November 27, 2012

NYS Sales Tax Considerations As We Rebuild After Hurricane Sandy

Tax & Business

As we rebuild after Hurricane Sandy it is essential we take advantage of all sales tax exemptions and benefits that may be available to you or your business. In addition, new and revitalized governmental programs may be instrumental in helping you rebuild.

Products and Services Subject to Sales Tax
Many of the products and services you may have to purchase as a result of the storm are subject to sales tax. For example, most sales of tangible personal property, such as building materials, generators, appliances, and automobiles, to name just a few items, are subject to sales tax. Except for the purchase of an automobile, the person who pays the tax on the building materials, generators, and appliances depends upon who is purchasing the items and how the items are installed. Since the method of installation may affect how the work is taxed, certain work will need to be looked at on a case-by-case basis.

For example, if you hire a contractor to furnish and install building materials, appliances or a generator in such a way that the installation becomes a capital improvement then the sale is not subject to sales tax. In order to qualify as tax exempt capital improvement the installation must meet all of the following conditions:

The item must be permanently attached to real property,
The installation must substantially add to the value of the property or prolong the useful life of the property it is installed upon; and
The intention of the installation must be permanent. This last condition can be an issue in the case of a tenant whose lease reads that any improvements must be removed at the end of the lease.

On the other hand, if you purchase the building materials, generator, etc. and hire a contractor to install the items for you then you will have to pay the sales tax to your supplier on all of the materials purchased. The contractor’s labor to install such may however be exempt if the above three capital improvement conditions are met. For more information on the various types of work that may qualify as capital improvements see NYS’ Publication 862, Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property, by visiting: http://www.tax.ny.gov/pdf/publications/sales/pub862.pdf and Sales Tax Bulletin ST-104, Capital Improvements at: http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/capital_improvements.htm.

If you are a contractor or repair person, you must also be aware of the sales tax rules regarding exempt capital improvements and taxable repair/maintenance services so you can meet your sales tax collection and filing responsibilities. See http://www.tax.ny.gov/pubs_and_bulls/publications/sales/contractors.htm where you will find several resources to help you understand your sales and use tax responsibilities.

In addition, many of the services sold by businesses as a result of the storm are subject to sales tax. Among the list of taxable services are: trash/debris removal (certain exceptions apply), appliance repairs, tree removal, and repairing of damaged roofing, siding, wiring, windows, etc. For more detailed information about what products and services are subject to sales tax see New York State Tax Bulletin, TB-ST-740, located at: Quick Reference Guide for Taxable and Exempt Property and Services (TB-ST-740). Also see Publication 862 referenced above.

Voucher Purchases
As with many of the natural disasters we face, the Federal Emergency Management Agency (“FEMA”) and the Red Cross often issue vouchers that can be used to obtain specifically identified goods and services (e.g., hotel accommodations). The value of items purchased with these vouchers is not subject to sales tax. However, if the individual pays a vendor for additional taxable products and services not covered by the voucher, the additional amount is subject to sales tax.

As consumers and homeowners we should always be wary of unscrupulous contractors. There are many contractors who may not be looking out for your best interest. Many of these contractors are from outside NYS looking to make a quick profit. NYS Tax and Finance has adopted an audit/compliance policy with respect to businesses and individuals who are present in NYS on a temporary basis as a result of Hurricane Sandy. However, this policy does not apply to sales tax or to any other taxes not specifically discussed in the aforementioned publication. You should be extremely cautious when hiring an out of state contractor and call the NYS Tax Department, or your local State and Local Tax Professional if you are not sure whether sales tax applies to your job. To protect yourself from a later potential sales tax assessment you should consider making a direct purchase of the necessary repair materials from a known local vendor such as a local lumberyard, plumbing supplier or retailer like Home Depot or Lowe’s. Remember, it is ultimately your responsibility to pay sales tax where due.

Governmental Programs to Help Businesses Rebuild
Edward P. Mangano, Nassau County Executive, has announced the formation of a new Task Force, The Business Recovery Task Force, to help Nassau County businesses rebuild after Hurricane Sandy. The committee’s mission is to create jobs by providing Nassau businesses and not-for-profit organizations the tools they need to restore, reopen and grow businesses in Nassau County. In conjunction with the Nassau County Industrial Development Agency, (“IDA”) the Task Force is providing disaster relief information and recovery assistance to Nassau County businesses impacted by Hurricane Sandy.

The Nassau County IDA through its LEADS (Local Enterprise Assistance and Development Service) program is offering IDA sales tax waivers to qualifying small businesses to assist them in purchasing furniture, fixtures, and equipment and making capital improvements and renovations thus saving businesses owners 8.625% on their purchases.

The NYC Industrial Development Agency will waive up to $100,000 in sales taxes on reconstruction materials and equipment. To learn more about the Hurricane Emergency Sales Tax Exemption Program, please visit www.nyc.gov/sbs.

Businesses in Suffolk County can now apply for an emergency sales tax exemption on purchases related to Sandy reconstruction. The Suffolk Industrial Development Agency will exempt certain small businesses that sustained physical damage from Hurricane Sandy from the county’s 8.625% sales tax for purchases related to reconstruction, renovation, repair and /or the purchase replacement equipment. To learn more, visit http://bit.ly/UPfWPU.

There are many additional programs to help assist businesses affected by Hurricane Sandy. For a detailed listing visit NYS’ Empire State Development web site at http://www.esd.ny.gov/StormRecovery.asp or call your local Marcum State and Local Tax Professional.

As the rebuilding process continues we expect our federal, state and local governments to announce additional programs or enhance existing programs. Marcum will keep you informed of these important developments.

Significant Sales Tax Rate Reduction on Commercial Rentals in Florida Starting June 2024

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