NY State Sup. (17 Mar. 21) (O) v 2.1.4
Instructions
Page 2 of 2 ST-124 (12/15) (11/2018 THD)
When the customer completes this certificate and gives it to the
contractor, who accepts it in good faith, it is evidence that the
work to be performed will result in a capital improvement to real
property.
A capital improvement to real property is an addition or alteration
to real property that:
(a) substantially adds to the value of the real property or
appreciably prolongs the useful life of the real property, and
(b) 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
(c) is intended to become a permanent installation.
The work performed by the contractor must meet all three of
these requirements to be considered a capital improvement. This
certificate may not be issued unless the work qualifies as a
capital improvement. See Tax Bulletin Capital Improvements (TB-
ST-104).
If a contractor performs work that constitutes a capital
improvement, the contractor must pay tax on the purchase of
building materials or other tangible personal property, but is
not required to collect tax from the customer for the capital
improvement. No credit or refund is allowed for the tax paid on the
cost of materials by the contractor. See Tax Bulletin
Contractors – Sales Tax Credits (TB-ST-130)
For guidance as to whether a job is a repair or a
capital improvement, see Publication 862, Sales and Use Tax
Classifications of Capital Improvements and Repairs to Real
Property.
A contractor, subcontractor, property owner, or tenant, may
not use this certificate to purchase building materials or other
tangible personal property tax free. A contractor’s acceptance
of this certificate does not relieve the contractor of the liability
for sales tax on the purchase of buildingmaterials or other tangible
personal property subsequently incorporated into the real property
as a capital improvement unless the contractor can legally issue
Form ST-120.1, Contractor Exempt Purchase Certificate. (See
Publication 862 for additional information.)
The term materials is defined as items that become a physical
component part of real or personal property, such as lumber, bricks,
or steel. This term also includes items such as doors, windows,
sinks, and furnaces used in construction.
Floor covering
Floor covering such as carpet, carpet padding, linoleum and vinyl
roll flooring, carpet tile, linoleum tile, and vinyl tile installed as the
initial finished floor covering in new construction, a new addition
to an existing building or structure, or in a total reconstruction of
an existing building or structure, constitutes a capital improvement
regardless of the method of installation. As a capital improvement,
the charge to the property owner for the installation of floor
covering is not subject to New York State and local sales and
use taxes. However, the retail purchase of floor covering (such
as carpet or padding) itself is subject to tax. Floor covering
installed other than as described above does not qualify as a capital
improvement. Therefore, the charges for materials and labor are
subject to sales tax. The contractor may apply for a credit or refund
of any sales tax already paid on the materials.
The term floor covering does not include flooring such as
ceramic tile, hardwood, slate, terrazzo, and marble. The rules for
determining when floor covering constitutes a capital improvement
do not apply to such flooring. The criteria stated in (a), (b), and (c)
above apply to such flooring.
A certificate is accepted in good faith when a contractor has no
knowledge that the certificate is false or is fraudulently given, and
reasonable ordinary due care is exercised in the acceptance of the
certificate.
If a contractor gets a properly completed Form ST-124 from the
customer within 90 days after rendering services, and accepts it
in good faith, the customer bears the burden of proving the job or
transaction was not taxable.
If you are a contractor who installs items such as washing
machines, clothes dryers, dishwashers, refrigerators, furniture, etc.,
which when installed or placed in real property do not become part
of the real property, you must collect tax on your charge for the
installation. The individual charge for any of these items is also
taxable as the sale of tangible personal property.
If a contractor does not get a properly completed Certificate
of Capital Improvement within 90 days, the contractor bears
the burden of proving the work or transaction was a capital
improvement. The failure to get a properly completed certificate,
however, does not change the taxable status of a transaction;
a contractor may still show that the transaction was a capital
improvement.
The contractor must keep any exemption certificate for at least
three years after the due date of the last return to which it relates,
or the date the return was filed, if later. The contractor must
also maintain a method of associating an exempt sale made to a
particular customer with the exemption certificate on file for that
customer.
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