Quick answer: A New York contractor cannot use Form ST-120, the Resale Certificate, to buy job materials. The correct document is Form ST-120.1, the Contractor Exempt Purchase Certificate, and it only works on specific project types. Form ST-119.1 belongs to the exempt customer, not to you.
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Which exemption certificate, and when?
ST-120.1 versus ST-120 versus ST-124 versus ST-119.1 — who issues each, what it covers, the five things contractors get wrong, and the rules that apply to all of them.
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Form ST-119.1 belongs to your customer, not to you
Form ST-119.1, the Exempt Organization Exempt Purchase Certificate, is used by an exempt organization for the organization’s own purchases. The organization has to be the direct purchaser and the direct payer of record. A contractor buying materials on its own account is neither, so ST-119.1 cannot be used for your purchases. You collect the customer’s ST-119.1 as backing documentation and issue your own ST-120.1 to the supplier.
Two details catch people out. First, ST-119.1 is not a downloadable form — there is no PDF on tax.ny.gov. It is obtained by calling the Tax Department at (518) 485-2889. Second, ST-119.1 is not valid for governmental entities. New York and federal governmental entities hold no ST-119 certificate, so a school district or a state agency proves its status with a governmental purchase order, a signed contract, or Form AC-946 instead. If a municipality hands you an ST-119.1, something is wrong with the paperwork.
On a government job the signed contract or purchase order is itself sufficient proof, and the prime contractor gives each subcontractor a signed document identifying the project, its location and the exempt owner. Each contractor in the chain then issues its own ST-120.1 to its own suppliers.
On exempt jobs, capital improvement versus repair does not matter
This is the part that surprises contractors who have spent years sorting jobs into capital improvement and repair buckets. When the customer is an exempt organization, that distinction stops driving the materials answer. TB-ST-130 states that you will not charge sales tax on the work whether it is a capital improvement or a repair and maintenance job, and that building materials transferred to the customer can be purchased without tax on Form ST-120.1. The regulation at 20 NYCRR 541.3(d)(1) adds that this holds whether the contract is lump sum, time and material, cost-plus or anything else.
What does govern is whether the item becomes an integral component part of the property, and who owns the property when it does. Publication 843 gives the cleanest illustration: an exempt organization hires a painter, and the paint is exempt while the masking tape and sandpaper are taxable. Same job, same customer, different answer, because only one of those becomes part of the building.
Ownership timing matters just as much. There is no exemption for spec construction that an exempt organization happens to buy later, and none where a non-exempt owner builds a property in order to lease it to an exempt organization. The exempt entity has to own the real property at the time your materials are incorporated into it.
A separate certificate for every single project.
ST-120.1 is not a blanket certificate, and tools, equipment, rentals and consumables never qualify on it. Misuse carries $50 per document plus 100% of the tax that should have been paid. If purchasing is reusing one certificate across jobs, stop and let us look at it.
A worked example: the same $60,000 job, three customers
A drywall subcontractor bids the same interior fit-out three times. Materials cost $20,000 before tax, labor and overhead are $32,000, and the target margin is $8,000. Assume an 8.625% combined rate.
| Private owner — capital improvement | Private owner — repair job | School district — either | |
|---|---|---|---|
| Certificate you issue to the supplier | None. You pay the tax. | None at purchase. | ST-120.1, item A |
| Certificate you collect from the customer | ST-124 | None | Governmental purchase order or signed contract |
| Sales tax paid on materials | $1,725 | $1,725 | $0 |
| Credit or refund of that tax | None. Permanent cost. | Credit available for materials transferred to the customer | Not applicable |
| Sales tax you charge the customer | $0 | $5,175 on the full $60,000, including markup | $0 |
| True cost of the job to you | $53,725 | $52,000 | $52,000 |
| Margin at a $60,000 price | $6,275 | $8,000 | $8,000 |
The capital improvement version of this job is 21.6% less profitable than the other two, and nothing about the scope of work changed. That $1,725 is the number contractors forget to price. It is also why the classification question is a pricing question before it is a compliance question.
Two smaller points from the same example. On the repair job, the credit is limited to your cost of the materials, not the marked-up amount you billed, and you cannot claim it until the materials are actually used on a job you report. And if you bought the drywall in a county at 7% and used it in a county at 8%, you owe the higher rate as use tax and take a credit for what you already paid — both entries have to appear on the return even when the rates happen to match.
Six mistakes that cost New York contractors real money
- Using ST-120 for job materials. Barred by the form. Route everything through ST-120.1 or pay the tax.
- Treating an ST-124 as a purchasing document. It is not, and the ST-120.1 form specifically forbids relying on it for that purpose.
- Buying tools, rentals or consumables on ST-120.1. Construction machinery and equipment including rentals and repair parts, office supplies, tools, form lumber and scaffolding materials are taxable to the contractor even on exempt-organization jobs.
- Appliances on a new build. A contractor can buy appliances exempt on ST-120.1 under item D — and then must collect sales tax from the customer on the charge for those appliances and their installation. Exempt in, taxable out, on the same job.
- Issuing one ST-120.1 for the whole business. One certificate per project, with the project address and owner on the paperwork.
- Missing the 90-day window. A seller must have a properly completed certificate within 90 days after delivery or performance. After that, buyer and seller share the burden of proving the sale was exempt. Keep certificates at least three years past the due date of the return they relate to.
The penalties are not trivial. Issuing a false or fraudulent exemption certificate with intent to evade tax carries a penalty of $50 per document plus 100% of the tax that would have been due, and operating without a required Certificate of Authority can run to $500 for the first day plus $200 for each additional day, capped at $10,000. Both ST-120 and ST-120.1 also warn on their face that a willfully false certificate may constitute a felony.
One note on sources: New York discontinued tax bulletin TB-ST-113 on the ST-124, and now directs readers to the form itself. If a template or a checklist in your office still cites TB-ST-113, it is out of date.
Where this stops being a tax question and becomes an accounting one
Certificates are paperwork. What they actually control is job cost, and that is where the money is won or lost.
On a capital improvement job for a private owner, sales tax on materials is a permanent, unrecoverable cost that has to sit in the job’s direct material cost — not in a tax expense account at the bottom of the income statement. Post it anywhere else and every estimate you build off historical job cost will understate materials by roughly the tax rate. On a taxable repair job, that same tax is a receivable until you claim the credit, and it does not belong in job cost at all. Two jobs, identical invoices from the same supplier, two different accounting answers.
Getting that split right requires a ledger that can carry it. A construction chart of accounts that separates direct job costs from overhead is what makes the distinction visible; without it, the tax disappears into a general materials account and the margin erosion in the worked example above never shows up on a report. From there it flows into job costing, and eventually into the WIP schedule that tells you whether the project is actually profitable.
There is also a documentation dimension that is pure bookkeeping discipline. A separate certificate per project, matched to a job number, retained for at least three years, and tied to the purchase orders and invoices that claim the exemption — that is a filing system, and it is the difference between a clean audit and a reconstruction exercise two years later. If you are working for exempt organizations regularly, the same discipline shows up on the customer’s side of the relationship too, which is why nonprofit bookkeeping and contractor bookkeeping keep running into each other.
For the customer-facing half of this — when a job is a capital improvement, who signs Form ST-124, and why the materials trap exists at all — see our full guide to sales tax on construction in New York.
Frequently asked questions
Can a contractor use Form ST-120 in New York?
No. The current Form ST-120 (1/26) states that contractors cannot use the certificate, and the front page adds that contractors may not use it to purchase materials and supplies. Use Form ST-120.1 where the project qualifies, or pay the tax at purchase.
What is Form ST-120.1 used for?
Form ST-120.1, the Contractor Exempt Purchase Certificate, lets a registered contractor buy tangible personal property or certain services without sales tax for a specific qualifying project — most commonly work on real property owned by an exempt organization or a governmental entity. It covers nineteen categories, items A through S, and a separate certificate is required for each project.
Where do I get Form ST-119.1?
You do not download it. New York does not publish ST-119.1 as a PDF; the exempt organization obtains it by calling the Tax Department at (518) 485-2889. And it is the organization’s certificate for its own purchases, not something a contractor uses to buy materials.
Do I charge sales tax on a repair job for a school district?
No. Work for an exempt organization is not taxable whether it is a capital improvement or a repair, and building materials transferred to the customer can be bought exempt on Form ST-120.1. Your tools, rentals and consumables are still taxable to you.
How long does a supplier have to get my exemption certificate?
The seller must have a properly completed certificate within 90 days after delivery of the property or performance of the service. Past that point, purchaser and seller share the burden of proving the sale was exempt. A certificate that arrives on time but is incomplete can generally be corrected within a reasonable period.
Can an unregistered subcontractor accept an exemption certificate?
Only Form ST-124. An unregistered subcontractor — one performing solely capital improvement work and therefore not required to hold a Certificate of Authority — may not accept any other exemption certificate.
This article is general information about New York sales tax rules for contractors, not advice for a specific job or contract. Certificate requirements turn on the facts of the project and the status of the property owner. Confirm your situation before you issue or accept a certificate.
The certificate the customer hands you runs on its own set of rules — who may sign it, the 90-day window, and how long you have to keep it on file. Those mechanics are covered in how to fill out Form ST-124.
For the capital-improvement side of the decision, see capital improvement or repair?
Certificates are only one part of a contractor bookkeeping system that has to survive a sales tax audit. Getting the underlying records right month by month is the substance of construction bookkeeping, and it is what makes an exemption position defensible years later.
Talk to an accountant who works in your industry
Precision Accounting & Consulting works with contractors, law firms, medical practices and property owners across the country. If something on this page raised a question about your own books, send it over and we will give you a straight answer.