Is installing raised access flooring a nontaxable capital improvement or 'floor covering,' or a taxable sale and installation of tangible personal property?

Plain-English summary

Raised Computer Floors, Inc. furnishes the materials and labor to build access (raised) floors in business buildings. The flooring sits on pedestals bolted or epoxied to the base slab, with panels laid on struts several inches above the slab so that electrical, plumbing, telephone, security, and HVAC systems run in the cavity underneath. The installed surface becomes the building's working "floor," level with doors, corridors, and elevators. The company asked whether installing access flooring is the installation of "floor covering" under § 1101(b)(9)(iii) (which would make it a capital improvement).

The Department held the installation is taxable.

• Raised flooring is tangible personal property, not a capital improvement. Following its own decision in Matter of Raised Computer Floors, Inc. (affirmed as Raised Computer Floors, Inc. v. Chu, 116 AD2d 958), the Department explained that raised flooring is tangible personal property — even though annexed to the building, it does not become part of, or permanently affix to, the real property (§ 526.8(d)). So the capital-improvement exemption in § 1105(c)(3) does not apply.
• It is not "floor covering" either. The floor-covering clause added to § 1101(b)(9)(iii) effective June 1, 1989 (Ch. 61, L. 1989) is specifically limited to carpet, carpet padding, linoleum, and vinyl roll flooring and tiles — and does not include access flooring.
• Result. The sale and installation of access flooring is a taxable sale and installation of tangible personal property under §§ 1105(a) and 1105(c)(3).

What this means for you

Not everything attached to a building is a capital improvement

The capital-improvement exemption applies only when the installed item becomes part of or permanently affixes to the real property so that removal would cause material damage. Raised flooring bolts down but stays removable tangible personal property — so its sale and installation are fully taxable, unlike a permanent structural addition.

The "floor covering" category is narrow and specific

The 1989 amendment that treats certain initial floor coverings in new construction as capital improvements lists exactly what it covers — carpet, padding, linoleum, and vinyl roll and tile. Access flooring, engineered raised floors, and other systems outside that list don't qualify, no matter how integral they are to the building's design.

Charge tax on both the material and the installation

Because this is a sale and installation of tangible personal property, you collect New York State and local sales tax on the full charge — the flooring and the installation labor. There's no capital-improvement certificate to take here; the customer owes tax on the job.

Common questions

Q: Is installing raised computer-room flooring a capital improvement?
A: No. Raised access flooring is tangible personal property that doesn't permanently affix to the real property, so it isn't a capital improvement — the sale and installation are taxable.

Q: Does it count as "floor covering" under the 1989 amendment?
A: No. That clause is limited to carpet, carpet padding, linoleum, and vinyl roll flooring and tiles. Access flooring isn't included.

Q: Do I charge tax on the installation labor too?
A: Yes. It's a taxable installation of tangible personal property under §§ 1105(a) and 1105(c)(3), so tax applies to the whole charge, materials and labor.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(9)(iii) — floor covering treated as a capital improvement (carpet, padding, linoleum, vinyl roll/tile), added by Ch. 61, L. 1989, eff. June 1, 1989
• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1105(c)(3) — tax on installing tangible personal property
• 20 NYCRR § 526.8(d) — property that remains tangible personal property even after annexation to real property

Cited authority:

• Matter of Raised Computer Floors, Inc., Dec. St. Tax Comm., January 6, 1984, TSB-H-84(12)S; aff'd Raised Computer Floors, Inc. v. Chu, 116 AD2d 958, TSB-H-84(12.1)S
• Technical Services Bureau Memorandum, Taxable Status of Raised Flooring, December 10, 1982, TSB-M-82(30)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a90_22s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-90 (22)S
Sales Tax
April 16, 1990

