Is installing a synthetic-turf putting green on real property a nontaxable capital improvement, or a taxable installation service?

Plain-English summary

Loren D. Caputo asked whether installing a synthetic-turf putting green on real property is a capital improvement exempt from sales and use tax. The described job is substantial: excavating and removing existing sod and topsoil, providing under-drainage, laying a compacted 4-inch crushed-stone base, trenching the perimeter about 8 inches deep, installing a urethane shock pad and synthetic turf (roughly 1,000 pounds for a 30-by-30-foot green), anchoring the turf in the trench with 10-inch steel staples every 2 feet, top-dressing with sand, setting regulation cups and pins, and restoring the perimeter. Removing it would destroy the turf and require extensive restoration of the land.

The Department's answer, under Tax Law §§ 1105(c)(3) and 1101(b)(9):

• The installation is a capital improvement. Section 1105(c)(3) taxes installing tangible personal property except where the installed property becomes an addition or capital improvement to real property. A "capital improvement" under § 1101(b)(9)(i) is an addition or alteration that (A) substantially adds to the value of the real property or appreciably prolongs its useful life, (B) becomes part of the realty or is permanently affixed so that removal would cause material damage, and (C) is intended to be permanent. The putting green meets all three, so building it is exempt from state and local sales and use tax.
• But the floor-covering rule narrows that. The Department noted that the synthetic turf and urethane shock pad fall within the definition of "floor coverings" (like carpet and carpet padding). Under § 1101(b)(9)(iii), floor covering counts as a capital improvement only when installed as the initial finished covering in new construction, a new addition, or a total reconstruction. So the putting green is a capital improvement only when installed in one of those situations.

What this means for you

Landscapers and contractors who install synthetic greens

If you build a permanent synthetic-turf putting green that becomes part of the real property, the installation can be a nontaxable capital improvement — but only if it's part of new construction, a new addition, or a total reconstruction. Get a properly completed capital improvement certificate (Form ST-124) from the customer in those cases.

Watch the floor-covering trap

Because synthetic turf and its shock pad are treated as floor covering, replacing or adding one to existing construction (rather than as part of new construction/addition/total reconstruction) does not get capital-improvement treatment. In that situation the charge is taxable like other floor-covering installations.

You still owe tax on your own materials

Capital-improvement treatment means you don't charge the customer sales tax on the job, but as the contractor you generally pay sales or use tax on the materials you buy and incorporate (the turf, stone, pad, staples, sand, cups, and pins).

Property owners

Adding a permanent putting green to your property in new construction or a total reconstruction should come to you as a nontaxable capital improvement. If it's being added to an existing setup, expect the floor-covering rule to make the installation taxable.

Common questions

Q: Is installing a synthetic-turf putting green taxable in New York?
A: The installation is a capital improvement — and therefore exempt — when the green is permanent and installed as part of new construction, a new addition, or a total reconstruction. Otherwise the floor-covering rule makes it taxable.

Q: Why does "floor covering" matter for a putting green?
A: The Department treats synthetic turf and the urethane shock pad as floor coverings, like carpet. Under § 1101(b)(9)(iii), floor covering is a capital improvement only in new construction, a new addition, or a total reconstruction.

Q: What makes something a capital improvement here?
A: It must substantially add value (or prolong useful life), be permanently affixed so removal would cause material damage, and be intended to be permanent — all three, under § 1101(b)(9)(i).

Q: Does the contractor pay any tax at all?
A: Yes. Even on an exempt capital-improvement job, the contractor generally pays sales or use tax on the materials it purchases and installs.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(3) (tax on installing tangible personal property, excluding property that becomes a capital improvement to real property)
• Tax Law § 1101(b)(9)(i) (definition of capital improvement — value/useful life, permanent affixation, permanent intent)
• Tax Law § 1101(b)(9)(iii) (floor covering is a capital improvement only in new construction, a new addition, or a total reconstruction)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_35s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (35) S
Sales Tax
April 17, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920302A

On March 2, 1992 a Petition for Advisory Opinion was received from Loren D. Caputo, 264
Parkside Avenue, Miller Place, New York 11764.
The issue raised by Petitioner, Loren D. Caputo, is whether the installation of a synthetic turf
putting green on real property constitutes a capital improvement exempt from the imposition of sales
and use taxes.
The installation of a synthetic putting green on real property requires:
1)
2)
3)
4)
5)

6)
7)
8)
9)

The excavation and removal of the existing sod and topsoil,
Provision for adequate under-drainage,
The installation of a compacted, crushed stone base approximately 4 inches thick,
The trenching of the entire perimeter of the putting green to a depth of approximately
8 inches,
The installation of a urethane shock pad and synthetic turf over the prepared base
area, the weight of which for a 30 by 30 foot average size putting green is
approximately 1000 pounds,
The anchoring of the synthetic turf in the perimeter trench using 10 inch long steel
staples at 2 foot intervals around the entire green,
The application of a top dressing of fine sand to the surface of the entire green at the
rate of 1 to 2 pounds per square foot,
The installation of regulation cups and pins, and
The restoration of the perimeter area.

The putting green is a permanent installation of considerable expense, the removal of which
would destroy the synthetic turf and would require extensive restoration of the real property.
Section 1105(c)(3) of the Tax Law imposes a tax on the receipts from the service of
"installing tangible personal property. . . except. . . (iii) for installing property which, when installed,
will constitute an addition or capital improvement to real property. . . ."
The term "capital improvement" is defined in section 1101(b)(9)(i) of the Tax Law as
follows:
(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

TP-9 (9/88)

-2­
TSB-A-92 (35) S
Sales Tax
April 17, 1992

(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.

(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.

Accordingly, pursuant to Sections 1105(c)(3) and 1101(b)(9)(i) of the Tax Law since the
synthetic putting green described above substantially adds to the value of the real property, is
permanently affixed to the real property so that removal would cause material damage to the property
or article itself, and is intended to be a permanent installation, the construction of said synthetic
putting green constitutes a capital improvement exempt from the imposition of State and local sales
and use taxes.
It is noted that the synthetic turf and the urethane shock pad comes within the definition of
floor coverings such as carpets or carpet paddings and thus the synthetic putting green constitutes
a capital improvement only in new construction of, in a new addition to or in a total reconstruction
of a synthetic putting green in accordance with the meaning and intent of Section 1101(b)(9)(iii) of
the Tax Law.

DATED: April 17, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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