I'm a controller for an electric installation and repair company in the Northeast. We're trying to understand the sales tax requirements for capital improvements when the service is provided in New York. The rules are very confusing and we're not sure if we're collecting sales tax correctly from our clients and paying it to our suppliers.

ANSWER

The BIDaWIZ Team's Answer:

Generally, a contractor must pay sales tax to their supplier for the purchase of electric materials and supplies. This rule applies whether the materials are used in performing a capital improvement, repair, or installation service. However, the sales tax rules vary as it relates to the client. Specifically, if the work is considered a capital improvement, the client is exempt from sales tax if they pay for the materials, supplies and labor directly from the contractor. If the client purchases the materials and supplies directly from the supplier, they need to remit sales tax for those items, but not the labor.

Please note that if the client is exempt from sales tax for a capital improvement, they need to present Form ST-124, Certificate of Capital Improvement to you.

References: New York Sales Tax Publication 862; NY Tax Law Sections 1101(b)(4), 1105(c)(3), 1105(c)(5)
State: New York
Sales tax category: Product Taxability
Product/Service: Lighting