1. (a) The term customers in this classification includes, but is not limited to:

   1. (1) residential customers; and

   2. (2) business customers.

      (b) Capital improvements contracts.

   3. (1) Purchases. All purchases of tangible personal property (excluding qualifying production machinery and equipment exempt under section 1115[a][12] of the Tax Law) which are incorporated into and become part of the realty or are used or consumed in performing the contract are subject to tax at the time of purchase by the contractor or any other purchaser. A certificate of capital improvement may not be validly given by any person or accepted by a supplier to exempt the purchase of these materials.
   4. (2) Labor and material charges. All charges by a contractor to the customer for adding to or improving real property by a capital improvement are not subject to tax provided the customer supplies the contractor with a properly completed certificate of capital improvement.

   5. (3) Direct payment permit. A direct payment permit cannot be used as a device to defer payment of the sales tax on purchases which are taxable. A contractor who receives a direct payment permit from a customer cannot use such permit to defer his payment of tax on purchases used by him or incorporated into a capital improvement to real property. The contractor's liability for the tax on his purchases are not relieved by his customer's direct payment permit. Cross-reference:

      Cross-reference:

      For information on direct payment permits, see section 532.5 of this Title.

   6. (4) Documents; capital improvement contracts.

      1. (i) When a properly completed certificate of capital improvement has been furnished to the contractor, the burden of proving the job or transaction is not taxable and the liability for the tax rests solely upon the customer.

         1. (a) The prime contractor should obtain a certificate of capital improvement from the customer and retain it as part of his records. Copies of such certificate must be furnished to all subcontractors on the job and retained as part of their records.
         2. (b) A certificate of capital improvement may not be issued by a contractor, subcontractor or any other person to a supplier on the purchase of tangible personal property.

      2. (ii) Where a contractor does not receive a capital improvement certificate from a customer, the contract or other records of the transaction will prevail. In such case:

         1. (a) where the contractor does not receive a capital improvement certificate, collects tax on the full invoice price and the job is a capital improvement to real property, the contractor is liable for the tax on the cost of materials incorporated into the job, plus the tax collected from the customer. The customer is entitled to a refund of the tax paid to the contractor; or
         2. (b) where the contractor does not receive a capital improvement certificate, collects no tax on the charges billed to the customer and the job is a capital improvement to real property, the contractor is liable for the the tax on the cost of materials incorporated into the job performed.

      3. (iii) If a contract includes the sale of tangible personal property which remains tangible personal property after installation, the contractor must collect the appropriate New York State and local taxes from the customer on the selling price, including any charge for installation, of the tangible personal property unless a properly completed exemption certificate is issued by the customer. The contractor may apply for a credit or refund of taxes he has paid on purchases of the tangible personal property that remain tangible personal property after installation. Cross-reference: Example 1: Cross-references:

         Cross-reference:

         For refunds and credits, see Part 534 of this Title. For vendors' obligations to the Department of Taxation and Finance in relation to exemption certificates, see section 532.4 of this Title.

         Example 1:

         A contractor sells a building he has constructed and, as a part of the sale agreement, installs free standing water fountains which remain tangible personal property when installed. The contractor's billing to his customer must separately state all charges for tangible personal property included in the sales agreement. The New York State and applicable local tax rate must be collected on the total charges for the water fountains including any installation charges. In this instance, the contractor may purchase the water fountains tax-free using a contractor exempt purchase certificate. If he pays the tax to his supplier, he is entitled to a refund or credit of the tax paid on the purchase of the water fountains.

         Cross-references:

         For production machinery and equipment, see section 541.6 of this Part. For equipment, tools, and supplies, see sections 541.9 and 541.10 of this Part. For use tax liability, see Part 531 of this Title. For refunds and credits, see Part 534 of this Title.

         (c) Agency contracts.

   7. (1) If a customer enters into an agency contract with a prime contractor and all subcontractors, all purchases of materials for such contract are taxable to the customer (other than qualifying production machinery and equipment exempt under section 1115(a)(12) of the Tax Law). In order to create an agency relationship, all of the following conditions must be met:

      1. (i) purchases must be billed or invoiced by the vendor to the customer or to the contractor specifying that the contractor is acting as agent for the customer (e.g., X contractor, as agent for Y, name of corporation) and identify the place of delivery;
      2. (ii) payment must be made by the customer or by the contractor, acting as agent, directly to the vendor from a special fund created by the customer for this specific purpose; and
      3. (iii) deliveries must be made to the job site; or under certain circumstances (such as where the materials require additional fabrication before installation on the job site or for storage to protect the materials from theft or vandalism prior to installation at the job site) deliveries may be made to a site, other than the job site, providing the ultimate delivery of the materials is made to the job site. Where delivery is made to a site, other than the job site, the purchases must be billed or invoiced by the vendor to the customer or to the contractor as agent, identify the place of delivery, the customer's full name and address and the job site location where the materials will ultimately be delivered for installation.
   8. (2) Under an agency relationship, the sale of tangible personal property is deemed to be a retail sale to the customer (principal) and the customer is liable for the tax due on his purchases of such tangible personal property.

