New York State’s sales tax rules are complex, often-times confusing, frequently counterintuitive, and full of traps for the unwary. Why? Because the sales tax is strictly a creature of statute. Form trumps substance and each transaction has the potential to be governed by a unique set of definitions, exemptions, exclusions, and filing requirements. This is particularly true in the construction industry.

In this context, New York’s Tax Law contains special rules that apply to (among other things) the taxation of capital improvements, construction materials, purchases for resale, tenant improvements and businesses conducted through limited liability companies. This article will provide an overview of these distinctive rules, and will highlight certain issues that should be on the mind of every construction contractor doing business in New York State.

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