Is a capital improvement exempt from sales tax in New York?
Yes, but only with the paperwork. In New York a capital improvement to real property is exempt to the customer, and the exemption is claimed by the customer giving the contractor Form ST-124. ⚠ The certificate IS the exemption. Without a signed Form ST-124 on file the job is taxable, however obviously it was a capital improvement — that is the single most common way a contractor loses a sales tax audit. A capital improvement is a permanent addition that becomes part of the property; a repair restores something to working order and is treated differently. Source: N.Y. Tax Law §1105(c)(3),(5); Publication 862; TB-ST-104 (Capital Improvements) and TB-ST-129 (Contractors — Repair, Maintenance and Installation Services to Real Property).
| What | New York |
|---|---|
| Capital improvement exempt to the customer | Yes |
| Certificate required | Form ST-124 |
| Repair labor — residential | Taxable |
| Repair labor — commercial | Taxable |
Notes
The canonical version of the whole doctrine. ALL charges for materials and labor on a repair, maintenance or installation project are taxable, including expenses and markup. A capital improvement is exempt when the customer gives the contractor Form ST-124, Certificate of Capital Improvement. The contractor pays tax on materials at purchase and may credit tax paid on materials transferred in a taxable project. Form ST-120.1 is the contractor's own exempt purchase certificate.
Source
N.Y. Tax Law §1105(c)(3),(5); Publication 862; TB-ST-104 (Capital Improvements) and TB-ST-129 (Contractors — Repair, Maintenance and Installation Services to Real Property). — last checked 2026-09-15.
This is a summary of a state’s published guidance, not tax or legal advice. Rates and rules change, local jurisdictions add their own, and the treatment of a specific job depends on the contract and the work. Check the citation and speak to a CPA or a state tax adviser before relying on it.
How Seayora uses this rule
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