The general rule in NY is that sales tax applies to everything.  Parts, labor, shipping, material - all of it.  Capital improvement is exempted, but only on the labor.  Thus if you build a garage for somebody you pay tax when you buy the material and pass the tax on material through to the customer.  The labor you charge is not taxable, but only if your customer provides the proper exemption form that you need to keep on file.  Form is below.

http://www.tax.ny.gov/pdf/current_forms/st/st124_fill_in.pdf

Sometimes I do 'cash' jobs and bury the tax.  It's 8% here so I'll tell a customer something is $100 and it gets booked as $92.59 plus tax.  They think they are getting a deal or dodging the tax whereas if you tell them $90 for the job and write it up as $97.20 with tax they get annoyed.  I plow snow and it's especially true there.  We have a lot of 'beer money plowers' around here who don't collect tax (and can't because they don't have a sales tax id).  The problem is that in the customer's eyes the going rate is the rate.  To them $100 is $100 regardless of how much is service and how much is tax.  Basically it means the legitimate ones of us have to essentially charge 8% less to compete.