June 14th, 2011 | 
Author: Question: Do I pay Sales Tax if Lowes or Home Depot are remodeling my kitchen and bathroom?
If I am purchasing all the material for the remodel from them (cabinets, tile, sinks etc) and they are installing everything, do I have to pay sales tax on those products? What about the labor, is that taxed? I am confused about “capital improvement”.
P.S. I live in New York
Answer:
Answer by the tax lady
If you buy it, you pay sales tax.
If they buy it, they pay the sales tax and add it to the amount you pay them.
The fact that it’s a capital improvement doesn’t change this. (The sales tax is added to your basis.)
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See Form ST-124: http://www.tax.state.ny.us/pdf/2006/fillin/st/st124_506_fill_in.pdf
If you paying a single price for the job, quoted with all materials and labor and it qualifies as a capital improvement then it’s not taxable. (If the contractor paid tax on the materials then he may pass that tax on to you though.)
If you buy the materials separately and then contract for the installation you’ll pay tax on the materials but not the labor, if I’m interpreting things properly.
Note that special rules apply for certain types of floor covering but not others. “Soft” coverings such as carpet, linoleum, and vinyl are taxable unless it’s new construction, an addition to the structure, or a complete refurb of the entire building. “Hard” coverings such as tile, slate, hardwood, etc. are not taxable if part of a capital improvement project.
Confusing? Yep, NYS is infamous for that!
If you buy it, you pay tax on it. Labor is not taxed.
By remodeling your house, you add value to it (an improvement of your capital)
try this