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Volume 3 - Opinions of Counsel SBEA No. 41

Opinions of Counsel index

Real property, definition of (sawmill machinery and equipment) - Real Property Tax Law, § 102(12)(f):

Sawmill machinery and equipment constitute real property for purposes of taxation if such machinery and equipment are physically annexed to the property and are adaptable and appropriate for sawmill production purposes. However, such equipment, if owned by a 9-A corporation, may be exempt from taxation if it is removable “without material injury to the building” pursuant to section 102(12)(f) of the Real Property Tax Law.

Our opinion has been requested concerning the classification of a sawmill owned by a 9-A corporation (Tax Law, Article 9-A) as real or personal property for purposes of taxation.

Real property by definition in subdivision 12 of section 102 of the Real Property Tax Law includes the land itself, and structures erected thereon. Accordingly, the buildings which are a part of the sawmill operation would constitute real property.

The machinery and equipment in a sawmill are includible in the general definition of real property if they are actually annexed to the property, if they are adaptable and appropriate to the use of the real property to which they are annexed, and if there is an intention to make them a permanent accession.

However, certain machinery and equipment belonging to 9-A corporations, which is real property under the general principles outlined above, may be exempt by subdivision 12(f) of section 102; to wit, movable machinery and equipment used for trade and manufacture, not essential for the support of the building structure and removable without material injury to the structure.

As a practical matter, in determining whether machinery or equipment is removable “without material injury to the building”, the factual situation must be considered. If the damage to the realty would be minimal and highly costly machinery is involved, the injury probably would not be considered “material injury”. For example, sustaining damage of $200 to the curtain walls generally used in most sawmill construction to move equipment worth $2,000 would not be considered material damage.

Accordingly, the machinery and equipment used in a sawmill operation and owned by a 9-A corporation probably will not constitute real property for tax purposes, except in those situations where removal would result in substantial damage to the building.

May 22, 1973