N.Y. Comp. Codes R. & Regs. tit. 20 § 541.6

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

Section 541.6 - Production machinery and equipment

Tax Law, §§ 1105(b) and (c)(3), (5); 1115 (a)(12)

(a)Machinery and equipment which becomes realty.

If a contractor, in the performance of a contract, is required to purchase and install production machinery and equipment that qualifies for the manufacturer's exemption provided for in section 1115(a)(12) of the Tax Law and such machinery and equipment subsequently becomes part of the real property, the contractor is required to obtain from the customer a properly completed certificate of capital improvement and an exempt use certificate which identifies the machinery and equipment that qualifies for the manufacturer's exemption and which, upon installation, becomes part of the real property. The contractor then may purchase such machinery or equipment exempt from the New York State and local taxes, including the sales and use taxes in New York City, upon issuance of a properly completed contractor exempt purchase certificate to his supplier.

(b)Machinery and equipment which remains tangible personal property.

If a contractor purchases production machinery and equipment which qualifies for the manufacturer's exemption provided for in section 1115(a)(12) of the Tax Law and such machinery and equipment retains its identity after installation as tangible personal property, the contractor must obtain from his customer a properly completed exempt use certificate which identifies the machinery and equipment that qualifies for the manufacturer's exemption. The contractor then may purchase such machinery and equipment exempt from all state and local sales taxes upon issuance of a properly completed contractor exempt purchase certificate.

(c)Charges for installation.

(1) All charges for the installation of production machinery and equipment which becomes part of the realty are not subject to tax.

(2) All charges for the installation of production machinery and equipment that qualifies for exemption under section 1115(a)(12) of the Tax Law and which retains its identity as tangible personal property after installation are subject to any local sales and use taxes and the sales and use taxes applicable in New York City but are exempt from the State tax.

(d)Charges for on-site assembly.

(1) On-site assembly performed by a manufacturer-installer or a contractor hired by the manufacturer to perform such assembly is recognized as a continuation of the manufacturing process in those instances where it is demonstrated that machinery and equipment by virtue of its size, weight, and the like could not be completely assembled prior to delivery to the customer. The cost of such assembly becomes part of the selling price of the machinery and equipment. However in order for the charge by the contractor to the manufacturer to be exempt as a service to property being resold, the contractor must obtain a resale certificate from the manufacturer. The charge by the vendor of the machinery and equipment for assembly is taxable if the machinery and equipment is subject to sales or use tax and exempt if the machinery and equipment is exempt from sales and use tax. When a contract is on a lump-sum basis to furnish and install machinery and equipment involving on-site assembly and installation charges, reasonable engineering estimates may be used to determine the amount of the price relating to the taxable installation after on-site assembly has been completed.

(2) On-site assembly is completed at the point where the machinery and equipment is assembled into a completed unit. Any further charges are charges for installing, maintaining and servicing machinery and equipment and may be subject to local sales and use taxes including the sales and use tax applicable in New York City in accordance with subdivision (c) of this section. Such charges with respect to production machinery and equipment are exempt from the State tax.

(3) Installation charges include but are not limited to:

(i) the wiring from the electrical panel to the machinery and equipment to make it operational; and

(ii) attaching the machinery and equipment by bolts or other means to a foundation.

(4) Charges by a contractor for installing and/or assembling machinery or equipment owned by the customer prior to hiring the contractor are not part of the selling price of the machinery or equipment and may be subject to local sales and use taxes including the sales and use taxes applicable in New York City in accordance with subdivision (c) of this section. Such charges with respect to production machinery and equipment are exempt from the State tax.

(e)Charges for repairing, servicing, or maintaining.

All labor charges for repairing, servicing, and maintaining production machinery and equipment which has been incorporated into realty or which retains its identity as tangible personal property are subject to local sales and use taxes including the sales and use tax applicable in New York City. Such charges are exempt from the State tax.

(f)Documents.

(1) In a capital improvement contract that provides for the sale of production machinery or equipment qualifying for exemption under section 1115(a)(12) of the Tax Law, the contractor must obtain from the customer a certificate of capital improvement covering the entire project and an exempt use certificate identifying the exempt machinery or equipment incorporated into the real property. Both certificates must be properly completed by the customer and retained by the contractor as part of his records. The contractor may purchase the qualifying machinery or equipment exempt from State and local taxes, including the taxes imposed in New York City under section 1107 of the Tax Law, by issuing a properly completed contractor exempt purchase certificate to the supplier.

(2) Under a contract to furnish and install exempt production machinery and equipment which, after installation, retains its identity as tangible personal property, the contractor may purchase such machinery and equipment exempt from all State and local taxes, including the taxes imposed in New York City under section 1107 of the Tax Law, but only if he issues a properly completed contractor exempt purchase certificate to the supplier.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 541.6