InvoiceCraftDo New York Contractors Charge Sales Tax on Labor?
Sometimes, and the answer changes job to job rather than trade to trade. New York is stricter than most states about taxing repair labor, so getting this wrong is expensive. This is written for the person sending the invoice, and every rule below links to the New York State Department of Taxation and Finance page it came from.
Read this first. This is a plain-English summary of the New York rules for contractors and service businesses, not tax advice. New York decides the tax by looking at what the work did to the property, so two jobs on the same house can be billed differently. Check the linked bulletin and ask your accountant before you change what you charge.
The question that decides a New York job
Did the work make a capital improvement to the property, or was it repair, maintenance or installation? A capital improvement has to clear all three parts of a single test. The Department's wording is worth keeping in front of you:
- It "substantially adds to the value of the real property, or appreciably prolongs the useful life of the real property."
- It "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."
- It "is intended to become a permanent installation."
Clear all three and the job is exempt. You pay sales tax on your materials at the supply house, you collect Form ST-124 from the customer, and no tax goes on the invoice. Miss any one of them and the work is repair, maintenance or installation, and you charge tax on the entire bill: materials, labor, markup and expenses together.
Building a deck, installing a hot water heater and installing kitchen cabinets are capital improvements. Fixing a broken step, replacing a thermostat and painting existing cabinets are not. The mobile home rule is absolute: adding a mobile home to real property is never a capital improvement, however it was installed.
Source: NYS Tax Bulletin ST-104, Capital Improvements.
What gets taxed, at a glance
| The job | Is the labor taxable? | Who pays tax on materials | On the invoice |
|---|---|---|---|
| Capital improvement | No | You, at the supply house | No tax line. Keep Form ST-124. |
| Repair or maintenance of real property | Yes | Customer, through your bill | Tax the whole invoice |
| Installing something that stays movable | Yes | Customer, through your bill | Tax the whole invoice |
| Repairing equipment or a vehicle | Yes | Customer, you buy parts for resale | Tax parts and labor together |
| Interior cleaning and janitorial | Yes | You, on your supplies | Tax the total charge |
| Mowing, trimming, snow removal | Yes | Customer, through your bill | Tax the total charge |
| New lawn, retaining wall, planting trees | No | You, at the supply house | No tax line. Keep Form ST-124. |
| Work for an exempt organization | Depends on the job | Buy exempt with Form ST-120.1 | Keep the exemption document |
Capital improvement jobs: get ST-124 before you start
On a capital improvement you are the end user of everything you install. You pay sales tax to your supplier, you build that cost into your price, and you charge the customer nothing. The Department's own example is a porch: $600 of materials (markup and the 8% tax the contractor already paid included) plus $1,000 of labor, billed as $1,600 with no sales tax collected.
Get a properly completed Form ST-124, Certificate of Capital Improvement, signed by the customer, and get it before or at the time of the work rather than three years later when an auditor asks. Exempt organizations sign one too. The certificate is what stands between you and a bill for the tax you did not collect.
One thing people expect and do not get: there is no credit for the tax you paid on capital improvement materials. You were the consumer, so that tax is a cost of doing business. Price it in.
Source: TB-ST-104 and TB-ST-130, Contractors and Sales Tax Credits.
Repair jobs: tax everything on the bill, then take the credit
When the work is repair, maintenance or installation, sales tax applies to your whole charge. Not just the parts. Materials, labor, markup, travel, disposal and any other expense you pass through all sit inside the taxable amount. Fixing railings, repointing a chimney, replacing a faucet and replacing roof shingles are the Department's own examples.
You still pay tax on the materials at the supply house, and then you take a credit for it. Run the Department's numbers through an invoice and the mechanism is clear. You buy $100 of materials and pay $8 tax. You bill the customer $130 for materials and $250 for labor, a $380 subtotal, and you charge 8% sales tax of $30.40 for a $410.40 total. You remit the $30.40 you collected, minus the $8 credit for the tax you already paid on materials that went to the customer.
The credit goes on the jurisdiction line for the place where you paid the tax, and if you are not registered for sales tax you claim a refund on Form AU-11 instead. If you bought $150 of materials and only used $50 on the job, the credit covers the tax on the $50 you actually transferred.
Source: TB-ST-129, Contractors: Repair, Maintenance, and Installation Services to Real Property and TB-ST-130.
Where the line actually falls, trade by trade
Publication 862 sorts several hundred jobs into the two columns. These are the calls that come up most on a working week:
- Roofing. Complete replacement of a roof, of a complete side of a peaked roof, or of the roof on a wing, turret or dormer is a capital improvement. Spot replacement, repairing shingles, flashings and skylights, applying roof coating to an existing roof, and cleaning gutters are taxable. Installing or completely replacing a gutter and downspout system is exempt; replacing part of one is not.
