New York State Sales and Use Tax Update: Contractor’s Purchase of Concrete Not Exempt

By Don Warrant, CPA on August 5, 2022
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Don Warrant, CPA

Director | Tax Practice


The Appellate Division of the New York State Supreme Court confirmed a contractor’s purchase of concrete was not exempt from the New York State sales and use tax.

M & Y Developers, Inc. purchased concrete for use in New York State construction projects, including concrete foundations, sidewalks, driveways, and walkways. The Appellate Division (In Matter of M&Y Developers, Inc. v N.Y. Tax Appeals Trib., N.Y. App. Div., 3d Dep’t, No. 533346, 7/14/22) confirmed the tribunal’s decision that the contractor’s purchases were for concrete materials and not exempt concrete installation services.

Concrete installation services that constitute a capital improvement to real property located within New York State are not subject to sales tax. A capital improvement means an addition or alteration to real property that (1) substantially adds to the value of the real property or appreciably prolongs the useful life of the real property; (2) becomes part of the real property or is permanently affixed to the real property so that removal would cause material damage to the property or article itself; and (3) is intended to become a permanent installation.

In this case, the employees of the contractor and subcontractors performed all preparatory work for the installation, including excavation work, building the formwork and flatwork to shape the poured concrete, and installing rebar and other supports. The contractor was responsible for ensuring the poured concrete would form the structure contemplated by the project specifications. As a result, the contractor and subcontractors performed the work that constituted a capital improvement.

The concrete suppliers prepared the amount and type of concrete required, delivered the concrete to the site, and poured or pumped the concrete into the areas that has been prepared. The concrete suppliers were paid to provide the concrete as evidenced by the invoices for concrete purchases rather than installation services. Therefore, the Appellate Division upheld the Tribunal’s determination that the concrete suppliers provided taxable concrete materials and not exempt concrete installation services.

New York State Sales and Use Tax Considerations for Concrete Suppliers

  1. 1. The supplier may be entitled to claim a sales tax refund when New York State collected sales tax from the customer.
  2. 2. The supplier may be required to collect and remit sales tax when delivering concrete to a job site.
  3. 3. The supplier should determine if an exemption applies whereby the supplier is not required to pay or collect sales tax. For example, an IDA exemption may apply.

New York State Sales and Use Tax Considerations for Contractors

  1. 1. The contractor should review its contracts with suppliers to determine who is performing the work that constitutes a capital improvement. Sales or use tax may be owed for the current and prior tax years.
  2. 2. The contractor might encourage the property owner to obtain an IDA exemption to avoid this issue. Under an IDA exemption, the contractor and its suppliers are exempt from sales tax.
    3. If the purchase of exempt concrete installation services was intended, then it may be necessary to change the contractual relationship with concrete suppliers to avoid a similar result under audit.

Have New York State sales and use tax questions or concerns? Contact Freed Maxick's SALT team to discuss your specific situation, or call to speak with an individual directly at 716.847.2651.

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