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Joined: Dec 2003
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Ok but how about this. You go on a service call and say you have to reset a breaker. No material involved only labor. I have for years been charging sales tax on the service call charge.
A few weeks ago a savy customer deducted the tax and it got me thinking. I know I should ask my accountant but I believe the customet is correct and I should not add tax on labor only invoices. I'm in NY what do you think?.
-Hal
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Joined: Oct 2000
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Hal, I'd say he was wrong. It's my understanding that Repairs are taxable, whether materials are involved or not. I found the following on a NYS website: (bold is mine) QuestionFor what services to real property is a contractor required to charge New York State sales tax? AnswerServices to real property are classified as either a capital improvement or a repair, maintenance or installation service. Installation services include the installation of tangible personal property which remains tangible personal property after its installation. A capital improvement is an addition or alteration to real property that: - substantially adds to the value of the real property, or appreciably prolongs the useful life of the real property - becomes part of the real property or is permanently affixed to the real property so that removal would cause material damage to the property or article itself; and - is intended to become a permanent installation. If a contractor does a capital improvement for a customer and the customer provides the contractor with a properly completed Form ST-124, Certificate of Capital Improvement , no sales tax is required to be collected from the customer. On the other hand, when a contractor performs a job that constitutes a repair, maintenance, or installation service to real property, sales tax must be collected from the customer. For further information pertaining to capital improvements and repairs to real property, please refer to Publication 862, Sales and Use Tax ...mprovements and Repairs to Real Property . Bill
Bill
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Hmmm, yes that's printed on the back of the capital improvement form the customer must sign in such cases. I still don't think it covers the situation I'm talking about.
Time to email my accountant and see what she has to say. I'll be back.
-Hal
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It's tax season and it could take days...
Anyway, I just went out for coffee and stopped in to see a buddy of mine who is in the locksmith/architectural hardware sales, service and installation business.
I mentioned this to him seeing as he is in the same sort of situation. He says this is a gray area, nobody knows for sure. He normally puts tax on the invoice but if the customer feels they shouldn't pay and they deduct it he doesn't care.
His father is an CPA who used to handle his business so I'm sure this is where this came from.
-Hal
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Joined: Oct 2000
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Hal, From the publication mentioned above: Services to real property are classified as either a capital improvement or a repair, maintenance or installation service.
Repair and maintenance relates to keeping real property in a condition of fitness, efficiency, readiness and/or safety or to restoring it to such condition. I think your resetting the Breaker would fit here (restoring to a condition of readiness) In the case of a job that constitutes repair or maintenance, if you are a property owner who:
- purchases materials and supplies only and performs your own labor, you pay tax to the supplier on the materials and supplies.
- purchases materials and supplies and hires a contractor to perform the labor, you pay tax to the supplier on the materials and supplies and to the contractor for the labor
- purchases materials and supplies and labor from a contractor, you pay tax to the Contractor on the total charge. This shows that Labor alone is taxable if it is not part of a Capital Improvement project. Bill
Bill
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Ahh if only the tax code was as easy to understand as the NEC! ![[Linked Image]](https://www.electrical-contractor.net/ubb/biggrin.gif) -Hal
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Joined: Dec 2003
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Well, this is what my accountant had to say-
Your services are specifically included within the range of services subject to sales tax so the guy should have paid the sales tax. When the mechanic fixes your car, the entire bill is subject to sales tax because the law was written to specifically tax services performed "installing, maintaining, servicing or repairing property not held for for sale." Everybody thinks they know the law but they don't.
So Bill, you are correct. Unless the job is a capital improvement or for a non-profit tax exempt organization they have to cough up the tax.
-Hal
[This message has been edited by hbiss (edited 04-04-2005).]
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Joined: Oct 2000
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Hal,
Thanks for the follow-up.
Bill
Bill
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Joined: Apr 2002
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In my state, Georgia, you can't tax labor. The only thing you can tax is materials. We pay the tax on materials when we buy them. We try not to break out materials and labor to avoid having to collect the tax on the mark-up. They do not require service companies to collect tax, one less thing to worry about.
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Joined: Apr 2005
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GA same as MA - Labor is not taxable, only materials. (5%)
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