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 190.1883


190.1883 Leases of Communication Equipment. A retailer of communication equipment purchases and installs communication equipment. This equipment consists of a central exchange, touch dial communicators, and head sets. The retailer installs a communication system in an existing building. The customer, who is not the owner of the building, will lease the equipment. The leasing company is billed lump sum by the communication equipment retailer with a parenthetical notation that sales tax, delivery, and installation are included.

Communication equipment constitutes improvement to realty with the components of the affixed system classified as fixtures under Regulation 1521(a)(5). The above transaction is a lump-sum construction contract for the furnishing and installation of a communications system. Where the contractor "sells" the fixtures to the leasing company (which is not also the lessor of the realty), if the contractor has properly reported the tax on the fixtures in accordance with Regulation 1521(b)(2)(B), the property will be regarded as tax paid in the hands of the lessor. Accordingly, the rental receipts from the lease will not be subject to tax. If the contractor has not properly reported the tax, liability for any additional tax will be that of the contractor.

The lessor may give the contractor a resale certificate for the property to be leased and elect to pay tax on his rental receipts, in which case the contractor would be permitted to regard his "sale" of the fixtures as a nontaxable sale for resale. 3/31/71.

(Note: Change in certain telephone equipment classification on and after July 1, 1988, Regulation 1521(c)(8).)