Is installing a new private cable television system for an apartment/condo complex an exempt capital improvement, or a taxable installation of tangible personal property?

Subject

, is whether the original installation of a private cable television system constitutes a capital improvement or a sale of tangible personal property.

What this means for you

Installing tangible personal property is normally a taxable service in New York -- unless the installation results in a "capital improvement": something that substantially adds to the real property's value, becomes permanently affixed (removal would cause material damage), and is intended as a permanent installation. When work qualifies as a capital improvement, both the materials and the labor to install them are exempt.

Here, a company installing private cable TV systems for apartment/condo complexes described its process in detail: contacting utilities to locate underground obstructions, burying trunk cable 18 inches deep (in conduit under roads/sidewalks), post-wiring buildings from a wall outlet to a central point outside, placing cable pedestals and splicing trunk cable/taps/line extenders, and constructing, adjusting, and balancing the "head end" (the system's signal-origination equipment, which typically includes a satellite dish).

The Department drew a line based on two prior opinions:

• Work that becomes affixed to the real property and permanent -- burying the trunk cable and conduits, wiring buildings from the wall outlet to the pedestal, constructing the cable pedestal, and splicing/activating the cable lines -- satisfies the capital-improvement test and is exempt from sales tax.
• The satellite dish, however, is equipment that keeps its identity as tangible personal property even when welded or otherwise bolted to the pedestal -- so its sale and installation remains taxable.

Q&A

Q: We install cable/satellite systems for apartment complexes -- is the whole job tax-exempt as a capital improvement?
A: Not automatically. The buried cable, building wiring, pedestal construction, and splicing/activation work can qualify as an exempt capital improvement if it's permanently affixed and intended to stay. But a satellite dish or similar antenna equipment stays taxable tangible personal property even when it's physically attached to the installation, because it retains its own separate identity as equipment.

Q: Does it matter whether removing the equipment would damage the property?
A: Yes -- that's one of the three statutory tests for a capital improvement (along with substantially adding value and being intended as permanent), but it applies component-by-component. A dish can be unbolted without "material damage" to the system in the way a buried, spliced cable network can't be removed without real damage.

Q: What should we bill separately?
A: Based on this opinion's split, contractors installing similar systems should be prepared to separately identify and support the capital-improvement portions (buried cable, building wiring, pedestal, splicing) from the taxable equipment portion (the dish itself) for sales tax purposes.

Citations

• Tax Law § 1105 -- imposes sales tax on retail sales of tangible personal property and on installing tangible personal property, except installations that constitute a capital improvement.
• Tax Law § 1101(b)(9)(i) -- defines "capital improvement": substantially adds value or prolongs useful life, becomes part of or permanently affixed to real property (removal causes material damage), and is intended as a permanent installation.
• Tax Law § 1115 -- exempts tangible personal property sold by a contractor for use in a capital improvement from sales tax.
• Multi-View Communications, Inc., Ad Op St Tx Comm, March 26, 1986, TSB-A-86(12)S -- concrete foundations/poles are a capital improvement, but a satellite dish stays tangible personal property after installation.
• Marvin Rosenthal, Adv Op Comm T&F, November 27, 1991, TSB-A-91(74)S -- specific cable-system installation services (testing, splicing, wiring, trenching) satisfy the capital-improvement criteria.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1995.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a95_29s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (29)S
Sales Tax
July 13, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S941205C

On December 5, 1994, a Petition for Advisory Opinion was received from Intertech Satellite
Systems, Inc., 6523 Transit Road, Lockport, NY 14094.
The issue raised by Petitioner, Intertech Satellite Systems, Inc., is whether the original
installation of a private cable television system constitutes a capital improvement or a sale of
tangible personal property.
Petitioner is in the business of installing private cable television systems. The systems, when
installed, add value to the real property. In addition the systems, which are installed on the private
property of the owners, are intended to be a permanent installation. Removal of the materials and
equipment would cause material damage to the system, either by physical damage or actual damage
in the market value as to its resale value.
Petitioner compiled the following step-by-step list describing the installation process, the
work performed and the materials used for the design and installation of a private cable system:
1.

2.

Proposal and Sale
A.

Preliminary information is sent to prospective customers.

B.

An appointment is set with the prospective customer to explain the cable
system, review the property and evaluate any prints and plot plans that are
available.

C.

All available information is compiled to form a prospectus to provide system
information, cost and profit projections to potential clients.

D.

After all details are worked out, a contract is written and presented to the
client.

Distribution and Head End Design
A.

A head end technician goes to site to determine location of the head end,
downlink antennas, and off-air antenna tower. A technician checks for
terrestrial interference, off-air interference and signal strength of local
reception channels.

-2­
TSB-A-95 (29)S
Sales Tax
July 13, 1995

3.

4.

B.

A distribution technician meets with property manager to determine the
proper method of post wiring the complex and the path to be taken for trunk
link burial.

C.

A system designer meets with head end and distribution technicians to
coordinate the location of all system components and cables.

D.

Design of the system is placed on a plot plan to designate the locations of
head end, antennas, trunk cable, line extenders and cable pedestals for the
installation crew.

E.

Data received from the site survey is reviewed to determine the proper head
end equipment, antenna tower height, type of antennas and quantity of
equipment to be used.

