Tax Requirements for Contractors
This page provides useful tax information for contractors.Overview
If you are a contractor or repair person, whether you collect sales tax from a customer depends on whether the work you perform is a capital improvement to real property, or is repair, maintenance, or installation work.
When to collect sales tax:
When you perform work that qualifies as a capital improvement to real property, you should not charge your customer sales tax.
For sales tax purposes, a capital improvement is any addition or alteration to real property that meets all three of the following conditions:
•it substantially adds to the value of the real property, or appreciably prolongs the useful life of the real property;
•it 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
•it is intended to become a permanent installation.
When you perform work that qualifies as repair, maintenance, or installation work, you must charge your customer sales tax. These services cover all activities that relate to keeping real property in a condition of fitness, efficiency, readiness, or safety, or restoring it to such condition.
Purchasing materials and supplies:
Materials and other tangible personal property purchased for a project are taxable, whether purchased by a contractor, subcontractor, or the property owner, unless the property owner is entitled to an exemption.
When to collect sales tax:
When you perform work that qualifies as a capital improvement to real property, you should not charge your customer sales tax.
For sales tax purposes, a capital improvement is any addition or alteration to real property that meets all three of the following conditions:
•it substantially adds to the value of the real property, or appreciably prolongs the useful life of the real property;
•it 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
•it is intended to become a permanent installation.
When you perform work that qualifies as repair, maintenance, or installation work, you must charge your customer sales tax. These services cover all activities that relate to keeping real property in a condition of fitness, efficiency, readiness, or safety, or restoring it to such condition.
Purchasing materials and supplies:
Materials and other tangible personal property purchased for a project are taxable, whether purchased by a contractor, subcontractor, or the property owner, unless the property owner is entitled to an exemption.
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