Ezel / Tax Rulings / NY
NY TSB-A-20(75)S Sales Tax 2020-12-01

Is fabricating and installing a permanent non-canvas awning a taxable installation or a non-taxable capital improvement?

Short answer: It's a capital improvement, so the installer shouldn't charge customers sales tax on the job. The business builds awnings from metal framework and PVC/vinyl material (no canvas), securely attached so that removal would damage the building, and intended to be permanent. Installing tangible personal property is normally a taxable service, but not when the result is a capital improvement — an addition that substantially adds value or prolongs the property's life, becomes permanently affixed so removal causes material damage, and is intended to be permanent (Tax Law § 1101(b)(9)). The Department has long treated installation or replacement of non-canvas awnings as a capital improvement. The installer should get Form ST-124 from the customer within 90 days; but it must pay sales tax on the materials it buys to do the job.
Currency note: this ruling is from 2020
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
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 business fabricates and installs awnings — new installations or full replacements — using metal framework covered with PVC/vinyl material (it does not use canvas). The awnings are securely attached so that removal would damage the building and are designed to be permanent. It asked whether its installations are capital improvements (and so not taxable to the customer).

The Office of Counsel said yes — capital improvement:

  • Installing tangible personal property is normally a taxable service (Tax Law § 1105(c)(3)) — except when the installed property becomes an addition or capital improvement to real property.
  • A capital improvement must meet all three tests (Tax Law § 1101(b)(9)): it (A) substantially adds value or appreciably prolongs the useful life of the real property; (B) becomes part of / is permanently affixed so that removal would cause material damage; and (C) is intended to be permanent.
  • The Department has long treated installation or replacement of non-canvas awnings as a capital improvement (Publication 862; TSB-A-92(11)S; TSB-A-98(76)S). So the installer doesn't charge customers tax if it receives a Form ST-124 (Certificate of Capital Improvement) in good faith within 90 days of the work.
  • But the installer must pay sales tax on the materials it buys and installs, at the time of purchase (Tax Law § 1101(b)(4)) — a contractor doing a capital improvement is the consumer of those materials.

What this means for you

Awning, canopy, and similar installers

Permanent, non-canvas awnings that are affixed so removal damages the building are capital improvements — don't charge the customer sales tax. Collect a Form ST-124 within 90 days to support it. Canvas awnings are treated differently (historically a repair/installation), so the material matters.

The contractor pays tax on materials — build it into your price

On a capital-improvement job you are the end user of the metal, fabric, and hardware: pay sales tax when you buy them. You don't pass through tax on the labor/job to the customer, so price the materials tax accordingly.

Customers buying awning installation

For a qualifying permanent awning, expect no sales tax on the installation — and expect to sign a capital-improvement certificate (ST-124).

Common questions

Q: Do I charge my customer sales tax on an awning installation?
A: No, for a permanent non-canvas awning that qualifies as a capital improvement — get a Form ST-124 within 90 days instead.

Q: Do I owe tax on the framework and fabric I buy?
A: Yes. As the contractor performing a capital improvement, you're the consumer of the materials and pay sales tax when you purchase them.

Q: Would a canvas awning be treated the same?
A: No — the opinion's capital-improvement treatment is specifically for awnings other than canvas.

Q: What are the three capital-improvement tests?
A: It must substantially add value or prolong useful life, be permanently affixed so removal causes material damage, and be intended to be permanent.

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 § 1105(c) (enumerated services subject to tax)
  • Tax Law § 1105(c)(3) (taxable installing of tangible personal property, except capital improvements)
  • Tax Law § 1101(b)(9)(i) (definition of capital improvement)
  • Tax Law § 1101(b)(4) (definition of retail sale; contractor pays tax on materials)
  • 20 NYCRR 541.2(g)(1); Publication 862; TSB-A-92(11)S; TSB-A-98(76)S; Form ST-124

Source

Original ruling text

TSB-A-20(75)S
Sales Tax
December 1, 2020

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ REDACTED ] (“Petitioner”). Petitioner’s business fabricates and installs awning structures, either as new installments or as a complete replacement of existing awnings. Petitioner asks whether these installations constitute a capital improvement and therefore are not taxable to the consumer. We conclude that the Petitioner’s installment of awning structures are capital improvements and tax should not be charged to consumers.

Facts

Petitioner fabricates and installs awnings on pre-existing structures. The awning consists of metal framework, which is attached to a building, that is then covered with awning material. Awning material is made from PVC with high tenacity yarn or vinyl coated polyester. The awning covers are flame resistant and water proof and are designed to withstand various weather conditions. Petitioner does not use canvas awning material. The awning structures are designed to become permanent features of the buildings to which they are attached. Awning structures are attached securely to the buildings in such a manner that removal would cause damage to the structure.

Analysis

Tax Law § 1105(c) imposes tax upon the receipts from every sale, except for resale, of certain enumerated services. Included in the services subject to sales tax is the service of installing tangible personal property, whether or not any tangible personal property is transferred in conjunction therewith, except if the installed property will constitute an addition or capital improvement to real property. Tax Law § 1105(c)(3). A capital improvement is defined as follows:

An addition or alteration to real property which:

(A) Substantially adds to the value of the real property, or appreciably prolongs the useful life 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.

Tax Law § 1101(b)(9)(i); see also 20 NYCRR 541.2(g)(1).

Installations will be capital improvements only if they meet all three criteria listed in Tax Law § 1101(b)(9). See TSB-A-06(9)S. The Department has previously determined that the installation or replacement of existing awnings (other than canvas) constitutes a capital improvement for purposes of Tax Law § 1101(b)(9). See Publication 862 (4/01), Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property; TSB-A-92(11)S; TSB-A-98(76)S. Petitioner will not be required to collect sales if it receives in good faith Form ST-124, Certificate of Capital Improvement, within 90 days after the installation is performed. However, Petitioner must pay sales tax on its purchase of the materials that are installed as part of the capital improvement at the time of purchase. See Tax Law § 1101(b)(4); TSB-A-15(32)S; TSB-A-12(6)S.

DATED: December 1, 2020

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.