Is buying and installing custom wood athletic lockers at a private golf club a capital improvement exempt from New York sales tax?

Plain-English summary

A CPA representing a private golf club asked whether custom wooden athletic lockers the club purchased and installed were subject to New York sales tax. The lockers were manufactured to the club's exact specifications, installed by the manufacturer with matching spacers, fillers, corners, and moldings -- the same way kitchen cabinets are installed -- and intended to be permanent. Unlike ordinary prefabricated steel lockers that are simply bolted to a wall, removing these custom lockers would damage the property and greatly reduce or eliminate the value of the lockers themselves. The club owns the real property where the lockers sit.

The Department found the lockers qualify as a capital improvement, exempting both the purchase and installation from sales tax. All three parts of the statutory test were satisfied: the lockers substantially add to the property's value, they're permanently affixed so that removal would cause material damage (unlike simple bolted-on steel lockers), and the club's ownership of the underlying real estate plus the built-in installation method showed they were intended to be permanent (citing the Tax Appeals Tribunal's 1991 Grumman Aerospace decision). Because the club bought both the lockers and their installation directly from the manufacturer, and the whole job qualifies as a capital improvement, no sales tax is due on either the materials or the installation charge. To document the exemption, the club must give the installer a properly completed Certificate of Capital Improvement (Form ST-124) within 90 days of the work.

What this means for you

Golf clubs, country clubs, and similar membership facilities

Custom-built-in lockers, cabinetry, and similar fixtures installed like kitchen cabinets -- with matching trim pieces and clearly permanent installation -- can qualify as an exempt capital improvement, unlike ordinary prefabricated units that are just bolted to a wall. Get a properly completed Certificate of Capital Improvement (Form ST-124) to your contractor within 90 days to lock in the exemption.

Locker, cabinetry, and custom-millwork manufacturers/installers

If you both manufacture and install custom fixtures to a customer's specific dimensions (rather than selling prefabricated units that are merely attached), your work is more likely to satisfy the permanence prong of the capital-improvement test. Collect a Certificate of Capital Improvement from your customer to support not charging sales tax.

Accountants and tax professionals

This ruling makes a useful contrast with the same-session floating-dock ruling (TSB-A-98(60)S): here, the custom-fit, kitchen-cabinet-style installation with matching trim satisfied the permanent-affixation prong (removal damages the lockers and the property), while the floating docks failed it because removability was a functional necessity. The property owner's ownership of the underlying real estate is also a relevant (though not independently dispositive) factor supporting permanence, per Grumman Aerospace.

Common questions

Q: Are custom-built lockers always exempt from New York sales tax?
A: Not automatically -- ordinary prefabricated steel lockers merely bolted to a wall generally would not qualify. The exemption here turned on the lockers being custom-manufactured to fit, installed like built-in cabinetry, and permanently affixed so removal causes damage.

Q: What paperwork is needed to claim this exemption?
A: The purchaser must give the installing contractor a properly completed Certificate of Capital Improvement (Form ST-124) within 90 days of the service.

Q: Does the property owner's ownership of the real estate matter?
A: Yes, it's a supporting factor for showing the installation is intended to be permanent, though the physical permanence of the installation itself is the core test.

Q: Can another club or facility rely on this ruling for its own locker installation?
A: Not automatically. This advisory opinion binds the Department only as to the petitioner and the specific facts (custom fit, kitchen-cabinet-style installation) described.

Citations and references

Statutes and rules:

• Tax Law § 1101(b)(9) (definition of capital improvement)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1105(c)(3) (tax on installing tangible personal property, except capital improvements)
• Tax Law § 1115(a)(17) (exemption for materials incorporated into a capital improvement by a contractor)
• Tax Law § 1132(c) (certificates and resale certificates)
• 20 NYCRR § 532.4 (Certificate of Capital Improvement, Form ST-124)
• Grumman Aerospace Corporation, Dec Tx App Trib, Apr. 11, 1991, TSB-D-91(22)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_61s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(61)S
Sales Tax
September 9, 1998

