N.Y. Comp. Codes R. & Regs. tit. 20 § 541.11

Current through Register Vol. 46, No. 45, November 2, 2024

Section 541.11 - Fabrication and manufacturing

Tax Law, §§ 1105(c)(2), 1110, 1111(a)

(a) Fabricators and manufacturers who install their fabricated or manufactured product into real property are contractors.

(b)Fabricators as contractors.

(1) When a contractor-fabricator purchases tangible personal property which he fabricates and installs to the specifications of a capital improvement, the value added by such fabrication is not subject to the use tax.

Example 1:

A contractor-fabricator purchases steel beams from a manufacturer and pays the sales tax on his cost. His employees fabricate the beams to job specifications and install the beams in a capital improvement job. The contractor-fabricator is not subject to a use tax on the value added by his fabrication.

(2) However, where a contractor fabricates tangible personal property of others, without installation, he is required to collect the tax on his total charges even if the property is to be installed by another to the specifications of a capital improvement. If he fabricates tangible personal property and sells the tangible personal property, the total charge for the tangible personal property and services performed thereon is subject to tax.

Example 2:

A contractor purchases steel beams which must be fabricated before they can be installed. The work is subcontracted out for fabrication. The fabricator's charge to the contractor for the fabrication of the steel beams which the contractor will install is subject to the tax.

(3) Machinery and equipment used predominantly to fabricate tangible personal property which the fabricator installs are subject to the tax.

(4) When a fabricator uses machinery and equipment directly and predominantly to process tangible personal property for sale without installation (as the term directly and predominantly is used in section 528.13 and the term processing is used in section 531.2 of this Title), such machinery and equipment is exempt from the New York State and local sales and use taxes, including the taxes imposed in New York City under section 1107 of the Tax Law.

(c)Manufacturers as contractors.

(1) Manufacturing is the production of tangible personal property that has a different identity from its ingredients. Manufacturing includes the production of standardized items as well as the production of items to a customer's specifications.

(2) When a manufacturer incorporates its manufactured product into real property in New York State to the specifications of a capital improvement, the manufacturer is making a use of the product that is subject to use tax. The amount subject to use tax depends on whether the manufacturer offers items of the same kind for sale in the regular course of business.

(3) When a manufacturer fabricates its manufactured product and later incorporates the product into real property in New York State to the specifications of a capital improvement to real property, the manufacturer does not owe a use tax on the value added by the fabrication. However, the incorporation of the manufactured product into real property in New York State is a use of the product that is subject to use tax. The amount subject to tax depends on whether the manufacturer offers items of the same kind for sale in the regular course of business.

Cross-reference:

For a detailed discussion of the computation of use tax on property manufactured by the user, see section 531.3(b) of this Title.

(4) Machinery and equipment used directly and predominantly to produce tangible personal property for sale, as the terms production and directly and predominantly are used in section 528.13 of this Title, are exempt from the New York State and local sales and use taxes, including the taxes imposed in New York City under section 1107 of the Tax Law.

Cross-reference:

For production machinery and equipment, see section 541.6 of this Part. For computation of compensating use tax on fabricated or manufactured property, see Part 531 of this Title.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 541.11