Are a contractor's cable-TV installation and testing charges to a cable company taxable, and when do resale, capital-improvement, or exempt-organization rules apply?

Plain-English summary

Marvin Rosenthal asked, on behalf of a contractor client, whether the contractor's charges to a cable-television company for a list of 13 installation and testing services — electronic testing of CATV amplifiers, street mapping/design, assembling and splicing electronics, wiring apartments, replacing components, testing for signal leakage, trenching and placing cable, pulling cable, installing drop cable from a pole to a subscriber's house, and transferring attachments to new poles — are subject to New York sales tax.

The Department gave a layered answer:

• Default rule — taxable. Most of the contractor's charges are receipts from selling tangible personal property, or from installing/maintaining/servicing/repairing tangible personal property (§ 1105(c)(3)) or real property (§ 1105(c)(5)), and are taxable under §§ 1105(a), 1105(c)(3), and 1105(c)(5).
• Resale exception (item 11). Where a service — such as the drop-cable install in item (11) — is purchased by the cable company for resale to a subscriber and the subscriber is separately billed, the contractor's charge is not taxable if the cable company gives a properly completed Form ST-120 resale certificate.
• Capital-improvement exception. Where the cable system's installation qualifies as a capital improvement (e.g., the lease/franchise doesn't require removal and title to the installed portion vests in and stays with the real-property owner), the contractor's services performed in conjunction with that capital improvement — all except item (2) mapping/design and item (11) — are exempt under § 1115(a)(17), documented with Form ST-124 (certificate of capital improvement).
• Exempt-owner (municipal) exception. Where a franchise with a municipality provides that title to the installed system immediately vests in the municipality and it isn't to be removed, the contractor's receipts are exempt under §§ 1115(a)(15) and 1115(a)(16) (property used on the job of a § 1116(a) exempt organization), documented with signed contracts/government purchase orders and a signed document identifying the project and exempt owner.

What this means for you

Start from "taxable," then look for a specific exception

Installing, servicing, or repairing equipment and cabling is generally a taxable service in New York. For cable-TV and similar infrastructure work, the taxable default only gives way when a specific rule — resale, capital improvement, or exempt owner — is met and documented.

The documentation is the exemption

Each carve-out depends on the right paperwork: ST-120 (resale certificate) for resold, separately billed services; ST-124 (certificate of capital improvement) for capital-improvement work; and signed contracts/purchase orders plus a project-identifying document for exempt-organization jobs. No certificate, no exemption.

Whether it's a "capital improvement" turns on title and removal

The installed system is a capital improvement when it becomes a permanent part of the real property — typically shown by lease/franchise terms that don't require removal and that vest title in the property owner (or municipality). Mapping/design work (item 2) and services resold to the subscriber (item 11) stay outside the capital-improvement exemption.

Common questions

Q: Are a contractor's cable-TV installation charges taxable in New York?
A: Generally yes, under §§ 1105(a), 1105(c)(3), and 1105(c)(5) — unless a resale, capital-improvement, or exempt-owner exception applies.

Q: When is the drop-cable install to a subscriber not taxable?
A: When the cable company buys it for resale and separately bills the subscriber, and gives the contractor a Form ST-120 resale certificate.

Q: What makes the installation a tax-exempt capital improvement?
A: The lease/franchise doesn't require removal and title to the installed system vests in and remains with the real-property owner; then most services (except items 2 and 11) are exempt under § 1115(a)(17) with Form ST-124.

Q: What if the system is installed on municipal property?
A: If title immediately vests in the municipality and it stays in place, the contractor's receipts are exempt under §§ 1115(a)(15)-(16), documented with signed contracts/purchase orders identifying the exempt owner.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c)(3) (installing/maintaining/servicing/repairing tangible personal property; exception (iii) for installation that becomes a capital improvement)
• Tax Law § 1105(c)(5) (maintaining/servicing/repairing real property, as distinguished from a capital improvement)
• Tax Law § 1101(b)(4)(i) and § 1101(b)(9) (retail sale; definition of capital improvement)
• Tax Law § 1115(a)(15), (16), (17) (exemptions for property used in erecting/improving/servicing exempt-organization real property, and for property becoming an integral component of a customer's capital improvement)
• 20 NYCRR § 541.2(f) (real property includes telephone/telegraph lines, wires, poles, and appurtenances)
• Forms ST-120 (resale certificate) and ST-124 (certificate of capital improvement)

