Is a capital improvement exempt from sales tax?

It depends on the state. Seayora holds a published statute for 8 states. The table below gives the figure for each, with the statute it comes from.

Capital improvement, state by state

StateCapital improvementSource
ArizonaNot exemptA.R.S. §42-5075 (prime contracting classification); A.R.S. §42-5074 / MRRA treatment for maintenance, repair, replacement and alteration.
HawaiiNot exemptHaw. Rev. Stat. ch. 237 (General Excise Tax — levied on the business's gross income, contracting included, not on the customer).
MississippiNot exemptMiss. Code §27-65-21 (contractor's tax on commercial construction contracts exceeding $10,000).
New JerseyExempt with Form ST-8N.J.S.A. 54:32B-3(b)(4); Tax Topic Bulletin S&U-2, "Sales Tax and Home Improvements".
New MexicoNot exemptNMSA 1978 §7-9-4 (gross receipts tax on receipts from performing services and selling property in New Mexico).
New YorkExempt with Form ST-124N.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).
South DakotaNot exemptSDCL ch. 10-46A (contractor's excise tax on realty improvement contracts) and ch. 10-45 (sales tax).
WashingtonNot exemptRCW 82.04.050(2)(b); WAC 458-20-170 (constructing, repairing or improving real property for a consumer is a retail sale).

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.

Only states where Seayora holds a published statute appear above. Where no statute is recorded, no figure is shown rather than a guess.

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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).

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Is a capital improvement exempt from sales tax in New Jersey?

Yes, but only with the paperwork. In New Jersey a capital improvement to real property is exempt to the customer, and the exemption is claimed by the customer giving the contractor Form ST-8. ⚠ The certificate IS the exemption. Without a signed Form ST-8 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.J.S.A. 54:32B-3(b)(4); Tax Topic Bulletin S&U-2, "Sales Tax and Home Improvements".

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Is a capital improvement exempt from sales tax in Washington?

No. Washington does not exempt capital improvements to real property the way most states do. Work that would be exempt elsewhere is taxable here. 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: RCW 82.04.050(2)(b); WAC 458-20-170 (constructing, repairing or improving real property for a consumer is a retail sale).

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Is a capital improvement exempt from sales tax in Arizona?

No. Arizona does not exempt capital improvements to real property the way most states do, because it taxes the contractor's gross receipts rather than running a sales tax on the customer. Work that would be exempt elsewhere is taxable here. 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: A.R.S. §42-5075 (prime contracting classification); A.R.S. §42-5074 / MRRA treatment for maintenance, repair, replacement and alteration.

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Is a capital improvement exempt from sales tax in Hawaii?

No. Hawaii does not exempt capital improvements to real property the way most states do, because it taxes the contractor's gross receipts rather than running a sales tax on the customer. Work that would be exempt elsewhere is taxable here. 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: Haw. Rev. Stat. ch. 237 (General Excise Tax — levied on the business's gross income, contracting included, not on the customer).

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Is a capital improvement exempt from sales tax in Mississippi?

No. Mississippi does not exempt capital improvements to real property the way most states do, because it taxes the contractor's gross receipts rather than running a sales tax on the customer. Work that would be exempt elsewhere is taxable here. 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: Miss. Code §27-65-21 (contractor's tax on commercial construction contracts exceeding $10,000).

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Is a capital improvement exempt from sales tax in New Mexico?

No. New Mexico does not exempt capital improvements to real property the way most states do, because it taxes the contractor's gross receipts rather than running a sales tax on the customer. Work that would be exempt elsewhere is taxable here. 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: NMSA 1978 §7-9-4 (gross receipts tax on receipts from performing services and selling property in New Mexico).

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Is a capital improvement exempt from sales tax in South Dakota?

No. South Dakota does not exempt capital improvements to real property the way most states do. Work that would be exempt elsewhere is taxable here. 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: SDCL ch. 10-46A (contractor's excise tax on realty improvement contracts) and ch. 10-45 (sales tax).

More on South Dakota

How Seayora uses this rule

Seayora resolves this rule on every invoice a contractor raises — per line, from the job site’s own address — and prints the rate, the jurisdiction and this citation on the document itself, so the estimate a customer accepts is the invoice they are billed. Where the rule is more nuanced than a single answer, Seayora refuses to guess a total rather than quoting a confident wrong one.

Other rules compared across states

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