Is 'guniting' an existing in-ground concrete swimming pool -- coating it with marble dust to extend its life 10-15 years -- an exempt capital improvement, or a taxable repair?

Subject

Issue raised by Petitioner, Alfred Arthur Hulse, is whether the "Guniting" of an existing swimming pool qualifies as a capital improvement for sales tax purposes.

What this means for you

"Guniting" a pool means coating an existing in-ground concrete swimming pool with marble dust, which prolongs its useful life by an estimated 10 to 15 years. The owner asked whether this qualifies as a capital improvement (which would make the labor exempt) rather than a taxable repair.

New York's capital-improvement test requires the work to substantially add value or appreciably prolong useful life, become permanently part of the real property (removal would cause material damage), and be intended as a permanent installation. But the Department drew an analogy to an earlier case involving "palgard coating" applied to storage tanks to prevent corrosion -- a coating with a similar roughly-10-year estimated life, which the Tax Appeals Tribunal held was NOT a capital improvement but ordinary maintenance/repair, since it's essentially a protective coating that restores or maintains the underlying structure rather than adding a genuinely new, permanent structural addition.

Because guniting a pool is functionally similar (a protective coating applied to existing real property, with a comparable service life to the palgard precedent), the Department concluded it's likewise taxable as maintenance/repair of real property, not exempt as a capital improvement -- even though it demonstrably extends the pool's useful life by a decade or more.

Q&A

Q: We resurface/recoat an existing pool to make it last longer -- is that exempt as a capital improvement?
A: Based on this opinion, no. Even a substantial life-extension (10-15 years here) doesn't automatically make a coating/resurfacing job a capital improvement -- the Department treats it as maintenance/repair, following precedent on similar protective coatings applied to other structures (like storage tanks).

Q: What's the difference between this and work that DOES qualify as a capital improvement?
A: The opinion doesn't spell out a bright-line rule beyond following the storage-tank precedent, but the underlying test still requires the work to substantially add value, become permanently part of the property, and be intended as permanent -- a surface coating/recoating job, even a long-lasting one, is treated as restoring the existing structure to a better condition rather than adding a new permanent structural element.

Q: Does the specific material (marble dust vs. another coating) matter?
A: The opinion doesn't distinguish based on the specific coating material -- what mattered was the functional similarity (a protective/resurfacing coating with a roughly similar service life) to the prior storage-tank case, not the particular substance used.

Citations

• Tax Law § 1105(c)(5) -- taxes maintaining, servicing, or repairing real property, as distinguished from a capital improvement.
• 20 NYCRR 541.2(g) -- defines "capital improvement": substantially adds value or prolongs useful life, becomes permanently part of the real property, and is intended as permanent.
• 20 NYCRR 527.5(a)(3) -- defines maintaining/servicing/repairing as activities keeping property in a condition of fitness, efficiency, readiness, or safety, or restoring it to such condition.
• Pierce & Stevens Chemical Corp., Dec St Tx Comm, October 5, 1984, TSB-H-85(9)S -- applying "palgard coating" to storage tanks to prevent corrosion (roughly 10-year life) is maintenance/repair, not a capital improvement.

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_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (7)S
Sales Tax
February 15, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S941017A

On October 17, 1994, a Petition for Advisory Opinion was received from Alfred Arthur
Hulse, 1990 New York Ave., Huntington Station, New York 11746.
The issue raised by Petitioner, Alfred Arthur Hulse, is whether the "Guniting" of an existing
swimming pool qualifies as a capital improvement for sales tax purposes.
Guniting of a pool consists of coating an existing in ground concrete swimming pool with
marble dust. The guniting prolongs the useful life of the pool by ten to fifteen years.
Section 1105(c)(5) of the Tax Law imposes a tax on maintaining, servicing or repairing real
property as distinguished from adding to or improving real property by a capital improvement.
Section 541.2(g) of the Sales and Use Tax Regulations defines the term capital improvement
as follows:
Capital improvement. (1) A "capital improvement" means an addition or alteration
to real property, which:
(i) substantially adds to the value of the real property, or appreciably prolongs the
useful life of the real property;
(ii) 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
(iii) is intended to become a permanent installation.
Section 527.5(a)(3) of the Sales and Use Tax Regulations states that "[M]aintaining,
servicing and repairing are terms which are 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."
It has been held that the application of "palgard coating" to storage tanks to prevent corrosion
did not constitute a capital improvement but instead was subject to tax under section 1105(c)(5) of
the Tax Law as maintaining, servicing or repairing real property. (Pierce & Stevens Chemical Corp.
Dec. St Tx Comm., October 5, 1984, TSB-H-85(9)S) The estimated life of "palgard coating" was
approximately ten years.

-2­
TSB-A-95 (7)S
Sales Tax
February 15, 1995
The application of marble dust in the instant case and "palgard coating" are similar in that
both coated real property and both lasted approximately the same time.
Therefor, in accordance with sections 541.2(g) and 527.5(a)(3) of the Sales and Use Tax
Regulations and Pierce & Stevens Chemical Corp., supra the guniting of a pool as described by
Petitioner is not a capital improvement but is taxable as a repair or maintenance of real property in
accordance with section 1105(c)(5) of the Tax Law.

DATED: February 15, 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.