Which of a property manager's charges — management fees versus cleaning, repair, and maintenance — are subject to New York sales tax?

Plain-English summary

Certified Properties, Inc. manages apartments and houses for clients. It asked whether the management fees it charges are subject to sales and use tax. Its work includes renting units and signing leases, collecting and depositing rents, writing checks to pay clients' bills, answering phones, and bookkeeping — for a set fee. It also purchases and repairs furniture and appliances, cleans apartments, and repairs and maintains the properties, billing those separately (and already collecting tax on furniture/appliance purchases and on repair labor and materials).

The Department sorted the charges by type of service:

• Core management is not taxable. Renting/leasing, collecting and depositing rents, writing checks, answering phones, and bookkeeping are not enumerated services under § 1105(c), so those fees are not subject to sales or use tax.
• Real-property work is taxable. Cleaning apartments and repairing/maintaining the properties are taxable services of maintaining, servicing, or repairing real property under § 527.7.
• Furniture/appliance work is taxable. Repairing and maintaining the clients' furniture and appliances is taxable servicing of tangible personal property under § 527.5(a).
• Resale mechanics. Under § 526.6(c)(1), Certified Properties may buy furniture, appliances, and the repair/maintenance services for resale (no tax at purchase), and must collect sales tax when it bills those to clients.
• Separate billing controls the outcome. Under § 527.1(b) (taxable and exempt items sold as a single unit), if Certified Properties charged one price for all its services, the entire charge would be taxable. Because it bills management separately from the purchasing, cleaning, repair, and maintenance services, only the latter portion is taxed.

What this means for you

Property management fees themselves are generally not taxable

The administrative heart of property management — leasing, rent collection, bill paying, bookkeeping, phones — is not an enumerated taxable service in New York. Those management fees aren't subject to sales tax.

But the hands-on work is taxable, whether on the building or its furnishings

Cleaning, repairs, and maintenance are taxable — on real property under § 527.7 and on furniture/appliances under § 527.5(a). A manager who performs or arranges these and bills the client is collecting for taxable services, and can buy the underlying goods and services for resale (§ 526.6(c)(1)) and pass the tax through on the client bill.

How you bill decides how much is taxed

This is the practical takeaway: separately state the nontaxable management fee from the taxable cleaning/repair/maintenance charges. Bundle everything into a single lump-sum fee and § 527.1(b) taxes the whole thing. Clear invoice line items are what preserve the nontaxable treatment of the management portion.

Common questions

Q: Are property management fees subject to New York sales tax?
A: No. Leasing, rent collection, check-writing, phones, and bookkeeping are not enumerated services under § 1105(c), so those fees are not taxable.

Q: What parts of a property manager's bill are taxable?
A: Cleaning and repairing/maintaining the property (real property, § 527.7) and repairing/maintaining furniture and appliances (tangible personal property, § 527.5(a)).

Q: Does it matter whether I bill one lump sum or separate line items?
A: Yes. If you charge a single price for all services, the entire charge is taxable under § 527.1(b). Billing the management services separately keeps only the taxable services taxed.

Q: Can I buy repair services and furnishings for resale?
A: Yes, under § 526.6(c)(1) — no tax at purchase, but you must collect sales tax when you bill those items and services to your clients.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c) — enumerated taxable services (core management services are not among them)
• 20 NYCRR § 527.7 — tax on maintaining, servicing, or repairing real property (cleaning, repairs, maintenance of the property)
• 20 NYCRR § 527.5(a) — tax on installing, maintaining, servicing, or repairing tangible personal property (furniture and appliances)
• 20 NYCRR § 526.6(c)(1) — purchases for resale
• 20 NYCRR § 527.1(b) — taxable and exempt items sold as a single unit are taxed on the total price

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_43s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-91 (43)S
Sales Tax
May 17, 1991

