Is a moisture-survey company's roof inspection service subject to New York sales tax?

Plain-English summary

A-Tech Moisture Survey Corp., a national franchised business, inspects roofs by laying out a marked grid, taking electrical-probe moisture readings at set intervals, and statistically analyzing the results to map where moisture is trapped in the roof. It then reports its findings and recommendations to the building owner so they can plan repairs or replacement, saving time and unnecessary work. The service isn't performed by licensed engineers. A-Tech asked whether these roof-inspection services are subject to New York sales tax.

The Department said the inspection service, by itself, is taxable -- it falls under Tax Law § 1105(c)(5)'s tax on maintaining, servicing, or repairing real property, since the end result of the inspection is information used to maintain or repair the roof (as opposed to a capital improvement). But the Department then laid out two important exceptions, both carried over from earlier rulings:

• Mandatory code-compliance exception: If a roof inspection is performed solely to satisfy a mandatory government code-compliance requirement, and isn't related to or performed in conjunction with actually repairing, maintaining, or servicing the property, it isn't taxable at all -- following the Department's 1996 Elevator Service Companies ruling.
• No-ownership-interest exception: If the person paying for the inspection doesn't own or lease the property being inspected, the charge isn't taxable as "maintaining, servicing or repairing real property," because that tax category is tied to the purchaser having a property interest in what's being maintained -- following the 1990 Matocha and 1993 National Elevator Inspection Services rulings.

What this means for you

Building inspection and moisture-survey companies

Your basic inspection service is taxable real-property maintenance under New York law. But watch your customer's identity and the purpose of the job closely: if the customer is a prospective buyer, real estate agent, or anyone else without an ownership or leasehold interest in the property, don't charge sales tax on that inspection. Likewise, if the inspection is purely to satisfy a mandatory government inspection requirement and isn't tied to actual maintenance or repair work, it's not taxable.

Property owners and building managers ordering roof inspections

Expect to pay sales tax on a standard moisture or condition survey of your own roof, since it's treated the same as any other real-property maintenance service.

Accountants and tax professionals

This ruling closely parallels the electrical-safety-survey ruling in this corpus (TSB-A-98(82)S) -- the same two-track analysis (ownership-interest test; mandatory-code-compliance carve-out) applies to any diagnostic real-property inspection service, regardless of what's being inspected (roofs, elevators, wiring, etc.).

Common questions

Q: Is a roof moisture inspection subject to New York sales tax?
A: Yes, generally, as a real-property maintenance service under § 1105(c)(5) -- unless one of the exceptions below applies.

Q: Does it matter who pays for the inspection?
A: Yes. If the purchaser doesn't own or lease the property (for example, a prospective buyer or their agent), the charge isn't taxable, because the tax applies only to services performed for someone with a property interest in the real estate.

Q: What if the inspection is required by a building code?
A: An inspection performed solely for mandatory government code compliance, and not tied to actual repair, maintenance, or servicing work, is not taxable.

Q: Can another inspection company rely on this ruling directly?
A: Not automatically. This advisory opinion binds the Department only as to the petitioner and the specific facts described. Confirm your own facts (who's paying, and why the inspection is being done) before assuming the same result.

Citations and references

Statutes and rules:

• Tax Law § 1105(c)(5) (tax on maintaining, servicing, or repairing real property)
• 20 NYCRR § 527.5 (installing, repairing, servicing, and maintaining tangible personal property)
• 20 NYCRR § 527.7(b) (maintaining, servicing, or repairing real property; capital improvement distinction)
• Elevator Service Companies, Adv Op Comm T&F, Oct. 7, 1996, TSB-A-96(67)S
• Joseph A. Matocha, Adv Op Comm T&F, Mar. 21, 1990, TSB-A-90(12)S
• National Elevator Inspection Services, Adv Op Comm T&F, Sept. 17, 1993, TSB-A-93(49)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_65s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(65)S
Sales Tax
September 9, 1998