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S980520A

On May 20, 1998, the Department of Taxation and Finance received a Petition
for Advisory Opinion from Anthony J. Dapolito, CPA, Dapolito and Company, 2234
Jackson Avenue, Seaford, New York, 11783.
Petitioner, Anthony Dapolito,
submitted additional facts relating to the Petition on July 6, 1998.
The issue raised by Petitioner, Anthony J. Dapolito, is whether the
purchase and installation of custom athletic lockers at a private golf club are
subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory
Opinion.
Petitioner’s client, a private golf club, purchased wooden athletic lockers
and installed them at its facilities. The lockers were custom manufactured to the
specifications of the golf club to be installed by the manufacturer within
specific dimensions. The lockers are affixed to the premises with matching
spacers, fillers, corners and moldings of the type used in the installation of
kitchen cabinets and are intended to be permanent. The lockers are not similar
to prefabricated steel lockers that are merely bolted to the wall. Removal of
the lockers would damage the property and greatly reduce or eliminate the value
of the lockers. Petitioner’s client owns the real property where the lockers are
installed. Petitioner states that the lockers are permanently installed.

Applicable Law and Regulations
Section 1101(b) of the Tax Law provides, in part:
When used in this article for the purposes of the taxes
imposed by subdivisions (a), (b), (c) and (d) of section eleven
hundred five and by section eleven hundred ten, the following terms
shall mean:
*

*

(9) Capital improvement.
property which:

*
An addition or alteration to real

(i) Substantially adds to the value of the real property, or
appreciably prolongs the useful life of the real property; and
(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

-2­
TSB-A-98(61)S
Sales Tax
September 9, 1998

(iii) Is intended to become a permanent installation.
Section 1105(a) of the Tax Law imposes a tax on the receipts from every
retail sale of tangible personal property, except as otherwise provided.
Section 1105(c) of the Tax Law imposes a tax on the following:
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 land 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 1115(a) of the Tax Law provides, in part:
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
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; 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.

-3­
TSB-A-98(61)S
Sales Tax
September 9, 1998

Opinion
Petitioner’s client, a private golf club, installed custom wood lockers at
its facility.
These lockers were manufactured to the club’s specifications and
were installed by the manufacturer like custom kitchen cabinets. Removal of
these lockers would result in damage to the lockers and reduce or eliminate their
value. Section 1105(c)(3) of the Tax Law provides an exemption from sales tax
for any installation of tangible personal property which results in a capital
improvement. A capital improvement is statutorily defined as an addition or
alteration to real property which substantially adds to the value of the
property, is permanently affixed so that removal would cause damage to the
property or the article itself, and is intended to be permanent. Since the
custom wood lockers substantially add to the value of the property, and were
permanently affixed to the property so that removal would cause damage to the
property, they would meet the statutory test for a capital improvement as
described in Section 1101(b)(9) of the Tax Law, if they are intended to be a
permanent installation. The fact that Petitioner’s client owns the real property
to which the improvement is affixed and the nature of the installation indicates
that the lockers were intended to be permanent. (Grumman Aerospace Corporation,
Dec Tx App Trib, April 11, 1991, TSB-D-91(22)S)) Therefore, these custom
constructed lockers qualify as capital improvements under Section 1101(b)(9).
Sales tax is not due on the purchase from a contractor of installation
services resulting in a capital improvement. See Section 1105(c)(3)(iii) of the
Tax Law. The purchase from a contractor of the materials incorporated into a
capital improvement is exempt from tax if the contractor also installs the
materials for the purchaser. See Section 1115(a)(17) of the Tax Law. In that
instance, the contractor would have been required to pay tax on the materials
incorporated into the capital improvement. Since Petitioner’s client purchased
the lockers and installation of these lockers from the manufacturer, and the
lockers qualify as a capital improvement, no sales tax is due from Petitioner’s
client on the purchase or the installation of these lockers. Whenever capital
improvement work is performed, the purchaser of the installation service must
provide the installation contractor with a Certificate of Capital Improvement
(Form ST-124) within 90 days of rendition of the service to avail itself of this
exemption from sales and use tax. See Section 1132(c) of the Tax Law and Section
532.4 of the Sales and Use Tax Regulations.

DATED: September 9, 1998

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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