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK

COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S910220B

On February 20, 1991, a Petition for Advisory Opinion was received from Certified
Properties, Inc., 427 N. Cayuga St., PO Box 392, Ithaca, New York 14851.
The issue raised by Petitioner, Certified Properties, Inc., is whether management fees that are
charged to clients are subject to State and local sales and use tax.
Petitioner manages apartments and houses for its clients. Petitioner's responsibilities include
renting apartments and signing leases, collecting and depositing rents into clients' checking accounts,
writing checks for clients to pay their bills on such properties, answering telephones and doing
bookkeeping. A set fee is charged to the clients for performing these services.
Petitioner is also responsible for the purchasing and repairing of furniture and appliances,
cleaning of apartments, and repairs and maintenance on the properties. Costs incurred for purchasing
and repairing furniture and appliances are separately billed to clients, including sales tax. Moreover,
maintenance and repairs are billed separately to clients and sales tax is collected on any labor and
material used in a repair. The maintenance and repair fees Petitioner charges are $14.00 per hour.
Petitioner's employees earn $7.00 to $12.00 per hour. The sales tax is computed on the $14.00
amount.
Section 1105(c) of the Tax Law imposes tax upon the receipts from every sale, except for
resale, of certain enumerated services. The renting and signing of leases, collecting and depositing
rents into clients' checking accounts, writing of checks for clients, answering telephones, and doing
bookkeeping are not services enumerated under Section 1105(c) of the Tax Law and, therefore, the
fees paid for such services are not subject to sales or use tax.
Section 527.7 of the Sales and Use Tax Regulations provides, in pertinent part, as follows:
(a) Definitions
(1) Maintaining, servicing and repairing are terms which are used to cover all
activities that relate to keeping real property in a condition of fitness, efficiency,
readiness or safety or restoring it to such condition. Among the services included are
services on a building itself such as painting; services to the grounds, such as lawn
services, tree removal and spraying; trash and garbage removal and sewerage service
and snow removal.
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TSB-A-91 (43)S
Sales Tax
May 17, 1991
(b) Imposition
(1) The tax is imposed on receipts from every sale of the services of maintaining,
servicing or repairing real property, whether inside or outside of a building.
Example 1: The replacement of broken windows is a repair to real property, which
is taxable.
Example 2: Company A enters into an agreement to provide periodic maintenance
services on elevators and escalators belonging to its customers. The contract provides
for inspection, lubrication and the performance of necessary repairs. These services
are taxable as maintaining, servicing of real property which is subject to the sales tax.
(2) All services of trash or garbage removal are taxable, whether from inside or
outside of a building or vacant land.
Section 527.5(a) of the Sales and Use Tax Regulations provides, in part, as follows:
(a) Imposition
(1) The tax is imposed on receipts from every sale of the services of installing,
maintaining, servicing or repairing tangible personal property, by any means
including coin-operated machines, whether or not any tangible personal property is
transferred in conjunction with the services.
(2) Installing means setting up tangible personal property or putting it in place for
use.
Example 1: An individual pays for the installation of a washer and dryer to existing
wiring and plumbing in his home. The charge for installation is taxable.
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(3) Maintaining, servicing and repairing are terms used to cover all activities that
relate to keeping tangible personal property in a condition of fitness, efficiency,
readiness or safety or restoring it to such condition.
Section 526.6(c)(1) of the Sales and Use Tax Regulations provides as follows:
Where a person, in the course of his business operations, purchases tangible
personal property or services which he intends to sell, either in the form in which
purchased, or as a component part of other property or services, the property or

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TSB-A-91 (43)S
Sales Tax
May 17, 1991
services which he has purchased will be considered as purchased for resale, and therefore not
subject to tax until he has transferred the property to his customer.
Accordingly, pursuant to Section 526.6(c)(1) of the Sales and Use Tax Regulations,
Petitioner may purchase furniture and appliances for resale. Sales or use tax will not be imposed at
the time of purchase, but sales tax must be collected upon the resale to its clients. Pursuant to Section
526.6(c)(1) of the Sales and Use Tax Regulations, Petitioner may purchase for resale repair and
maintenance service for the furniture and appliances where such charges are subsequently billed by
Petitioner to its clients. Sales tax must be collected from clients on such billed repairs and
maintenance. Where Petitioner repairs and maintains the clients' furniture and appliances, sales tax
is due pursuant to Section 527.5(a) of the Sales and Use Tax Regulations.
Where Petitioner cleans the apartments and repairs and maintains the properties, sales tax is
imposed pursuant to Section 527.7 of the Sales and Use Tax Regulations. Pursuant to Section
526.6(c)(1) of the Sales and Use Tax Regulations, Petitioner may purchase such services for resale
where such charges are subsequently billed by Petitioner to its clients. Sales tax must be collected
from clients on such billed services.
Section 527.1(b) of the Sales and Use Tax Regulations provides that:
(b) Taxable and exempt items sold as a single unit. When
tangible personal property, composed of taxable and exempt items is
sold as a single unit, the tax shall be collected on the total price.
Example:

A vendor sells a package containing assorted cheeses, a cheese board
and a knife for $15. He is required to collect tax on $15.

In accordance with said regulation, if Petitioner was to charge a single price for all of its
services, the entire charge would be subject to sales tax. However, since Petitioner bills its
management services separately from its purchasing, cleaning, repair and maintenance services, only
that portion of the bill that represents the charges for the latter services are subject to sales tax.

DATED: May 17, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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