Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 515.0011.220


515.0011.220 Failure Analysis Reports. An independent contractor provides failure analysis reports to various companies regarding the design and operation of electronic circuitry and components. As part of the reports, the contractor provides photomicrographs to illustrate the failure analysis. In some reports, the contractor splits the failing component (provided by the client requesting the report) for analysis and provides a cross-section of the component, encasing the split component in plastic for ease of handling. The contractor charges an hourly rate for the failure analyses consulting work, and does not charge separately for the photomicrographs or the cross-sections.

Sales tax does not apply to charges for preparing and furnishing failure analyses reports. It is immaterial that photomicrographs and cross-sections may be furnished to the customer since no separate charge is made for these items and they are not the true object of the contract. If the contractor did not provide a failure analysis report but only prepared a cross-section from a component provided by the customer, the sales tax is applicable under section 6006(b). 9/28/76.