New York Advises Lessee that Niche Walls, Wall Fittings, and Paneling are …

/PRNewswire/ — The New York State Department of Taxation and Finance (“Department”) issued an advisory opinion providing that tenant-installed niche walls, wall fittings, and paneling are capital improvements, not subject to sales and use tax. TSB-A-11(24)S. New York defines a capital improvement as an addition or alteration to real property that

  • Substantially adds value to the real property or appreciably prolongs the useful life of the real property,
  • 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 improvement, and
  • Is intended to become a permanent installation.



In this case, the tenant made various improvements to leased retail space during the initial build out. Under the terms of the retail-space lease, fixtures, paneling, and similar improvements became property of the lessor unless the lessor required that the tenant remove such improvements prior to the end of the lease.In responding to the tenant’s request for opinion, the Department determined that the tenant’s installed niche walls, wall fittings, and paneling added value to the real property and became a part of the property. Further, because the lease provided that the fixtures, paneling, partitions, railings, and similar improvements become the property of the lessor upon installation, the Department determined that the parties intended that the niche walls, wall fittings, and paneling would become part of the premises upon installation. Therefore, the improvements satisfied the third requirement of the capital improvement definition.Previously, the Department issued TSB-M-83(17) S, which made clear that “[a] provision granting the lessor the right to require removal of the improvement will not negate this demonstration of intention of permanence.”About RyanRyan is an award-winning global tax services firm, with the largest indirect tax practice in North America and the seventh largest corporate tax practice in the United States. Headquartered in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. In 2010, Ryan received the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan’s multi-disciplinary team of more than 900 professionals and associates serves over 6,500 clients in 40 countries, including many of the world’s most prominent Global 5000 companies. More information about Ryan can be found at


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