Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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C

190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521

Annotation 190.1305

(b) SPECIFIC PROPERTY AS "MATERIALS" OR "FIXTURES"

190.1305 Cabinets. The following examples illustrate various lump-sum contractual situations with respect to cabinets and the application of sales tax in accord with Regulation 1521(c)(2).

I. Contractor "A" contracts with a property owner to furnish and install a cabinet with a formica-topped work area. Contractor "A" builds the cabinet so that it is a unit, except that the formica top is not attached before affixation of the cabinet to the realty by Contractor "A".The formica top is installed after the rest 0of the cabinet has been affixed to realty. The direct costs of "A" on this job are:

Material

Fabrication
Labor

Installation
Labor

Total

Cabinet

$500

$600

$100

$1,200

Top

200

50

80

330

Total

$700

$650

$180

$1,530

Calculation:

(700 + 650)/1,530 = 88.2%

Since less than 90% of the direct cost of labor and material in fabricating and installing the cabinet is incurred prior to affixation to the realty, Contractor "A" is the consumer of materials on this job. No prefabricated cabinet is involved.

II. Contractor "A" contracts with a property owner to furnish and install a cabinet with a formica-topped work area.

Contractor "A" builds the cabinet so that it is a unit, except that the formica top is not attached before affixation of the cabinet to the realty by "A". He contracts with subcontractor "B" to furnish and install the formica top on the already affixed remainder of the cabinet. He bills "A" $360 for the furnish and install job. In this situation, contractor "A's" direct costs (the subcontractor's billing for the top excluded) are:

Material

Fabrication
Labor

Installation
Labor

Total

Cabinet

$500

$600

$100

$1,200

Calculation:

(500 + 600)/1,200 = 91.7%

"A" is the retailer of a prefabricated fixture. "B" is the consumer of materials, since he installed the formica top on real property.

III. Contractor "A" contracts with a property owner to furnish and install a cabinet with a formica-topped work area. Contractor "A" enters into a contract with "B" whereby "B" will furnish and install the cabinet unit except for the formica top.

Contractor "A" enters into a contract with "C" whereby "C" will furnish the formica top and install it on the cabinet after "B" has affixed the rest of the cabinet to realty.

The direct costs of "A" on this job are not of any significance in this situation.

The direct costs of "B" are:

Material

Fabrication
Labor

Installation
Labor

Total

"B"

$500

$600

$100

$1,200

Calculation:

(500 + 600)/1,200 = 91.7%

In this case, "B" has furnished and installed a prefabricated fixture, since, at least 90% of his direct cost of labor and material in fabricating and installing the cabinet is incurred prior to affixation to realty.

In this case, "C" is the consumer of materials since he installed the formica top on real property. 9/28/78.