A taxpayer’s installation of different types of wall partitions qualified as capital improvements exempt from New York sales tax. According to Tax Law 1105(c)(3), New York imposes a sales tax on the installation of tangible personal property, but exempts capital improvements to real property.
Capital improvement is defined as an addition to real property with all of the following qualifications:
The taxpayer’s wall partitions are designed for greater flexibility than traditional walls but are equally as sturdy and can act as a replacement. The wall partitions cannot be removed from placement without material damage to the partitions themselves or the structure attached, which evidences an “intention of permanency.” Based on the characteristics described, the wall partitions qualify for the exemption for capital improvement and the taxpayer should acquire a Certificate of Capital Improvement for future installations. (TSB-A-20(6)S, New York Commissioner of Taxation and Finance, May 26, 2020).