I
have summarized below, contrasting New York State Advisory Opinions on the
question of imposition of Sales Tax on scaffolding and temporary walkways used
on construction sites. The most recent
opinion was issued this year, and appears to be a departure from previous opinions. It states that the lump sum of the charges for rental and temporary walkway services would not be taxable.
Advisory
Opinion TSB-A-13(11)S
Petitioner
asks whether it must collect sales and use tax on the installation, rental, and
dismantling of temporary pedestrian walkways for use with capital improvements
when the price charged is a lump sum for all services and the rental.
New
York State concluded that the lump sum of the rental and the service of installing
scaffolding, safety netting, hoisting equipment, and temporary pedestrian
walkways are subject to sales tax when the installation is not a “temporary
facility” at a construction site that is a necessary prerequisite to the
construction of a capital improvement to real property.
Please
note that although the question concerned temporary walkways, the response
included the installation of scaffolding and other equipment, presumably since
they are all commonly addressed together, and are issues on sales tax audits.
The
advisory opinion unit continues by focusing on the issue of whether the
facilities are temporary. This is
consistent with NYS Regulation 541.8(a).
They say that if the temporary pedestrian walkway is a “temporary
facility” at a construction site that is a necessary prerequisite to the
construction of a capital improvement to real property, the lump sum
of the rental and services would not be taxable. This is a new position.
If
the rental of the temporary pedestrian walkway is separately charged however,
that charge would be subject to sales tax as a rental of tangible
personal property.
In
the advisory unit’s analysis, they state:
“Petitioner’s
lump sum charge is primarily for the provision of the service of installing and
dismantling temporary pedestrian walkways for its customers.”
This is the key to the opinion. Since this issue is viewed as primarily a
service of installing and dismantling temporary walkways, the advisory unit
rationally opined that it is not subject to sales tax, unless there is a
separate charge for rental.
Contrast
with advisory opinions TSB-A-02(30)S and TSB-A-09(9)S
TSB-A-02(30)S
In
response to almost the identical question as above, the advisory unit’s
conclusion was different:
“Accordingly,
because the agreement between Petitioner and the subcontractor is for the rental
of tangible personal property used by Petitioner to provide temporary
pedestrian walkways, the subcontractor is required to collect the tax on the
total receipts from such equipment rentals. Where the subcontractor charges for
installation or installation and subsequent removal of the rented
pedestrian walkways, whether or not separately stated, the entire charge is
subject to tax” (emphasis
added).
TSB-A-09(9)S
Question:
Is the rental of the specified construction equipment ever considered a
component of a capital improvement project, and therefore not a taxable sale?
Answer:
“Section 541.8(a) of the Sales and Use Tax Regulations provides an
exclusion from tax for charges for “the installation of materials and the
labor” to provide “temporary facilities at construction sites,” including
temporary pedestrian walkways, where the temporary facility is a necessary
prerequisite to the construction of a capital improvement to real property...
The provisions of Sales Tax Reg. § 541.8(a) apply to contracts
for the performance of a service of the installation of temporary facilities at
a construction site, and do not apply to contracts for the rental of tangible
personal property” (emphasis added).
Question:
Under what circumstances is a charge for disassembling scaffolding or temporary
pedestrian walkways taxable?
Answer:
“Disassembly is not one of the enumerated services subject to tax
under Tax Law section 1105(c). However, when disassembly is done as part of a
rental of scaffolding or a temporary pedestrian walkway, it is an integral part
of that rental, and therefore a separate charge for disassembly is taxable” (emphasis added).
In this opinion, the advisory unit obviously considered this issue
specifically one of equipment rental, and therefore concluded: “…that the rental and all related services
are all an integral part of the rental, and is therefore taxable whether
separately stated or not” (emphasis added).
They further explain that in deciding whether a contract qualifies
as a rental of tangible personal property, as distinguished from a contract to
provide a service using the property, the determinative factor is whether the
vendor maintains dominion and control of the property.
The issue of dominion and control is a question of fact that
cannot be determined in the context of an Advisory Opinion. If the equipment provider is not responsible
for the maintenance, insurance, or upkeep of the equipment once it has been
installed and approved by the appropriate governmental agencies, it would
appear that it is a rental rather than a service.
The new opinion TSB-A-13(11)S
discussed above, did not address dominion and control. The issue of installation,
rental, and dismantling
was determined to be primarily a service, and as long as the installation is a
temporary structure, a necessary prerequisite to a capital improvement, and
billed as a lump sum, the service is not subject to NYS sales tax.
