| Connect Follow us on Twitter Like us on Facebook
About | Subscribe | Advertise


Download our free ebook on Abrasive Blast Cleaning

Paint and Coatings Industry News

Main News Page

Capital Victory: Bridge Painter Bests NY State’s Tax Man

Monday, July 11, 2011

More items for Environmental Controls

Comment | More

What’s the difference between maintenance painting and capital improvement painting?

About a million dollars, for one New York bridge painter.

The distinction is at the heart of L&L Painting Inc.’s successful appeal to the New York State Tax Tribunal regarding a tax bill for the installation of a massive containment system the company was required to use in painting New York’s Pulaski Bridge.

 L&L Painting Inc.

 L&L Painting Inc.

Family-owned L&L Painting Inc., established in 1949, has abated and painted most of New York City’s bridges over time.

At issue was whether the $5.4 million bridge coatings removal, surface preparation and recoating project—spelled out in a 600-page contract—was considered routine maintenance and repair or a capital improvement.

‘Unusually Protracted Audit’

The flap began in 2001, when the state Division of Taxation launched an audit of L&L—an audit later expanded to eventually encompass the period from Dec. 1, 1998, through Nov. 30, 2005.

(L&L’s owner, Alvin Levine, died during the appeal of what the Administrative Law Judge, in his recent ruling, called an “unusually protracted audit.”)

The company, a QP-1/QP-2 certified paint contractor, reported more than $423 million in sales and accrued use taxes for taxable purchases for the audit period, which the Division verified as correct.

With expense purchases, however, the company did not provide enough records for a detailed review over the entire audit period, the state said. The company did turn over complete records for the month of March 2001—a month it then agreed to use as a “test period audit” for its expenses.

Containment Expense Flagged

That month included a $148,843 payment toward a $650,000, 40,000-square-foot platform from Safespan Platform Systems Inc., the ruling noted.

The platform was part of a $1.5 million “Class 1A” containment system to contain debris and pollutants during abrasive blasting and removal of the bridge’s lead paint. The system was mandated by the New York Department of Transportation in the painting contract, which specified an SSPC SP-10 Near-White blast finish.

Under New York’s tax law, painting is generally considered a preventive maintenance program and not eligible for funding as a capital project. However, if the end result of services performed during the project is a capital improvement to real property, then the services are excluded from sales tax.

The tax agency deemed the job “functionally the same as traditional painting,” saying, “the painting of existing structures is repair and maintenance.”

Thus, the agency ruled, the platform and about $20,000 in other services purchased for the project were taxable expenses. Not only that, but computing an “error rate” that was then projected over the audit period, the division put the tax tab at $1,047,474.98.

Capital Contentions

L&L contended that complete removal of all lead paint and coatings from a six-lane steel bridge, surface preparation, and application of a completely new four-layer, zinc- and epoxy-based protective coating system on the structural steel, plus two layers of epoxy coatings on the concrete—a project that would add 20 to 40 years to the bridge’s life—constituted a capital improvement.

Installation of the temporary platform was a “necessary prerequisite” to the construction of a capital improvement, and thus not subject to sales tax, the company said.

The state contended the city’s failure to provide a certificate of capital improvement disqualified the installation from being considered part of a capital improvement for taxation purposes. It also argued that the platform was not a “temporary facility” under the state tax code, because such a facility was not specifically named in the code’s list of examples.

3-Part Test

So, when is painting maintenance and when is it capital improvement? Under New York’s tax law, a capital improvement:

• Substantially adds to the value of the property or appreciably prolongs its useful life;

• Becomes part of, or is permanently affixed to, the property so that removal would damage it; and

• Is intended to become a permanent installation.

With testimony from two experts—one from L&L and one an expert witness in the field of corrosion—the Administrative Law Judge agreed that the coating of 57-year-old, six-lane, bascule-type drawbridge amply met all three criteria of that test.

Coatings Noted

The judge noted, among other things, that the “extremely expensive” zinc primer and other coatings used were “categorically different” from conventional paint products—a distinction that the Tax Division itself had made in another case, the judge said.

Thus, he said, “the scope of the project, along with the use of the zinc and epoxy coating materials, distinguish the Pulaski Bridge work from the sort of routine maintenance painting contemplated by the regulation.”

The judge did not exempt the lesser expenses for temporary lighting and wiring for trailers, however, saying the painting company had not proved that those expenditures were “necessary prerequisites” to the project.

L&L did not respond Monday to a request for comment.


Tagged categories: Bridges; Containment; Industrial Contractors; Lead; Maintenance coating work; SSPC; Taxes

Comment from shane hirvi, (7/12/2011, 10:58 AM)

Kind of warms the heart doesn't it.

Comment Join the Conversation:

Sign in to our community to add your comments.


Temporary climate control equipment. Dehumidifiers,
Heaters, A/C, Power, More…
Toll Free: 866-379-2600

SSPC: The Society for Protective Coatings

Join SSPC and Enhance
Your Career !

Minerals Research & Recovery


“Made in the USA!”

Why recycle waste from other countries? Go FASTER, CLEANER, at 1/3 THE COST with MR&R “All-American” Sharpshot®HP!!


Armakleen Company, The
ARMEX when nondestructive cleaning is critical

ARMEX the original baking soda blast abrasive is a brand of Church & Dwight Co., Inc. makers of ARM & HAMMER products since 1896.

HoldTight Solutions Inc.

Our HoldTight®102 salt remover & flash rust preventer prevents flash
rust by removing surface contaminants. It has no equal; only wannabees.
Contact us for your
nearest distributor.
(800) 319.8802

U.S. Zinc
Products. Customized With U.S.

Our plant can produce multiple grades of zinc dust. In fact, we offer the most comprehensive product line in the industry, including special additive blends.

Wasser High-Tech Coatings Inc.
Wasser Coatings Protect

Wasser Coatings offer a complete range of Moisture Cure Urethane (NEPCOAT approved) systems in addition to Polyurea membranes and linings(NSF).

SAFE Systems, Inc.
Portable Dust Collectors for Tough Environments

Trailer and skid-mounted models in numerous sizes, powered by electric and/or diesel. Sloped roofs, multiple dust inlets, high static, dampered fans. Lockable power & drive compartments.

Thermion Inc
Buy Back Program

We are offering $5,000
credit for your old Model
This drive system is
being discontinued by
the manufacturer.
More information at

Mitsubishi Gas Chemical America
Performance Amine 1,3-BAC

A highly reactive cycloaliphatic diamine offering superior performance. Reasonable cost and curing efficacy makes it suitable for all types of epoxy resin applications.

Technology Publishing

The Technology Publishing Network

The Journal of Protective Coatings & Linings (JPCL) PaintSquare
Durability + Design Paint BidTracker

EXPLORE:      JPCL   |   PaintSquare News   |   Interact   |   Buying Guides   |   Webinars   |   Resources   |   Classifieds
REGISTER AND SUBSCRIBE:      Free PaintSquare Registration   |   Subscribe to JPCL   |   Subscribe to PaintSquare News
MORE:      About   |   Privacy policy   |   Terms & conditions   |   Site Map   |   Search   |   Contact Us

© Copyright 2000-2015, Technology Publishing / PaintSquare, All rights reserved
2100 Wharton Street, Suite 310, Pittsburgh PA 15203-1951; Tel 1-412-431-8300; Fax 1-412-431-5428; E-mail