Sales Tax State Activity Update - September 2004

New York Mitigates Mold

An advisory has been issued concerning mold mitigation services performed in homes that suffered a fire. As part of the reconstruction and repair of the damaged property, the service involves the removal of damp and musty structures such as walls, ceilings, and flooring, and drying the underlying structures to mitigate the formation of mold or the spreading of mold. If the mold mitigation service is rendered as part of a capital improvement to real property as defined in Section 1101(b) (9) of the Tax Law, then the service would be exempt.

On the other hand, if the service falls under the definiton of repair or maintenance as out lined in Section 527.7 of the Sales and Use Tax Regulations, the service is taxable. A capital improvement is defined as an addition or alteration to real property which adds substantial value, appreciably prolongs the life, is permanently affixed to the real property, removal of said property would cause material damage, and the installation is intended to be permanent. Repair and maintenance generally means keeping the real property in a condition of fitness, efficiency, readiness, or safety. Under Section 1119 (c) a refund or credit is available to the service provider for the tax paid on the material use to complete a taxable repair as an offset against the tax collected from the customer.

The opinion is available at: http://www.tax.state.ny.us/pdf/Advisory_Opinions/Sales/A04_18s.pdf

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