NY TSB-A-24(47)S Sales Tax 2024-10-16

Can a manufacturer sell uninstalled building panels (materials) tax-free if the customer hands over a Form ST-124 Certificate of Capital Improvement?

Short answer: No. A sale of uninstalled panels is a taxable retail sale of tangible personal property under Tax Law § 1105(a), and a Form ST-124 (Certificate of Capital Improvement) cannot be used to buy building materials or other tangible personal property tax-free — the form's own instructions say so. The manufacturer must collect sales tax on the materials it sells to the customer.

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 manufacturer and building subcontractor makes, sells, and installs panels. One of its customers insisted that handing over a Form ST-124 (Certificate of Capital Improvement) relieved the customer of having to pay sales tax on the panels (materials) it bought from the manufacturer. The manufacturer asked whether it owes sales tax on those material sales. The Department concluded yes — the sale of uninstalled panels is taxable, and the customer cannot use Form ST-124 to buy the materials tax-free.

The rule is straightforward. New York taxes every retail sale of tangible personal property unless an exemption applies (Tax Law § 1105(a)), and a "retail sale" is a sale to a person for any purpose other than resale (§ 1101(b)(4)(i)(A)). Selling uninstalled panels is a sale of tangible personal property, so the manufacturer must collect tax on it.

A Certificate of Capital Improvement (ST-124) does not change that. ST-124 is the document a customer gives a contractor to certify that the contractor's installation work will result in a capital improvement, so the contractor doesn't charge sales tax on the labor/installation charge. It is not a purchase exemption for building materials. The form's own instructions say it plainly: "A contractor, subcontractor, property owner, or tenant, may not use this certificate to purchase building materials or other tangible personal property tax free." So when this manufacturer just sells the panels (without the capital-improvement installation as part of the same job), that's a taxable material sale, and ST-124 is the wrong document.

This is the flip side of the capital-improvement opinions like TSB-A-24(37)S and TSB-A-24(39)S: even when an installed system is a capital improvement (no tax on the labor), someone still pays tax on the materials. ST-124 governs the installation charge, not the purchase of the goods.

What this means for you

Manufacturers and suppliers selling building materials

If you sell materials (panels, fixtures, components) to a customer, that's a taxable retail sale — collect sales tax. Don't accept a Form ST-124 as authority to sell those materials tax-free; it isn't, and the form says so. The only certificate that lets a buyer purchase tangible personal property without tax is a resale certificate (Form ST-120) when the buyer is genuinely buying for resale — not ST-124.

Contractors and subcontractors

You are generally the end user of the materials you incorporate into a capital improvement, and you owe sales/use tax on those materials. ST-124 is what your customer gives you so that you don't charge the customer tax on a capital-improvement installation; it does not let you (or your customer) buy the underlying materials tax-free.

Customers / property owners

Giving your contractor a Form ST-124 means the contractor shouldn't bill you sales tax on a qualifying capital-improvement job (the labor). It does not let you buy materials tax-free, and it can't be used to pressure a supplier into not charging tax on a straight materials purchase.

Know which certificate does what

ST-124 (Certificate of Capital Improvement): customer → contractor, so no tax on a capital-improvement installation charge. Not a materials-purchase exemption.
ST-120 (Resale Certificate): buyer → seller, to buy tangible personal property for resale without tax.
Capital-improvement treatment never makes the materials tax-free; the contractor pays tax on them.

Accountants and tax professionals

This is a clean § 1105(a)/§ 1101(b)(4)(i)(A) application plus the express ST-124 instruction barring its use to buy materials tax-free. Use it to correct the common misconception that a capital-improvement certificate exempts material purchases.

Common questions

Q: Can a customer use Form ST-124 to buy building materials without sales tax?
A: No. ST-124 certifies that an installation is a capital improvement so the contractor doesn't tax the labor. Its instructions expressly bar using it to purchase building materials or other tangible personal property tax-free.

Q: So is selling uninstalled panels taxable?
A: Yes. It's a retail sale of tangible personal property under Tax Law § 1105(a); the manufacturer must collect sales tax.

Q: What certificate does let someone buy materials without tax?
A: A resale certificate (Form ST-120), and only when the buyer is purchasing for resale. ST-124 is not a purchase exemption.

Q: If the installed panels are a capital improvement, who pays tax on the materials?
A: The contractor — as the end user of the materials it incorporates. Capital-improvement treatment removes tax on the installation charge to the customer, not on the materials.

Q: Can I rely on this opinion?
A: No. An Advisory Opinion binds the Department only as to the petitioner and the facts presented. It illustrates the Department's reasoning but cannot be relied on by another taxpayer.

Citations and references

Statutes and regulations:
- Tax Law § 1105(a) (sales tax on every retail sale of tangible personal property)
- Tax Law § 1101(b)(4)(i)(A) (retail sale = sale other than for resale)

Forms and related opinions: Form ST-124 (Certificate of Capital Improvement) and its instructions (may not be used to buy building materials/TPP tax-free); Form ST-120 (Resale Certificate); compare TSB-A-24(37)S and TSB-A-24(39)S (capital-improvement installations — contractor still pays tax on materials).

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/24-47s.htm
Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-47s.pdf

Original ruling text

TSB-A-24(47)S
Sales Tax
October 16, 2024

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ REDACTED ] (“Petitioner”). Petitioner asks whether it can sell panels to a customer without collecting sales tax if the customer provides a New York State and Local Sales and Use Tax Certificate of Capital Improvement (ST-124).

We conclude that petitioner’s sales of uninstalled panels to customers are subject to sales and use tax and petitioner’s customer cannot use a Form ST-124 to avoid paying the tax on such sales.

Facts

Petitioner is a manufacturer and building subcontractor who manufactures, sells, and installs panels. One of petitioner’s customers insists that Form ST-124 relieves him of the duty to pay sales tax on his purchases of materials from petitioner. Petitioner asks whether sales tax is owed on its sales of materials to its customer.

Analysis

Tax Law § 1105(a) imposes a tax on every retail sale of tangible personal property unless otherwise excluded, excepted, or exempted. Tax Law § 1105(a). A “retail sale” is “[a] sale of tangible personal property to any person for any purpose, other than … for resale as such” (Tax Law § 1101[b][4][i] [A]).

Petitioner’s sales of materials to its customer are sales of tangible personal property subject to sales and use tax. Accordingly, petitioner is required to collect the taxes due on such sales. The instructions on the ST-124 form clearly states that “[a] contractor, subcontractor, property owner, or tenant, may not use this certificate to purchase building materials or other tangible personal property tax free.”

DATED: October 16, 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.