Is installing a canvas awning a nontaxable capital improvement, or a taxable installation service?

Plain-English summary

Capital Awning Co., Inc. sells and installs canvas awnings. It asked whether installing a canvas awning is a capital improvement to real property — which would make the installation service nontaxable — under Article 28 of the Tax Law.

The Department held that canvas-awning installation is not a capital improvement, so the whole job is taxable.

• Installation is taxable unless it's a capital improvement. Section § 1105(c)(3) taxes the service of installing tangible personal property, but excepts installations that constitute a capital improvement to real property.
• Capital improvement has a strict three-part test. Under § 1101(b)(9), an addition or alteration to real property is a capital improvement only if it (i) substantially adds to the property's value or appreciably prolongs its useful life, (ii) becomes part of or is permanently affixed to the real property so that removal would cause material damage, and (iii) is intended to be a permanent installation.
• Canvas awnings don't qualify. The Department determined a canvas-awning installation is not a capital improvement, consistent with its Publication 862 (2/81) ("Classifications of Improvements and Repairs to Real Property for Sales Tax Purposes," at p. 7).
• Result: tax the total charge. The seller must collect State and local sales tax on the total charge for the sale and installation.

What this means for you

Not every attached fixture is a capital improvement. The three-part test is demanding — it requires real permanence and that removal would cause material damage. A canvas awning, which is removable and comparatively temporary, doesn't meet it, so its installation is a taxable service.

When installation is taxable, bill tax on the whole job. For a non-capital-improvement installation, the taxable amount is the total charge — the awning plus the labor to put it up — not just the goods.

Check the Department's classification publication. New York's Publication 862 classifies many common jobs as either capital improvements or taxable repairs/installations. If your work is on that list, the Department will apply the published classification.

Common questions

Q: We install canvas awnings. Do we charge sales tax on the installation?
A: Yes. The Department held canvas-awning installation is not a capital improvement, so State and local sales tax applies to the total charge for the awning and its installation.

Q: What makes an installation a nontaxable capital improvement?
A: It must meet all three parts of § 1101(b)(9): substantially add value or prolong the property's life; become part of or be permanently affixed so removal would cause material damage; and be intended as permanent.

Q: Where did the Department get this classification?
A: From its Publication 862 (2/81), which classifies improvements and repairs to real property for sales-tax purposes and lists canvas-awning installation as not a capital improvement.

Citations and references

Statutes:

• Tax Law § 1105(c)(3) — tax on installing tangible personal property, except capital improvements
• Tax Law § 1101(b)(9) — three-part definition of "capital improvement"

Department guidance cited:

• Publication 862 (2/81) — Classifications of Improvements and Repairs to Real Property for Sales Tax Purposes (p. 7)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_26s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-83(26)S
Sales Tax
June 17, 1983

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S821008B

On October 8, 1982 a Petition for Advisory Opinion was received from Capital Awning Co.,
Inc., 140-03 180th Street, Jamaica, New York 11433.
The issue raised is whether the installation of a canvas awning constitutes a capital
improvement for purposes of the sales tax imposed under Article 28 of the Tax Law.
Section 1105(c)(3) of the Tax Law imposes a tax on the service of installing tangible
property, but excepts such service where the installation constitutes a capital improvement to real
property.
Section 1101(b)(9) of the Tax Law defines the term "capital improvement" as:
An addition or alteration to real property which: (i) Substantially adds
to the value of the real property, or appreciably prolongs the useful life of the
real property; and (ii) 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 (iii) Is intended to become a permanent
installation.
It has been determined that the installation of canvas awnings does not constitute a capital
improvement within the meaning of section 1105(c)(3) of the Tax Law. See New York State
Department of Taxation and Finance, Publication 862(2/81), Classifications of Improvements and
Repairs to Real Property for Sales Tax Purposes, at p. 7.
Accordingly, Petitioner must collect state and local sales taxes on the total charge for the sale
and installation of a canvas awning.

DATED: May 26, 1983

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

s/FRANK J. PUCCIA
Director
Technical Services Bureau

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR