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New York guide for HVAC, plumbing and electrical contractors

Sales tax and bookkeeping for HVAC, plumbing and electrical contractors in New York

In New York repair, maintenance and installation work is taxed on the whole charge, labor included. A capital improvement is not taxed when the customer gives you Form ST-124.

New York sorts every job on a building into one of two columns: a capital improvement, with no tax on the customer's bill, or a repair, maintenance or installation service, taxed on the whole charge. The state publishes the list item by item, and the line falls in a place that surprises most shops. A complete furnace replacement is a capital improvement; replacing the blower inside it is a taxable repair. Here is the full picture for New York, with the state's own documents next to each rule.

Checked against New York’s own sources on October 18, 2026. By the Books and Trucks team. Not tax advice.

New York at a glance
LaborTaxed on repair, maintenance and installation work, on the total charge. Not taxed on a capital improvement when the customer gives you Form ST-124 within 90 days.
MaterialsYou pay tax at the supply house on every job. On taxable repairs you take a credit for it on your return. On capital improvements it is a cost you keep.
FilingAnnual return if you owe $3,000 or less a year, quarterly below $300,000 of taxable receipts a quarter, monthly above that. The state moves you as your numbers change.
Rate4% state plus the local rate where the work is done; 8% to 8.875% combined in the main counties.
LicenceNo state licence for HVAC, plumbing or electrical work. Each city and county runs its own.
Income taxYes. Withhold New York State tax, plus New York City and Yonkers tax where they apply.

Sales tax on labor

Complete replacement is a capital improvement. A part swap is a repair.

A job is a capital improvement only if it passes all three of the state's tests: it substantially adds to the value of the property or appreciably prolongs its life, it becomes part of the property so that removal would cause material damage, and it is intended to be permanent. Everything else that keeps a building in a condition of fitness, efficiency, readiness or safety is a repair or maintenance service, and the customer pays tax to you on the total charge, labor included.

Publication 862 is the state's own list, trade by trade. The pattern through all of it is the same: installing or completely replacing a system is a capital improvement, while repairing or replacing a component inside it is taxable.

The state's own worked example: $130 of materials plus $250 of labor on a repair is a $380 subtotal; at 8% the customer pays $30.40 in tax, and the contractor then claims an $8 credit for the tax it paid on the $100 of materials it bought.

Form ST-124

The certificate that moves the burden of proof

Materials

You pay tax on materials, then claim it back only on taxable jobs

New York contractors pay sales tax to the supplier on everything they buy, whatever the job. What happens next depends on the column the job is in. That difference is the most under-used credit we see in New York trade shop books.

Rates and filing

The rate follows the job site, and the state picks your filing schedule

Licensing

No state licence. Each city and county runs its own.

New York has no statewide plumbing, electrical or HVAC licence. The city or county where you work issues it, and the renewal clocks are different everywhere. For a shop working across New York City and Long Island that can mean three or four licences expiring in different months.

  • New York City master plumber: Department of Buildings licence, at least seven years of experience in the last ten, written exam $585 and practical exam $530, three-year term, renewal $225 with a 7-hour continuing education course.

    Source: NYC Department of Buildings, master plumber licence

  • New York City master or special electrician: Department of Buildings licence, seven years of experience in the last ten with at least two in the city, three-year term, renewal $90 with an 8-hour approved course. A special electrician works only for a building owner-employer.

    Source: NYC Department of Buildings, master and special electrician licence

  • New York City has no HVAC licence as such. Oil-fired equipment needs the oil burner equipment installer licence (Class A, four years of experience in seven; Class B, three in five); gas piping needs a master plumber; wiring needs an electrician.

    Source: NYC Department of Buildings, oil burner equipment installer licence

  • Residential work in New York City costing more than $200, including HVAC jobs, also needs the Department of Consumer and Worker Protection home improvement contractor licence, which runs up to two years and does not cover plumbing or purely electrical work.

    Source: NYC Department of Consumer and Worker Protection, home improvement contractor licence

  • Nassau County: the Office of Consumer Affairs home improvement licence covers air conditioning and heating systems, is issued for two years at $500 plus a one-time $50 restitution fund payment, and renewing holders are fingerprinted. Plumbing is licensed by the towns, such as Hempstead, North Hempstead and Oyster Bay.

    Source: Nassau County Office of Consumer Affairs, licensing

  • Suffolk County issues home improvement, master plumber, restricted plumber, master electrician and restricted electrical licences, and electricians must complete continuing education before renewal.

    Source: Suffolk County Consumer Affairs, licensing

  • Westchester County plumbing and electrical licences renew every year and all expire December 31; master plumber renewals received after October 31 pay a late fee; electricians need four hours of continuing education.

    Source: Westchester County Consumer Protection, renew a licence

Payroll and business taxes

Withholding, unemployment, family leave, disability and the commuter tax

  • Withhold New York State income tax for residents wherever they work and for nonresidents working in the state; also New York City tax for city residents and Yonkers tax for Yonkers residents and nonresidents working in Yonkers.

    Source: NYS Tax Department, withholding tax requirements

  • File Form NYS-45 every quarter even with no payroll. Once withheld tax reaches $700 in a quarter, Form NYS-1 and payment are due within three or five business days of that payroll. Electronic filing is mandatory.

    Source: NYS Tax Department, withholding filing requirements

  • Unemployment insurance 2026: new employer rate 4.1% (4.025% plus the 0.075% re-employment service fund) on a taxable wage base of $17,600, up from $12,800. From 2026 the base resets each January to 18% of the state average annual wage.