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_74s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-91 (74)S
Sales Tax
November 27, 1991

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK

COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S910624B

On June 24, 1991 a Petition for Advisory Opinion was received from Marvin Rosenthal, 2
Nelson Avenue, Hicksville, N.Y. 11801.
The issue raised by Petitioner, Marvin Rosenthal, is whether the receipts from charges billed
by Petitioner's client to a cable television company for performing installation services are subject
to State and local sales tax.
Petitioner's client, a contractor, hereafter referred to as "Contractor", performs the following
installation services for a cable television company, hereafter referred to as "Cable TV Co.".
(1)

Electronic testing and data recording performed on newly placed CATV amplifiers
and associated equipment.

(2)

Street mapping and electronic design (draft).

(3)

Assembling of electronics for splicing in newly constructed cable plant including
electronic testing.

(4)

Splicing of active and passive equipment in newly constructed cable plant.
Activation and testing of equipment including identification of customer "hook-ups".

(5)

Wiring of individual apartments from junction box to outlet in a housing complex.

(6)

Replacement of defective passive components in newly constructed CATV plant.

(7)

Testing of existing CATV cable lines for signal leakage.

(8)

Splicing and activating aerial cable lines.

(9)

Opening trenches, placing CATV cables in the ground, and restoring the area.

(10)

Pulling cable through conduits previously placed in the ground.

(11)

Installing drop cable from a utility pole to a subscriber's house.

(12)

Electronically testing cables prior to installation in the cable plant.

(13)

Transferring CATV attachments from existing utility poles to newly placed utility
poles.

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Sales Tax
November 27, 1991
Section 1101 of the Tax Law states, in part:
Definitions. -­
(b) When used in this article for purposes of the taxes imposed by subdivisions. .
.(c). . .of section eleven hundred five and by section eleven hundred ten, the
following terms shall mean:
(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such or as a physical component part of tangible
personal property, or (B) for use by that person in performing the services subject to
tax under paragraphs. . .(3). . .(5). . .of subdivision (c) of section eleven hundred five
where the property so sold becomes a physical component part of the property upon
which the services are performed or where the property so sold is later actually
transferred to the purchaser of the service in conjunction with the performance of the
service subject to tax. . . .
(9) Capital improvement. (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.
Section 1105 of the Tax Law states, in part:
. . .there is hereby imposed and there shall be paid a tax. . .upon:
(a) The receipts from every retail sale of tangible personal property. . .
(c) The receipts from every sale, except for resale, of the following services:
(3) Installing tangible personal property, . . .or maintaining, servicing or repairing
tangible personal property. . .except:
(iii) for installing property which, when installed, will constitute an addition or
capital improvement to real property, property or land. . .as. . .defined in paragraph
nine of subdivision (b) of section eleven hundred one of this chapter. . . .