F.

A bill of materials is compiled from the above information and equipment is
ordered from the manufacturers.

System Installation
A.

Local utilities are contacted to locate any underground piping, cable or other
obstructions that could be damaged by trunk burial.

B.

Trunk cable is buried 18 inches deep with a vibratory plow and placed in a
conduit under any road, sidewalk or other area that might be in danger of
damaging the trunk cable.

C.

All buildings are post wired from a wall outlet in the main viewing area to a
central location outside of building where cable pedestals will be placed.

D.

Technicians place cable TV pedestals, splices trunk cable, taps, line
extenders, directional couplers and drop lines.

E.

The head end is constructed, adjusted and balanced.

F.

The system is activated, balanced and checked for picture quality.

Post Installation
A.

The system is re-balanced and checked for picture quality within 48 hours of
complete activation.

B.

An audit is performed from a list provided by building management to trap
out nonsubscribing customers.

C.

On site personnel are trained to connect and disconnect subscribers and to
troubleshoot minor problems. The system is secured with pedestal locks to
prevent signal theft.

-3­
TSB-A-95 (29)S
Sales Tax
July 13, 1995
D.

The technician reviews the system to draft "as-built" for future system
maintenance and reference.

Section 1105 of the Tax Law provides, in part, as follows:
Sec. 1105. Imposition of sales tax.-- . . . there is hereby imposed and there
shall be paid a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
*

*

*

(3) Installing tangible personal property, excluding a mobile home, or
maintaining, servicing or repairing tangible personal property, including a mobile
home, not held for sale in the regular course of business, whether or not the services
are performed directly or by means of coin-operated equipment or by any other
means, and whether or not any tangible personal property is transferred in
conjunction therewith, except:

• *

*

(iii) for installing property which, when installed, will constitute an addition
or capital improvement to real property, property or land, as the terms real property,
property or lands are defined in the real property tax law as such term capital
improvement is defined in paragraph nine of subdivision (b) of section eleven
hundred one of this chapter. . .
Section 1101(b)(9)(i) of the Tax Law provides 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
(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 1115 of the Tax Law provides, in part, as follows:

-4­
TSB-A-95 (29)S
Sales Tax
July 13, 1995
Section 1115. 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:
*

*

*

(17) Tangible personal property sold by a contractor, subcontractor or
repairman to a person other than an organization descried 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; provided, however, that if such sale is
made pursuant to a contract irrevocably entered into before September first, nineteen
hundred sixty-nine, no exemption shall exist under this paragraph.
In Multi-View Communications, Inc., Ad Op St Tx Comm, March 26, 1986, TSB-A-86(12)S
the State Tax Commission advised that concrete foundations, including poles permanently installed
therein, constitute a capital improvement to real property. However, a satellite dish is considered
equipment which retains its identity as tangible personal property after installation, whether it is
welded or otherwise affixed to the pole. (emphasis added)
In Marvin Rosenthal, Adv Op Comm T&F, November 27, 1991, TSB-A-91(74)S the
Commissioner advised that services performed in the installation of a cable television system such
as electronic testing and data recording performed on newly placed CATV amplifiers and associated
equipment, assembling of electronics for splicing in newly constructed cable plant, splicing of active
and passive equipment in newly constructed cable plant, wiring of individual apartments from
junction boxes to outlet in housing complex, opening trenches for placement of cable wiring and
conduits and restoring the area, and splicing and activating aerial cable lines satisfied the criteria for
a capital improvement when performed in conjunction with a capital improvement.
In the instant case, Petitioner, when installing a private cable television system, contacts local
utility companies to locate any underground piping, cable or other obstructions that could be
damaged by trunk burial. Next, using a vibratory plow Petitioner buries trunk cable and places such
cable in a conduit in areas where the cable might be in danger of being damaged. Petitioner then
runs wire from a wall outlet in the main viewing area of the building to a central location outside of
the building where the cable pedestal will be placed. Petitioner then places the cable TV pedestal,
splices the trunk cable, taps, line extenders, directional couplers and drop lines. Following this, the
head end is constructed, adjusted and balanced.
In accordance with Multi-View Communications, Inc., supra, and Marvin Rosenthal, supra,
certain services performed by Petitioner during their "System Installation" result in capital
improvements within the meaning of that term as defined in Section 1101(b)(9)(i) of the Tax Law.
Therefore, pursuant to sections 1105 and 1115(a)(17) of the Tax Law the receipts from the sale and

-5­
TSB-A-95 (29)S
Sales Tax
July 13, 1995
installation of such tangible personal property would not be subject to sales tax. Pursuant to Marvin
Rosenthal, supra, the burying of the trunk cable and conduits, the wiring of buildings from the wall
outlet to the cable pedestal, the construction of the cable pedestal and the splicing and activating of
the cable lines would satisfy the criteria for a capital improvement where the installation becomes
affixed to the real property, is intended to be permanent and adds value to the property. However,
pursuant to Multi-View Communications. Inc., supra, a satellite dish is considered equipment which
retains its identity as tangible property after installation, whether it is welded or otherwise affixed
to the cable pedestal. Therefore, the sale and installation of such satellite dish would not be
considered a capital improvement and would be subject to sales tax.

DATED: July 13, 1995

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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