- Plumbing. Installing or completely replacing a sink, toilet, tub, shower stall or hot water heater is a capital improvement, fittings included. Replacing a faucet, a washer, a trap or a flush handle is taxable, and so is unclogging a drain or thawing a frozen pipe. Additions to piping systems are exempt; repairing pipes and fittings is not.
- HVAC. Installing a central air conditioning system, the original or additional ductwork, or a complete replacement unit is a capital improvement. Maintenance contracts, cleaning a furnace and repairing or replacing blowers, coils, compressors and controls are taxable. A window or through-the-wall unit is not real property at all, so supplying and installing one is taxable.
- Painting. The simplest rule on the list. Painting new buildings, new additions and new installations that are themselves capital improvements is exempt. Painting or repainting anything that already exists is taxable.
- Floor covering has its own rule. Installing carpet, carpet tile, padding, linoleum or vinyl counts as a capital improvement only as the initial finished floor covering in new construction, in a new addition, or in the total reconstruction of a building. Anywhere else, including more than six months after the building was otherwise completed, it is taxable. Hardwood, ceramic tile, terrazzo and similar hard floors follow the ordinary rule: installation or complete replacement is exempt, repair or partial replacement is taxable. Sanding, staining and refinishing an existing floor is taxable.
- Exterior work. Complete re-siding, insulating, new fences, new awnings other than canvas, and new or completely replaced gutters are capital improvements. Partial siding, fence pickets and posts, flashings, canvas awnings, snow removal and repairs to exterior surfaces are taxable.
Installing things that never become part of the building
Some installation work is taxable no matter how carefully you fit it, because the item stays tangible personal property. Freestanding appliances, above-ground pools, canvas awnings and weather stripping are the examples the Department gives. Delivering and setting up a free-standing range is a taxable installation. Hard-wiring a cooktop into the counter is not.
The same logic covers work on equipment and vehicles. Repairing a mower, a generator or a truck is a service to tangible personal property, so you buy the parts for resale and charge tax on parts and labor together.
Source: TB-ST-129.
Cleaning: New York taxes it, houses included
This is where crews that also work Florida or Texas get caught. New York does not care whether the building is a house or an office, and it stopped caring about the length of your contract in 1990. Since June 1, 1990 a combined state and local sales tax applies to all charges for interior cleaning and maintenance services performed in New York State, whether the work is a one-off call or a long-term contract. The older rule that exempted regular contracts of 30 days or more is gone.
Interior cleaning and maintenance covers ordinary janitorial work: dusting, vacuuming furniture and carpets, cleaning and disinfecting bathrooms, stripping and waxing floors, cleaning appliances, changing linens, replacing light bulbs, changing filters and adjusting thermostats. It does not cover work that is ordinarily viewed as repair, which lands back in the capital improvement test above.
Two narrow exclusions survive. An employee's wages for cleaning their employer's property are not taxable, and neither is cleaning done by someone who does occasional odd jobs and does not offer the service to the public as a business. If you run a cleaning company, neither one is you.
Source: TSB-M-91(4)S, New York State Sales and Use Tax on Interior Cleaning and Maintenance Services.
Landscaping: the mower is taxable, the new lawn is not
Landscapers run both columns in the same week, sometimes on the same property. Planting or installing a new lawn, planting trees, shrubs and perennials, installing retaining walls and building permanent ponds and water features are capital improvements. Take Form ST-124 and charge no tax.
Mowing lawns, trimming hedges and trees, reseeding bare spots, planting annuals, repairing or painting an existing fence, replacing flagstones or bricks, installing freestanding fountains and snow removal are all taxable maintenance. Removing a tree is taxable on its own, and exempt only when it is done as part of another capital improvement project.
Materials are always taxable to you when you buy them. On the taxable jobs you take the credit back the way any contractor does; on the capital improvement jobs you do not.
Source: TB-ST-505, Landscapers.
Exempt customers, subcontractors and Form ST-120.1
Form ST-120.1, the Contractor Exempt Purchase Certificate, is how a registered contractor buys without paying tax up front. It works in three situations: when the materials will be transferred to an exempt organization or a government body, when you are making a retail sale to a customer such as selling an appliance or leftover materials, and when you are a subcontractor performing a taxable service and the prime contractor accepts the certificate. A prime contractor uses the same certificate to buy a subcontractor's taxable services for resale, then collects the full tax from the customer.
Everyone in the chain has to be registered for New York sales tax and hold a valid Certificate of Authority. Doing taxable repair, maintenance or installation work without one is a penalty in itself, separate from the tax.