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S891106B

On November 6, 1989, a Petition for Advisory Opinion was received from Raised Computer
Floors, Inc., 1 Charles Street, Westwood, New Jersey 07675.
The issued raised by Petitioner, Raised Computer Floors, Inc., is whether the installation of
access flooring constitutes the installation of floor covering as defined in Section 1101(b)(9)(iii) of
the Tax Law.
Petitioner is engaged in the business of furnishing the materials and labor for the construction
of access floors in business buildings.
Access flooring is constructed above the building base floor (slab) in such a way that
electrical lines, plumbing, telephone systems and air-conditioning systems are installed in the cavity
between the slab and the floor.
The flooring is installed on pedestals which are bolted or epoxied to the base floor or slab
of the structure. After the plumbing, electrical, telephone, security and heating, ventilation and air
conditioning systems are in place on the slab, the connecting struts are affixed to the pedestals and
the flooring panels are placed on the struts. This installed surface is actually the "floor" of the
building, several inches above the slab.
The entire design of the space is keyed to the floor level so that doors, corridors, elevators,
etc. are the same level as the flooring. If the flooring was not installed, occupants would walk off the
elevator area into a cavity in the structure.
The State Tax Commission held in Matter of Raised Computer Floors, Inc., Dec St Tax
Comm, January 6, 1984, TSB-H-84(12)S that raised flooring is not a capital improvement. This
decision was affirmed by the Appellate Division, Third Department, in Raised Computer Floors, Inc.
v Chu, 116 AD2d 958, TSB-H-84(12.1)S. Raised flooring constitutes a type of tangible personal
property and is not considered to be real property. Further, even though it may be annexed to real
property, it is nevertheless considered tangible personal property at the time of sale in accordance
with Section 526.8(d) of the Sales and Use Tax Regulations. Because raised flooring neither
becomes a part of, nor is permanently affixed to real property, the exemption from sales tax which
applies to items constituting capital improvements to real property is not available with respect to
raised flooring in accordance with Sections 1105(c)(3) and (c)(3)(iii) of the Tax Law. The sale and
installation of raised flooring constitutes a sale and installation of tangible personal property in
accordance with Sections 1105(a) and (c) of the Tax Law and is therefore subject to the New York
State and local sales and use tax. (Technical Services Bureau Memorandum, Taxable Status of
Raised Flooring, December 10, 1982, TSB-M-82(30)S).
TP-9 (9/88)

-2­
TSB-A-90 (22)S
Sales Tax
April 16, 1990

Furthermore, the installation of the raised flooring does not fall within the definition of floor
covering as defined in Section 1101(b)(9)(iii) of the Tax Law.
Effective June 1, 1989 Section 1101(b)(9) of the Tax Law was amended by adding the
following clause:
(iii) Notwithstanding the provisions of subparagraph (i) of this
paragraph: (A) Floor covering, such as carpet, carpet padding,
linoleum and vinyl roll flooring, carpet tile, linoleum tile and vinyl
tile, installed as the initial finished floor covering in new construction
or a new addition to or total reconstruction of existing construction
shall constitute an addition or capital improvement to real property,
property or land; and
(B) Floor covering, such as carpet, carpet padding, linoleum and
vinyl roll flooring, carpet tile, linoleum tile and vinyl tile, installed
other than as described in clause (A) of this subparagraph shall not
constitute an addition or capital improvement to real property,
property or land. (Ch 61 L. 1989)
The language contained in the amendment describing the types of materials that constitute
capital improvements in new construction or additions or total reconstruction of existing construction
is very specific and does not include in the definition the type of access flooring that is being
installed by the Petitioner.
Accordingly, Petitioner's sales and installation of raised flooring does not come within the
meaning of "floor covering" as defined in Section 1101 (b)(9)(iii). Petitioner's sale of access flooring
is the sale and installation of tangible personal property. Therefore, petitioner's sales and installation
of access flooring are subject to the tax imposed under Sections 1105(a) and 1105(c)(3) of the Tax
Law.

DATED: April 16, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.