifications describe the individual, omni-directional panel partitions as mounted
on tracks above finished ceilings. The partitions have sixteen-gauge steel frames, which are
nominally four inches thick and can reach a height of forty feet. The partitions are structurally
made to withstand two hundred fifty pounds of force against fixed walls to prevent sound leaks.
The paired panel partitions are almost identical, as the only difference is hinging of the partition
sections. Additionally, the described firewall strength partitions are constructed to achieve a
specific rating of fire resistance.
For the electrically-operated lift panel partitions and the vertical folding door partitions,
the specifications describe structures like the above partitions, but with different mechanisms of
retraction. The electrically-operated lift panel partitions open automatically, and retract into the
ceiling to save floor space. The vertical folding door partitions do not retract into the ceiling, but
rather fold overhead to form an awning. These partitions can close securely and serve as exterior
doors.
A structural plan to account for the partitions’ size and weight is required as part of any
installation. Additionally, removal of the described partitions would require similar professional
guidance of a building engineer or an architect. Any of these partitions, once removed, would be
inoperable and disposed of as demolition debris.

-2-

TSB-A20(6)S
Sales Tax
May 26, 2020

Analysis
Tax Law § 1105(c)(3) imposes sales tax on the receipts from every installation of
tangible personal property, but exempts from tax the installation of property that will constitute a
capital improvement to real property. Tax Law § 1101(b)(9) defines a capital improvement as an
addition to real property that (A) substantially adds to the value 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. See also generally TSB-A-11(24)S.
The partitions described herein by Petitioner are capital improvements. The described
partitions are large, heavy devices designed to offer greater flexibility than more traditional
walls. The partitions, in effect, replace more traditional walls and offer equal sturdiness of
construction. Moreover, the pocket door enclosures are comparable to more traditional closets
for the partitions. Neither can be removed without material damage to either the partitions or the
surrounding structure, which evidences an intention of permanency. Accordingly, the described
partitions and pocket door enclosures satisfy the criteria of a capital improvement. The required
Certificate of Capital Improvement for any installation should be obtained in accordance with
Tax Law § 1132(c) and 20 NYCRR 532.4.

DATED: May 26, 2020

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE: 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.