    Source: NYS Department of Labor, unemployment insurance rate information

  • Paid Family Leave 2026: employee contribution 0.432% of wages, capped at $411.91 a year. Employers deduct it; it is not an employer tax.

    Source: New York State Paid Family Leave, 2026

  • Disability benefits insurance is mandatory for for-profit employers. You may deduct one half of one percent of wages from employees, up to 60 cents a week.

    Source: NYS Workers' Compensation Board, employer disability benefits

  • Paid sick leave: up to 56 hours paid a year with 100 or more employees, 40 hours paid with 5 to 99, and 40 hours paid or unpaid with 4 or fewer depending on net income. Accrual is one hour per 30 worked.

    Source: New York State Paid Sick Leave

  • The Metropolitan Commuter Transportation Mobility Tax hits employers only above $312,500 of quarterly payroll in the district, so most small shops owe none as employers. Self-employed owners owe it on district earnings above $150,000 from 2026, at 0.60% in the five boroughs and 0.34% in the suburban counties.

    Source: NYS Tax Department, MCTMT for employers

Season and market

Eight months of legal heat season

New York City's heat season runs October 1 to May 31. Building owners must keep apartments at 68 degrees by day when it is below 55 outside, 62 at night, and hot water at 120 degrees all year. For heating contractors that makes calls legally urgent for eight months, with summer cooling as the second peak and spring and fall as the shoulder. Two peaks and two troughs means each month should be compared with the same month last year.

  • New York State had 7,435 plumbing, heating and air conditioning contractor establishments with 67,966 employees in 2023, and 5,838 electrical contractor establishments with 57,696 employees. Building equipment contractors together paid $11.7 billion in annual wages.

    Source: BLS Quarterly Census of Employment and Wages, New York 2023

  • Of the plumbing and HVAC establishments, 5,729 are residential-focused and 1,706 non-residential. The residential side is where the capital improvement question comes up on every replacement.

    Source: BLS Quarterly Census of Employment and Wages, New York 2023

What goes wrong

The New York mistakes we fix most often

  1. 1Calling a parts job a capital improvementA new blower, coil, compressor, burner or circuit breaker is permanent, but Publication 862 puts it in the taxable column. Only complete replacement of the system qualifies. We set the item list in QuickBooks so each service item carries the right tax treatment.
  2. 2Never claiming the materials creditOn every taxable repair you can take back the tax you paid at the supply house on the parts you passed to the customer. Most shops never do. We track materials by job so the credit is on the return.
  3. 3ST-124 missing, or taken on a repairNo certificate within 90 days and you carry the burden of proof. A certificate on a repair job does not make it exempt. We attach the form to the invoice and flag replacements that are really component swaps.

In QuickBooks Online

Set up tax the way New York expects

In New York every job needs its column before it is invoiced, and the materials need to be tracked by job either way: on taxable repairs so the credit for tax paid at the supply house lands on the return, on capital improvements so the tax sits in the job cost. The rate comes from the job site's reporting code, so a shop in Nassau billing a Suffolk job charges 8.75%, not 8.625%.

Sales tax filing is part of our monthly bookkeeping for trade shops on QuickBooks Online, from $599 a month: see HVAC bookkeeping, plumbing bookkeeping and electrical contractor bookkeeping.

See monthly bookkeepingBook a 15-minute call

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Questions

New York owners ask

Do contractors charge sales tax on labor in New York?

Yes on repair, maintenance and installation jobs: the customer pays tax on the total charge, labor included, even when the customer supplied the parts. No on a capital improvement, where the customer pays no tax to you at all and you keep the tax you paid on materials as a cost.

Source: Publication 862

Is replacing a furnace a capital improvement in New York?

A complete furnace, boiler, heat pump or water heater replacement is listed as a capital improvement, so there is no tax on the customer's bill if you hold Form ST-124. Replacing the blower, coil, compressor, burner, valve or thermostat inside it is a taxable repair, and a maintenance contract is taxable too.

Source: Advisory Opinion TSB-A-24(37)S

What is Form ST-124 and do I need it?

It is the Certificate of Capital Improvement the customer signs and gives you within 90 days of the job. Accepted in good faith it shifts the burden of proof to the customer and relieves you of liability for tax on the work. It never lets you buy materials tax free, and it cannot be issued for a repair.

Source: Form ST-124 and instructions

How often do I file sales tax in New York?

Annually if you owe $3,000 or less a year (Form ST-101, due March 20), quarterly if taxable receipts are under $300,000 a quarter (Form ST-100, due 20 days after quarter end), monthly once receipts reach $300,000 in a quarter. The state reassigns you as your numbers change.

Source: Tax Bulletin ST-275

Can I use a resale certificate for materials as a New York contractor?

No. Form ST-120 cannot be used by contractors. You pay tax at the supply house, then take a credit on your sales tax return for tax paid on materials transferred to the customer in a taxable repair. There is no credit on capital improvement materials. Form ST-120.1 works only for qualifying exempt-owner projects.

Source: Form ST-120.1

Do I pay the commuter tax with two employees on Long Island?

As an employer, only if quarterly payroll in the district exceeds $312,500, so most two-truck shops do not. If your own self-employment earnings allocated to the suburban zone exceed $150,000 in 2026, you pay 0.34% personally.

Source: NYS Tax Department, MCTMT

Sources

Every rule above was read in these New York documents. Open the source before you change how you bill.

Other states

The short answer for every state is in contractor sales tax by state. Full guides so far: