Sales Tax Refunds

Purchases of building materials used in connection with industrial or commercial property located in an Empire Zone are exempt from state and county sales tax through a refund or credit process. The refund or credit is available for all purchases of such material, whether or not the purchase is made by a certified business.

The refund or credit does not apply if the property is residential or is to be used exclusively by one or more retail vendors. If a building is mixed use, please contact the EZ staff to discuss eligibility of the building.

The refund or credit applies to both the state and the county sales tax. Therefore, the refund is equal to 4.0 % for the state sales tax and 3.75% for Dutchess County sales tax. The refund does not apply to the .375% sales tax imposed by the MCTD.

The sales tax refund is available only for materials that are an integral part of the property. Miscellaneous items such as costs associated with redecorating, for example curtains or carpeting, are not eligible.

To claim the refund, the contractor or other party that actually pays the tax files for the refund using Form AU-11. If a contractor or builder claims the refund, an agreement with the property or business owner should be in place for the refund to be passed to the owner. Contact the EZ staff with any questions concerning eligible property. Questions may also be directed to the NYS Department of Taxation and Finance.

Retail Enterprise

A taxpayer that is registered as a NYS retail vendor, or is primarily engaged in the retail sale of tangible personal property to any person for any purpose other than for resale, or as a physical component part of tangible personal property, or for use by that person in performing certain services, is required to collect NYS retail sales tax. This is more fully defined in Tax Law Section 1101 (b)(4)(i).

Qualified Empire Zone Enterprise (QEZE)

If the building materials were purchased by a QEZE, the purchase is exempt from the state and MCTD portions of the sales tax (see also Sales Tax Exemption Incentive). QEZEs are still eligible for refund of the Dutchess County portion of the sales tax, or 3.75%.

EZ Sales Tax Refund Capital Improvements

  • Whenever a business manages to classify an investment as a capital improvement, that business is not required pay sales tax on the total cost of the capital improvement project. However, a contractor still pays sales tax on the materials and is eligible for a refund.
  • Sales tax refund enables the purchaser of the supplies to be eligible for the tax refund. For example, if the contractor pays for the materials which are an integral part of the investment, then he/she would receive the tax refund on the eligible materials. The contractor may pass these savings on to the business, but this is not mandatory. The business should have an agreement with the contractor on how the savings will be allocated.
  • Some businesses are tax exempt for sales tax purposes (e.g. utilities). This is different from the refund which applies to the cost of the material. See also Sales Tax Exemption for Qualified Empire Zone Enterprises.
  • Note: Capital Improvement and Sales Tax Refunds can be combined to maximize savings (exclusive to Zone certified businesses).

Example:

A contractor is repairing and enlarging a building in a designated Empire Zone in Poughkeepsie, New York. When completed, the building's three upper floors will be occupied by a company that manufactures dresses. The first floor will house commercial office space. The contractor purchases lumber, brick, cement, lighting fixtures, electric drills, saws, ladders, and a new heating system to be installed in the building. Some of the lumber will be used for scaffolding. Sales tax must be paid on these items at the time of purchase.

Because the building is not being exclusively used for retail establishments, the contractor can get a refund or credit for the sales tax paid (except for the .375% MCTD sales tax) on his purchase of bricks, cement, lighting fixtures, the new heating system, and that portion of the lumber that becomes an actual part of the building (i.e., not the scaffolding). No refund is allowed for the tools and ladders. The contractor will realize the savings unless there is an agreement with the owners.