Are a home electrical safety inspection ('survey') and mandatory municipal code-compliance electrical inspections subject to New York sales tax?

Plain-English summary

Commonwealth Electrical Inspection Service, Inc. performs two kinds of electrical inspections: (1) mandatory inspections for new and remodeled construction, required by local municipalities and their building codes, and (2) voluntary "surveys" -- visual electrical safety inspections requested by homeowners, prospective buyers, or real estate agents ahead of a pending home sale, resulting in a written report used to decide whether repairs or price adjustments are needed. Commonwealth performs no repairs itself. It asked whether it needs to register as a New York sales tax vendor and collect tax on the "survey" inspections.

New York taxes services that maintain, service, or repair real property, and the Department found a voluntary electrical safety survey is exactly that kind of diagnostic maintenance service -- like testing an appliance to check its condition, even without repairing it. But the taxable-service category only reaches charges paid by the property's owner or lessee; when a prospective home buyer or a real estate agent (someone with no ownership or leasehold interest in the property) pays for the inspection, that charge isn't a payment for "maintaining, servicing or repairing" property they don't own, so it falls outside the taxable category entirely. Separately, the Department confirmed that inspections performed purely to satisfy mandatory government building-code requirements -- regardless of who pays for them -- aren't a taxable service at all, since that's not one of New York's enumerated taxable services. Because Commonwealth does make some taxable sales (surveys bought by owners/lessees), it must register as a vendor, collect tax on those sales, and keep records distinguishing taxable from non-taxable inspections.

What this means for you

Home inspectors, electrical inspection companies, and similar diagnostic-service providers

Who's paying for the inspection determines taxability just as much as what the inspection covers. The same visual safety inspection is taxable when the property owner or a lessee pays for it, but not taxable when a prospective buyer or their agent pays for it -- track the payer's relationship to the property on every invoice, not just the service performed.

Municipalities, contractors, and property owners needing code-compliance inspections

Inspections performed solely to satisfy a mandatory government building-code requirement aren't subject to sales tax at all, regardless of who requests or pays for them, because they aren't on New York's enumerated list of taxable services.

Accountants and tax professionals

This ruling extends the reasoning from A-Tech Moisture Survey Corp. (TSB-A-98(65)S) and Joseph A. Matocha (TSB-A-90(12)S) to electrical inspections specifically, and cross-references the "diagnostic service" example for tangible personal property maintenance (20 NYCRR § 527.5(a)(3), Example 6) as an analogy for real property. It's a useful template for any pre-sale home-inspection business (structural, pest, environmental, electrical) needing to sort taxable owner-requested inspections from non-taxable buyer/agent-requested ones.

Common questions

Q: Is a home inspection always taxable in New York?
A: No -- it's taxable only when the property's owner or lessee is the one paying for it. The identical inspection purchased by a prospective buyer or a real estate agent is not taxable.

Q: Does it matter that the inspector doesn't perform any repairs?
A: No -- a diagnostic-only inspection service still counts as "maintaining" real property for tax purposes, the same way testing (without repairing) an appliance is a taxable maintenance service for tangible personal property.

Q: Are inspections required by a municipal building code taxable?
A: No -- inspections performed solely for mandatory government code compliance aren't an enumerated taxable service, regardless of who requests or pays for them.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(8)(i) (definition of "vendor")
• Tax Law § 1105(c)(5) (maintaining, servicing, or repairing real property)
• Tax Law § 1131(1) (persons required to collect tax)
• Tax Law § 1132 (registration and collection)
• Tax Law § 1134(a)(1) (vendor registration)
• Tax Law § 1135 (recordkeeping)
• Tax Law § 1210 (local sales tax authority)
• 20 NYCRR § 526.10(a)(1)(ii) (vendor)
• 20 NYCRR § 527.7 (maintaining, servicing, or repairing real property)

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_82s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(82)S
Sales Tax
December 2, 1998

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S980909A

On September 9, 1998, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Commonwealth Electrical Inspection Service, Inc., 176 Doe Run Road,
Manheim, PA 17545.
The issue raised by Petitioner, Commonwealth Electrical Inspection Service, Inc., is whether
it is required to register as a vendor and collect and remit New York State and local sales tax on
receipts from its performance of certain electrical inspections called “surveys.”
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner performs electrical inspections for commercial, industrial and new and remodeled
residential construction. These inspections are authorized by local municipalities, and must comply
with their regulations.
Petitioner also performs electrical inspections which are requested by homeowners, potential
buyers or real estate agents for pending residential real estate sales. Petitioner visually inspects the
existing residential structures for safety issues and quality of usability, and provides its customers
with written reports of its findings. No repair services are performed by Petitioner for its customers.
The customers generally rely on the inspection reports to decide if price adjustments or repair of
deficiencies are necessary before the real estate sales take place. Petitioner refers to these inspections
as “surveys,” and it is this type of inspection which is in question in this Advisory Opinion.
Applicable Law and Regulations
Section 1101(b)(8)(i) of the Tax Law defines the term “vendor,” in relevant part, as:
(A) A person making sales of tangible personal property or services, the
receipts from which are taxed by this article. . . .
Section 1105(c) of the Tax Law imposes sales tax, in part, upon:
The receipts from every sale, except for resale, of the following services:
*

*

*

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(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 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 1131(1) of the Tax Law defines “[p]ersons required to collect tax,” in part, as “every
vendor of tangible personal property or services . . . .”
Section 1134(a)(1) of the Tax Law provides, in part:
(i) Every person required to collect any tax imposed by this article ... shall file
with the commissioner a certificate of registration, in a form prescribed by the
commissioner, at least twenty days prior to commencing business or opening a new
place of business . . . .
Section 526.10(a)(1)(ii) of the Sales and Use Tax Regulations provides:
A person making sales of services, the receipts from which are subject to tax,
is a vendor. This may include a person entering this State from outside the state to
perform services on property located in this State.
Example 4:

S Company (a shopping mall management company)
hires B Company (a parking lot maintenance company
located in New Jersey) to patch, seal and line-strip the
parking lots of nine malls managed by S Company at
various locations throughout New York. B Company
is a vendor because it is providing a service in New
York subject to tax.

Section 527.5(a) 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 installing, maintaining, servicing or repairing tangible personal property. . . .
*

*

*

(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.

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*
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. (Emphasis added)

Section 527.7 of the Sales and Use Tax Regulations provides, in part:
(a) Definitions. (1) Maintaining, servicing and repairing are terms which are
used to cover all activities that relate to keeping real property in a condition of
fitness, efficiency, readiness or safety or restoring it to such condition . . . .
(2) Real property, property and land are defined as in subdivision 12 of
section 102 of the Real Property Tax Law. Among the items considered in this
classification are:
*

*

*

(ii) buildings and structures erected upon, under or above land, or affixed
thereto:
*

*

*

(v) mains, pipes and tanks for conducting steam, heat, water, oil, gas,
electricity; and
(vi) boilers, heating, ventilating, lighting apparatus, plumbing.
*

*

*

(b) 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.
*
Example 2:

*

*

Company A enters into an agreement to provide periodic
maintenance services on elevators and escalators belonging to
its customers. The contract provides for inspection,
lubrication and the performance of necessary repairs. These

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services are taxable as maintaining, servicing of real property
which is subject to the sales tax. (Emphasis added)
Opinion
Petitioner provides electrical inspection services performed through visual observation for
safety and usability purposes. Pursuant to Section 1105(c)(5) of the Tax Law and Section
527.7(b)(1) of the Sales and Use Tax Regulations, such services constitute the maintaining of real
property (see A-Tech Moisture Survey Corp, Adv Op Comm T&F, September 9, 1998,
TSB-A-98(65)S; Joseph A. Matocha, Adv Op Comm T&F, March 21, 1990, TSB-A-90(12)S).
Section 1105(c)(3) of the Tax Law imposes sales tax on the service of maintaining tangible personal
property. Section 527.5 of the Sales and Use Tax Regulations provides that this activity relates to
keeping the property in a condition of fitness, efficiency, readiness or safety. While real property
is involved in this case, the similarity in the imposition of sales tax upon the services of maintaining
real and tangible property is to be noted. The electrical inspection service Petitioner performs is a
diagnostic service for keeping the real property in a condition of fitness, efficiency, readiness and
safety, as contemplated in Example 6 of Section 527.5(a)(3) of the Sales and Use Tax Regulations
with respect to tangible personal property. Therefore, such service is subject to sales tax where it
is performed for the owner or lessee of the real property. However, where the purchaser of
Petitioner’s service is not the owner or lessee of the real property which is the subject of the
inspection report, i.e., potential home buyers and real estate agents, the charge paid by the purchaser
for the report is not 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 A-Tech Moisture Survey
Corp, supra; Joseph A. Matocha, supra).
Additionally, inspection services performed solely for purposes of mandatory governmental
code compliance, whether performed for the property owner or a third party, and which are not
related to or performed in conjunction with repairing, maintaining or servicing tangible personal
property or real property are not enumerated taxable services and are not subject to State and local
sales and use taxes (see Elevator Service Companies, Adv Op Comm T&F, October 7, 1996,
TSB-A-96(67)S; Richard T. Smokowski, Adv Op Comm T&F, March 27, 1997, TSB-A-97(18)S).
Since Petitioner provides taxable electrical inspection services in New York State, Petitioner
falls within the definition of vendor as defined in Section 1101(b)(8)(i) of the Tax Law and Section
526.10(a)(1)(ii) of the Sales and Use Tax Regulations. Therefore, Petitioner is a person required to
collect the sales tax in accordance with Section 1131 of the Tax Law. Accordingly, Petitioner is
required to register under Section 1134 of the Tax Law and to file returns and remit the New York
State sales tax required to be collected, as well as local sales tax imposed under the authority of
Article 29 of the Tax Law. See Sections 1132 and 1210 of the Tax Law. It is the responsibility of
every vendor who sells both taxable and nontaxable services to maintain accurate records indicating
such sales. See Section 1135 of the Tax Law which sets forth the record-keeping requirements
applicable to vendors for purposes of sales and compensating use taxes. Petitioner’s records must

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indicate the identity of the services sold, to whom they were sold and the amount of tax due and
collected thereon.

DATED: December 2, 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.