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TSB-A-91 (74)S
Sales Tax
November 27, 1991
(5) Maintaining, servicing or repairing real property, property or land, whether the
services are performed in or outside of a building, as distinguished from adding to
or improving such real property, property or land, by a capital improvement. . . .
Section 1115 of the Tax Law states, in part:
Exemptions from sales and use taxes.--(a) Receipts from the following shall be
exempt from the tax on retail sales imposed under subdivision (a) of section eleven
hundred five and the compensating use tax imposed under section eleven hundred
ten:
(15) Tangible personal property sold to a contractor, subcontractor or repairman for
use in erecting a structure or building of an organization described in subdivision (a)
of section eleven hundred sixteen, or adding to, altering, improving real property,
property or land of such an organization. . .; provided, however, no exemption shall
exist under this paragraph unless such tangible personal property is to become an
integral component part of such structure, building or real property.
(16) Tangible personal property sold to a contractor, subcontractor or repairman for
use in maintaining, servicing or repairing real property, property or land of an
organization described in subdivision (a) of section eleven hundred sixteen,. . .;
provided, however, no exemption shall exist under this paragraph unless such
tangible personal property is to become an integral component part of such structure,
building or real property.
(17) Tangible personal property sold by a contractor, subcontractor or repairman to
a person other than an organization described in subdivision (a) of section eleven
hundred sixteen, for whom he is adding to, or improving real property, property or
land by a capital improvement, or for whom he is about to do any of the foregoing,
if such tangible personal property is to become an integral component part of such
structure, building or real property;. . . .
Section 541.2 of the New York State Sales and Use Tax Regulations states, in part:
Definitions. The words, terms and phrases used in this Part have the following
definitions except when the context clearly indicates a different meaning:
(f) Real property, property, and land means real property, property or land as defined
in subdivision 12 of section 102 of the Real Property Tax Law. Among the items
considered in this classification are:
(4) telephone and telegraph lines, wires, poles and appurtenances;. . .

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TSB-A-91 (74)S
Sales Tax
November 27, 1991
Generally, Contractor's receipts from charges to Cable TV Co. for performing the various
services enumerated above will be considered as receipts from either the sale of tangible personal
property, the sale of the service of installing, maintaining, servicing or repairing tangible personal
property or, in certain instances, the sale of the service of maintaining, servicing or repairing real
property and will be subject to State and local sales tax imposed under the provisions of Sections
1105(a), 1105(c)(3) and 1105(c)(5) of the Tax Law, respectively.
However, in any instance where Contractor's services are purchased by Cable TV Co. for the
purpose of being resold to a subscriber as in (11) above and the subscriber is billed specifically for
such services, Contractor's receipts for such charges to Cable TV Co. will not be subject to State or
local sales tax provided Cable TV Co. gives Contractor a properly completed form ST-120, Resale
Certificate.
Where Cable TV Co. enters into a lease agreement with the owner of the real property on or
in which a cable television system will be installed and also enters into a separate franchise
agreement with a municipality, Contractor's receipts from charges to Cable TV Co. for installation
of that portion of the cable television system that is located on the property of the owner of the real
property will generally be subject to the State and local sales tax imposed under Sections 1105(a),
1105(c)(3) and 1105(c)(5) of the Tax Law. However, if neither the lease agreement nor the franchise
agreement require that the cable television system be removed upon expiration of the lease and
franchise, respectively, and the lease provides that title to that portion of the installed system located
on the property of the owner of the real property is to vest in the lessor and is to become part of and
remain with the lessor's premises, the installation of the cable television system will be considered
to satisfy the criteria for a capital improvement as defined under Section 1101(b)(9) of the Tax Law.
Where Contractor performs any of the services enumerated above, with the exception of (2) and (11),
in conjunction with a capital improvement such services will satisfy the criteria for a capital
improvement. Accordingly, the receipts from Contractor's charges to Cable TV Co. for such services
will be exempt from State and local sales tax under the provisions of Section 1115(a)(17) of the Tax
Law. For purposes of establishing the exempt status of such a transaction, Cable TV Co. must give
Contractor a properly completed form ST-124, Certificate of Capital Improvement.
Where Cable TV Co. and a municipality enter into a franchise agreement and such agreement
does not require that the cable television system installed on or in the municipality's property be
removed upon expiration of the franchise, but provides that title to the installed system is to
immediately vest in the municipality and the installed system is to become part of and remain with
the municipality's premises, the contractor's receipts from the installation of such portion of the
system will be exempt from State and local sales tax under the provisions of Sections 1115(a)(15)
and 1115(a)(16) of the Tax Law. Copies of signed contracts and government purchase orders will
be sufficient evidence to establish the exempt status of the job between Cable TV Co. and the
franchisor. Cable TV Co. and Contractor must have a signed document between them which

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TSB-A-91 (74)S
Sales Tax
November 27, 1991
identifies the project, location and exempt owner in order to substantiate the basis for tax exemption
of the tangible personal property purchased for incorporation into the exempt project.

DATED: November 27, 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.