NY TSB-A-24(16)S Sales Tax 2024-08-01

Are sales and installation of custom interior storm-window inserts a tax-exempt capital improvement, or taxable installation of tangible personal property?

Short answer: Taxable. The Department concluded that the petitioner's custom window inserts ('interior storm windows') are NOT a capital improvement, because they fail the second prong of the three-part test — they are held by compression tubing and a safety chain and can be easily removed without material damage to the inserts or the building. So the sale and installation are installation of tangible personal property, and the receipts are subject to State and local sales and use tax under Tax Law § 1105(a) and § 1105(c)(3). It didn't matter that the inserts add energy efficiency or are intended to be permanent.

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 that sells and installs custom window inserts — interior "storm windows" that improve energy efficiency and noise control — asked whether its sales-and-installation receipts are a tax-exempt capital improvement. The Department said no: they're taxable.

New York taxes retail sales of tangible personal property and the service of installing it, except when the installed item becomes a capital improvement to real property (Tax Law § 1105(a) and § 1105(c)(3)). A capital improvement must meet a three-part test: (A) it substantially adds value or prolongs the property's useful life, (B) it becomes part of or is permanently affixed to the real property so that removal would cause material damage to the property or the item itself, and (C) it's intended to be permanent (Tax Law § 1101(b)(9); Publication 862).

The inserts failed the second prong. They're held in place by patented compression tubing plus brackets and a safety chain, with no nails, adhesives, or framing changes — and the company itself said they can be easily removed. Because removal causes no material damage, they aren't "permanently affixed" in the required sense. The Department didn't even need to reach prongs A and C: failing the affixation test is enough. So the inserts are installed tangible personal property, and the full charge is taxable.

What this means for you

Window, storm-window, and home-improvement installers

Adding energy efficiency or value, and even intending a fixture to be permanent, is not enough to make an installation a capital improvement. The hinge is physical permanence: would removing it cause material damage to the item or the building? If it pops out with no damage (compression-fit, bracket-held, easily removable), expect the whole sale-and-install charge to be taxable.

Compare with permanently affixed installs

This is the flip side of installs that do qualify — e.g., hard-wired or structurally integrated items whose removal damages the property. The same three-part test governs both; only the affixation facts differ.

Accountants and tax professionals

The analysis collapses to prong (B) of the § 1101(b)(9) test. When a client claims capital-improvement treatment, pressure-test removability first; Publication 862 is the Department's go-to classification guide. Failing prong (B) makes the entire charge (materials plus labor) taxable under § 1105(c)(3).

Common questions

Q: Are custom window inserts taxable in New York?
A: In this opinion, yes. Because they are easily removable without material damage, they aren't a capital improvement, so the sale and installation are taxable as installed tangible personal property.

Q: They improve energy efficiency and are meant to be permanent — doesn't that make them a capital improvement?
A: No. Adding value and intending permanence address the first and third prongs, but the inserts failed the second prong (permanent affixation / damage on removal), which by itself defeats capital-improvement treatment.

Q: What's the deciding factor?
A: Whether removal would cause material damage to the item or the property. Compression-fit, bracket-held inserts that pop out without damage are not "permanently affixed."

Q: Can my business rely on this opinion?
A: Not as binding. A TSB-A advisory opinion binds the Department only as to the petitioner and the exact facts described. Use it to understand the reasoning, then check your own facts.

Citations and references

New York Tax Law and guidance:
- Tax Law § 1105(a) — sales tax on retail sales of tangible personal property
- Tax Law § 1105(c)(3) — tax on installing TPP, with an exclusion for capital improvements
- Tax Law § 1101(b)(9) — three-part definition of a capital improvement
- Publication 862 — Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao.htm
Opinion: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales/24-16s.htm
Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-16s.pdf

Original ruling text

Sales Tax
August 1, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ redacted ] (Petitioner). Petitioner asks whether receipts from the sales and installation of its custom window inserts constitute a capital improvement for sales tax purposes.

We conclude that the installation of Petitioner’s window inserts do not qualify as a capital improvement, but rather constitute installation of tangible personal property. Therefore, Petitioner’s receipts from the sale and installation of the custom window inserts are subject to State and local sales and use tax.

Facts

Petitioner sells and installs custom window inserts it describes as “interior storm windows.” Petitioner’s window inserts are designed primarily to improve energy efficiency and noise control. The inserts are measured specifically for a particular window and are not useful for other window openings. Screws are used to attach brackets on each side of an existing window frame which, once installed, are used to hold a safety chain that prevents accidental removal of the insert. Otherwise, there are no additional nails, adhesives, or screws involved in the installation and no construction is required to the window frame itself. Petitioner’s window inserts are easily installed on the interior portion of an existing or original window and are held in place by a patented compression tubing that expands into the space between the custom cut acrylic panel and the existing window frame. According to Petitioner, its window inserts can be easily removed. Petitioner also states that the window inserts are intended to be permanent and are covered by a lifetime warranty.

Analysis

Sales tax is imposed on “[t]he receipts from every retail sale of tangible personal property," and on the service of "[i]nstalling tangible personal property ... except for installing property which, when installed, will constitute (a) ... capital improvement to real property .... " See Tax Law §§ 1105(a) and (c)(3). Capital improvement is defined as "(i) 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."

Petitioner’s installation of window inserts is not a capital improvement. Although Petitioner asserts that its custom window inserts substantially add to the value of real property by increasing the property’s energy efficiency and noise control, and are intended to be permanent due to the custom nature of the inserts, we need not opine about whether the inserts satisfy the first and third prongs of the capital improvement test. Petitioner’s window inserts do not satisfy the second prong of that test because they are not permanently affixed in such a way that removal would cause material damage to the inserts themselves or to the real property. See Publication 862-- Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property Accordingly, Petitioner’s receipts from the sale and installation of its custom window inserts are subject to State and local sales and use taxes.

DATED: August 1, 2024

Mary Ellen Ladouceur
Principal Attorney

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.