Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 295.0711


295.0711 Start-Up Cost—Sale of Equipment. A taxpayer designs and manufactures equipment used in the treatment of wastewater for municipalities and other industrial applications. The taxpayer sells the equipment to the customer but is not involved in the installation of the equipment at the job site. It does, however, have a subcontractor that goes to the jobsite when the equipment is ready to begin operation and assists in the "start-up" of the equipment. The equipment is shipped to the jobsite via common carrier. The equipment is bid and invoiced as a lump-sum price. There are no separate line items on the invoice for start-up cost, freight cost, or materials.

Since the taxpayer requires the purchaser of the equipment to purchase the start-up services as a condition of purchase and/or for the functional use of the equipment, then that start-up service is a service that is part of a sale and the charge for it is subject to tax. No deduction from the taxable gross receipts is allowed on any freight costs to taxpayer since charges for transportation from the taxpayer's place of business or other point from which shipment is made directly to the purchaser are not separately stated on the invoice to the customer. 10/17/96.