Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521

Annotation 190.1097


190.1097 Walk-In Refrigeration Units. A company manufactures walk-in coolers (also called cooler boxes, freezer, or refrigeration "rooms.") Much of the work is as a subcontractor for the prime refrigeration contractor. The company manufactures prefabricated panels and doors which are assembled at the job location into a "room" or coolers. The panels lock together and the cooler can easily be assembled or disassembled at the jobsite. Presumably, the prime refrigeration contractor or another of the subcontractors installs the refrigeration system after the manufacturer completes its work. For the sake of clarity, three classifications are followed in determining the proper application of tax:

(1) Freestanding, prefabricated, self-contained units manufactured at the manufacturer's plant and transported as complete units to the jobsite:

These are tangible personal property (or machinery and equipment) and tax applies to the gross receipts from this sale at retail. If these are furnished as part of a construction contract, the measure of tax is determined under the criteria set forth in Regulation 1521(b)(2)(C). Sales of these units to the United State are exempt from tax. The person selling these units may take a resale certificate for them from the prime contractor.

(2) Prefabricated units which do not lose their identity when installed, but are affixed to the structure in such a manner that they become fixtures. These units, when installed, are fixtures under Regulation 1521 but are treated as fixtures only in the hands of the person who affixes them to realty. In other words, these rooms must be connected to the coolant system before they are fixtures.

If all the taxpayer does is take prefabricated panels to the jobsite and then assemble them into a freestanding room, the assembled room is tangible personal property in the manufacturer's hands and when sold by the manufacturer even though it is a component of a fixture when affixed to the realty by someone else. The prime contractor who is required to furnish and install the assembled refrigeration room is the retailer of the fixture. The prime contractor may purchase the room under a resale certificate. However, when the prime contract is with the United States, the sale to the prime contractor is a retail sale as set forth in Regulation 1521(b)(1)(A). If the same person assembles the panels into the freestanding room and also affixes it to the coolant system, the room is a fixture.

(3) A combination of materials and fixtures. As an example, sills are affixed to the concrete floor by nails and bolts. The panels are affixed to the sills panel by panel until the room is assembled.

The sills, wall panels, and doors are materials. The person furnishing and installing the panels is the consumer of the panels or if that person manufactures the panels, he is the consumer of the materials from which he manufactures them. The refrigeration units which include the compressor and evaporator are fixtures. Piping installed to connect the compressor with the room is materials. 8/4/77.