Which rate goes on the invoice
New York State takes 4%, and the county or city where the work happens adds its own. The rate that applies to a service is the one for the jurisdiction where the service is delivered or where the property worked on is located, not where your shop is. Jurisdictions in the Metropolitan Commuter Transportation District carry an extra 0.375% inside those combined rates.
From Publication 718, effective March 1, 2025, the combined rates that cover most jobs are 8.875% in New York City and in Yonkers, 8.75% in Suffolk and Erie, 8.625% in Nassau, 8.375% in Rockland, Putnam and the rest of Westchester, 8.125% in Dutchess and Orange, 8% across most upstate counties including Monroe, Onondaga and Albany, and 7% in Saratoga County. Check the Department's jurisdiction lookup for the exact rate and reporting code before you file, and do not use ZIP codes for it.
Source: Publication 718, Sales and Use Tax Rates by Jurisdiction and TB-ST-825, Sales Tax Rates, Additional Sales Taxes, and Fees.
What this means for how you write the invoice
- Decide the classification before you quote. A capital improvement and a repair are different prices to the customer, because one of them carries 8% or more on the whole bill. Deciding after the work is done means eating the difference.
- Describe the work, not just the cost. "Complete tear-off and replacement of rear roof slope" and "repaired flashing at chimney" sit on opposite sides of the line. Your line item description is the evidence an auditor reads.
- Tax the expenses too on a taxable job. Travel, dump fees, equipment rental and markup all belong inside the taxable amount. Leaving them out of the tax base is one of the most common assessments.
- Show the tax as its own line. New York requires the tax to be separately stated on the invoice. "Tax included" is not evidence of anything, and the whole charge can be treated as the taxable price.
- File the ST-124 against the invoice number. Same for an ST-120.1 or a customer's exemption certificate. If the paperwork is not findable in three years, the exemption effectively was not there.
- Split a mixed job into two invoices, or two clearly labelled sections. A new deck and a repaired step on the same visit are one exempt job and one taxable job. Blending them into one line makes the whole line look taxable.
Bill a New York job the way New York wants it billed
The free InvoiceCraft editor gives you separate line items for labor and materials, a tax rate field that applies to the subtotal, and a notes field for the ST-124 reference. Fill it in, download a clean PDF, no account needed.
Open the free invoice generator → or start from the roofing, plumber or cleaning template.
Frequently Asked Questions
Do New York contractors charge sales tax on labor?
It depends on whether the job was a capital improvement. If the work substantially added value or prolonged the life of the property, became permanently affixed to it and was intended to be permanent, it is exempt: you pay tax on the materials at the supply house, take Form ST-124 from the customer and charge no tax at all. If the work was repair, maintenance or installation, you charge sales tax on the entire bill, including labor, markup and expenses, and you take a credit for the tax you already paid on the materials you transferred to the customer.
What is Form ST-124 and when do I need it?
Form ST-124 is the Certificate of Capital Improvement. The customer signs it to confirm the job qualifies as a capital improvement, which is what allows you to bill without sales tax. Get it completed at the time of the work, including from exempt organizations, and file it against the invoice number. Without it, an auditor who disagrees with your classification can assess the tax you never collected on the full job, and you have no document to point at.
Is house cleaning taxable in New York?
Yes. Since June 1, 1990 the combined state and local sales tax applies to all charges for interior cleaning and maintenance services performed in New York State, residential and commercial alike, whether the job is a one-off call or a long-term contract. The older exclusion for regular contracts of 30 days or more was repealed. That is the opposite of Florida, where residential cleaning is untaxed and only nonresidential cleaning is taxable, so a crew working both states cannot reuse the same invoice template settings.
What sales tax rate do I charge on a New York job?
4% state tax plus the local rate for the jurisdiction where the service is delivered or the property is located, which is not necessarily where your shop is. Under Publication 718, effective March 1, 2025, that is 8.875% in New York City and Yonkers, 8.75% in Suffolk and Erie, 8.625% in Nassau, 8.375% in Rockland, Putnam and the rest of Westchester, 8.125% in Dutchess and Orange, 8% across most upstate counties, and 7% in Saratoga County. Jurisdictions in the Metropolitan Commuter Transportation District include an extra 0.375% in those figures.
Related pages
- Sales Tax on Labor by State, the ten largest states compared
- California Contractor Sales Tax on Labor, the full California guide
- Texas Contractor Sales Tax on Labor, the full Texas guide
- Florida Contractor Sales Tax on Labor, the full Florida guide
- Pennsylvania Contractor Sales Tax on Labor, the full Pennsylvania guide
- Illinois Contractor Sales Tax on Labor, the full Illinois guide
- What to Charge for Roofing Jobs in 2026
- What to Charge for Cleaning Jobs in 2026
- Roofing Invoice Template
- Plumber Invoice Template
- Cleaning Invoice Template
- Lawn Care Invoice Template
- All free invoice templates