   9. (3) A contractor is liable for the tax due on purchases made under a purported agency contract if subsequently it is determined the contract does not qualify as an agency contract. Example 1: Example 2:

      Example 1:

      A contractor enters into a purported agency contract with a customer for the construction of a capital improvement to real property. The customer or contractor, acting as agent for the customer, makes taxable purchases of materials, and purchases and rental of tools and/or equipment and supplies. Subsequently, it is determined the contract does not qualify as an agency contract. The contractor is liable for the tax due on the purchases or rentals of materials, tools and/or equipment and supplies. The contractor should include the tax as part of his cost of materials and services billed to the customer. The customer may submit a claim for refund or credit of the tax paid on purchases or rentals made before it was determined the contract did not qualify as an agency contract, providing the claim is submitted within three years of the date the tax was payable to the Department of Taxation and Finance.

      Example 2:

      Same as the example in subdivision (b) of this section except the customer is a holder of a direct payment permit. The customer either issues the direct payment permit to vendors and makes tax free purchases or issues the direct payment permit to the contractor, who acting as agent for the customer, uses the direct payment permit to make tax free purchases. Subsequently, it is determined the contract does not qualify as an agency contract. The contractor is liable for the tax due on the purchases or rentals of materials, tools and/or equipment and supplies. The contractor should include the tax as part of his cost of materials and services billed to his customer.

      If a proposed agency contract differs from the conditions in this paragraph, copies of the proposed contract and procedures may be submitted for an opinion to the Instructions and Interpretations Unit, Sales Tax Section, Technical Services Bureau, W.A. Harriman Campus, Albany, NY 12227.

      (d) Maintaining, installing, repairing, and servicing tangible personal property and real property.

   10. (1) Tangible personal property.

       1. (i) Charges for repair, service, maintenance, and installation of tangible personal property which retains its identity as tangible personal property are taxable to the customer based on the full invoice price.

       2. (ii) Some items of tangible personal property that retain their identity as tangible personal property after installation are:

          1. (a) theater seats;
          2. (b) bowling lanes and related equipment;
          3. (c) free-standing shelves, counters, bars and appliances (refrigerators, stoves, window air conditioning units); and

          4. (d) above ground swimming pools. Example 1: Example 2:

             Example 1:

             A customer contracts for the installation of a washer and dryer to be hooked up to existing wiring and plumbing in his home. The charge for the installation is taxable.

             Example 2:

             A contractor sells and installs an above-ground swimming pool. The pool consists of a vinyl liner supported by an aluminum and wood frame, which rests on the ground, and a wood and metal deck. The vinyl liner rests on a bed of sand to prevent damage. The deep end (hopper) of the pool is set approximately two feet in the ground. The pool may be dismantled and moved without substantially damaging the real property. The installation of this pool is not a capital improvement, as it may be dismantled and moved without substantial injury to the land, there is no intent that it become a permanent installation and it has not become affixed so that it has become part of the real property. Therefore, the charges for the sale and installation of the pool are subject to the tax.

       3. (iii) A subcontractor must collect tax on all his charges to a prime contractor for repair, service, maintenance, and installation of tangible personal property unless the prime contractor issues a properly completed exemption certificate or a capital improvement certificate to the subcontractor.
       4. (iv) For treatment of repairs, service, maintenance, and installation charges for production machinery and equipment, see section 541.6 of this Part.

   11. (2) Real property. Charges for repair, service, and maintenance to real property, except for interior cleaning and maintenance services of a janitorial nature performed on a regular contractual basis for a term of not less than 30 days, are taxable. However, charges for the services of window cleaning, rodent and pest control, and trash removal from buildings are also subject to tax. Cross-reference:

       Cross-reference:

       For debris removal, see section 541.7 of this Part. For exclusion of interior cleaning and maintenance services, see section 527.7(c)(3) of this Title. For repairing, servicing, maintaining production machinery and equipment, see section 541.6 of this Part.

   12. (3) Purchases. Purchases of any tangible personal property (excluding qualifying production machinery and equipment exempt under section 1115[a] [12] of the Tax Law) made by a contractor, subcontractor, or repairman for use or consumption in maintaining, servicing, or repairing real or personal property of others are subject to tax. The contractor is entitled to a refund or credit of tax paid on such materials incorporated into real property where such property is later transferred to the purchaser in conjunction with the performance of a service subject to the tax. Example 3: Cross-reference:

       Example 3:

       The repainting of a building is not a capital improvement. The customer must pay tax on the total contract charge for this service. The painter is liable for the tax on the materials, tools and supplies he uses for painting ( e.g., paint, spackling, brushes and drop cloths), subject to a right of refund or credit for the tax paid on the cost of the materials incorporated into the real property (e.g., paint, spackling).

       Cross-reference:

       For refunds and credits, see Part 534 of this Title.

Tax Law, §§ 1101(b)(4)(i), (9); 1105(c)(3), (5); 1115(a)(17)