New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter IV - Sales And Use And Other Miscellaneous Taxes
Subchapter A - Sales And Use Taxes
Part 528 - Exemptions
Section 528.18 - Tangible personal property sold by a contractor to a person other than an exempt organization

Tax Law, § 1115(a)(17)

Tangible personal property sold by a contractor, subcontractor or repairman to a person, other than an organization exempt pursuant to section 1116(a) of the Tax Law, for whom he is adding to, or improving real property, property or land by a capital improvement, is exempt, if the property sold by the contractor, subcontractor or repairman becomes an integral component part of the real property.

Example 1:

A contractor enters into a contract to build an addition to a home for $35,000. The terms of the contract are time and materials ($20,000 for materials and $15,000 for labor). Since the contractor is the consumer of the materials and the materials become an integral component part of the real property, he cannot charge his customer the tax on the materials.

Example 2:

A contractor builds a home for a customer which includes the sale of a free-standing refrigerator. He is required to collect the tax on the sale of the refrigerator.

Cross-references:

Purchase of tangible personal property by contractor, see section 526.6(b) of this Title.

Definitions of real property and capital improvement, see section 527.7(a) of this Title; contractors,see Part 541 of this Title.

Manufacturers installing their own product to the specifications of a capital improvement, see section 531.3(b) of this Title.