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO S980323B

On March 23, 1998, the Department of Taxation and Finance received a
Petition for Advisory Opinion from A-Tech Moisture Survey Corp, 61 Courtly
Circle, Rochester, New York 14615. Petitioner provided additional information
pertaining to the Petition on April 14, 1998.
The issue raised by Petitioner, A-Tech Moisture Survey Corp. is whether the
roof inspection services performed by Petitioner are subject to sales tax.
Petitioner submits the following facts as a basis for this advisory
opinion.
Petitioner is a national franchised business that was formed in 1975, in
Appleton, Wisconsin. In order to perform its inspections Petitioner creates a
grid pattern across the field of the roof to assist in systematic readings. This
involves stretching a marked rope and painting colored dots at intervals of five
feet.
Readings are recorded on a cross-section drawing of the roof
configuration. Other data is obtained from visual inspection and from additional
readings, using an electrical probe instrument, which are taken at several
locations.
Based on previous soak test data, information is statistically
analyzed to develop contours of differing moisture content in four different
areas on the roof. This information becomes the basis of recommendations to the
building owner with respect to decisions to arrange for roof repairs and/or
replacement.
These services are not performed by licensed engineers.
The
services provided allow the building owner to plan work, with great time savings
and reduction of unnecessary work related activities.
Applicable Law and Regulations
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax.--On and after June first, nineteen hundred
seventy-one, there is hereby imposed and there shall be paid a tax
of four percent upon:
*

*

*

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

*

*

(5) Maintaining, servicing or repairing real property, property or
land, as such terms are defined in the real property tax law,
whether the services are performed in or outside of a building, as

-2­
TSB-A-98(65)S
Sales Tax
September 9, 1998

distinguished from adding to or improving such real property,
property or land, by a capital improvement as such term capital
improvement is defined in paragraph nine of subdivision (b) of
section eleven hundred one of this chapter, but excluding services
rendered by an individual who is not in a regular trade or business
offering his services to the public.
Section 527.5 of the Sales and Use Tax Regulations provides, in part, as
follows:
Installing, repairing, servicing and maintaining tangible personal
property.
(a) Imposition.
*

*

*

(3) Maintaining, servicing and repairing are terms 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.
*
Example 6:

*

*

A company operates a diagnostic service in which it
tests an appliance for a set fee, but does not repair
the appliance. The charge for the diagnostic service is
taxable.

Section 527.7(b) of the Sales and Use Tax Regulations provides, in part:
Imposition. (1) The tax is imposed on receipts from every sale of
the services of maintaining, servicing or repairing real property,
whether inside or outside of a building.
*

*

*

(4) The imposition of tax on services performed on real property
depends on the end result of such service. If the end result of the
services is the repair or maintenance of real property, such
services are taxable. If the end result of the same service is a
capital improvement to the real property, such services are not
taxable.

Example 9:

The replacement of some shingles or patching of a
roof is a repair, but a new asphalt shingle roof
is a capital improvement.

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TSB-A-98(65)S
Sales Tax
September 9, 1998

Opinion
The roof inspection service performed by Petitioner, taken by itself, is
a service subject to tax under Section 1105(c)(5) of the Tax Law. However, a
roof inspection service performed by Petitioner which is done solely for the
purpose of mandatory governmental code compliance, and is not related to or
performed in conjunction with repairing, maintaining or servicing the real
property is not subject to tax (see Elevator Service Companies, Adv Op Comm T&F,
October 7, 1996, TSB-A-96(67)S). Where the purchaser of an inspection service
is not the owner or lessee of the real property which is the subject of the
inspection report, the charge paid by the purchaser of the report will not be
subject to sales tax pursuant to Section 1105(c)(5) of the Tax Law as a charge
for maintaining, servicing or repairing real property, property or land. See
Joseph A. Matocha, Adv Op Comm T&F, March 21, 1990, TSB-A-90(12)S and National
Elevator Inspection Services, Adv Op Comm T&F, September 17, 1993, TSB-A-93(49)S.

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.