(a)
General. This section
pertains to the sale and/or installation of carpeting, tile, linoleum and other
similar floor coverings. This ruling is intended to amplify the provisions of
§
31.16 (relating to contractors
acting as agents for their exempt customers).
(b)
Definitions. The
following words and terms, when used in this section, have the following
meanings, unless the context clearly indicates otherwise:
Construction contract-A sale of floor
covering under which the dealer has the responsibility for installation. If an
invoice to a customer is written to include the rendering of installation
services, such as with notations "installed", "including installation",
"delivered and installed", "paste-down" or "tacking", it is presumed that the
transaction constitutes a "construction contract".
Example. "D" Dealer agrees to furnish carpeting to "B"
Buyer for use in "B's" home. "D" engages "C" Installer to install the
carpeting. "D" includes on "B's" invoice the notation "installed". The sale
between "D" and "B" is a "construction contract".
Floor covering-A type of carpeting,
tile, linoleum or other floor surfacing materials.
Installation-The attachment of floor
covering to real estate by tacking, adhesive, hooks, tape or another
method.
Licensed dealer-A person engaged in the
business of selling floor covering who has been issued a license by the
Department to collect and remit sales tax. A dealer holding a use tax
registration number prefixed with the digits "89" is not a licensed
dealer.
Purchase price-For purposes of this
section, the total value of anything paid or delivered, or promised to be paid
or delivered, whether it is money or otherwise.
(i) Items which are includable in purchase
price whether or not they are separately stated are:
(A) Cost or value of the floor covering and
other materials transferred.
(B)
Cost or value of transportation.
(C) Discount paid or allowed after the sale,
such as a prompt payment discount.
(ii) Items which may be excluded from
purchase price, if separately stated, are:
(A)
Employe, volume, trade and cash discounts which establish a new purchase price
before the sale is completed.
(B)
Interest or finance charges paid by a purchaser on an installment basis.
Straight sale-A sale of floor covering
not a "construction contract" as defined in this subsection.
Example. "D" Dealer agrees to furnish carpeting to "B"
Buyer. "B," independent of the sale, engages and pays "C" Installer to install
the carpeting. The invoice between "D" and "B" does not reflect the notation
"installed," and the like. The sale between "D" and "B" is a "straight
sale."
(c)
Straight sales. A
straight sale of floor covering is a taxable sale of tangible personal property
under the sales tax law. Dealers making taxable straight sales of floor
covering are required to be licensed with the Department and collect and remit
sales tax upon the total purchase price, as defined in subsection (b), unless
the purchaser submits a properly executed exemption certificate or other
documentary evidence establishing that the transaction is exempt. See
subsection (h). The amount representing the purchase price of a taxable
"straight sale" is reported on the taxable sale line of the dealer's regular
sales tax return (Form PA-3).
(d)
Construction contracts. A construction contract does not
constitute a taxable sale of tangible personal property. Charges for the sale
and installation of floor covering (construction contract) are not subject to
tax. The dealer making the construction contract is not exempt from tax. He is
considered to be the consumer of property which he uses or transfers in the
performance of the "construction contract" and is liable for the payment of the
applicable tax. The tax which the dealer is required to pay is based upon his
purchase price, as defined in subsection (b), of property used, consumed or
transferred in the performance of the construction contract. The tax may be
paid by utilizing one of two procedures set forth at subsection (g). The amount
representing a construction contract is reported at the nontaxable sales line
of the dealer's regular sales tax return (Form PA-3).
(e)
Repairing of floor
covering. Repairing of floor covering shall conform with the
following:
(1) Persons who provide the service
of repairing or altering of floor covering without removing the floor covering
from the place where it is located are considered to be performing the services
upon a permanent part of the realty. As a service upon real estate, sales tax
is not due upon the contract price. The person performing the services is
deemed to be the ultimate consumer of the materials, supplies and equipment
used in performing the services and shall pay sales and use tax
thereon.
(2) Persons who provide
the service of repairing or altering of floor covering involving the removal of
floor covering from the place where it is located are performing a taxable
service upon tangible personal property. Persons performing these services
shall collect and remit sales tax upon the total price charged for performing
the services unless the purchase qualifies for exemption under subsection (h).
Purchases of machinery, equipment, tools, supplies, materials or other tangible
personal property, such as shampoo and other cleaning agents, are subject to
tax when purchased for use in performing these services. Persons performing
these services are entitled to use the "resale" exemption with respect to
purchases of tangible personal property or services which they transfer to
their customers.
(f)
Subcontractors' charges for installing floor covering. A
subcontractor's charges for floor covering installation services, as defined in
subsection (b) are not subject to sales tax as a separately stated item on the
customer's invoice, since a subcontract to perform the services falls within
the definition of a "construction contract."
Example. "D" Dealer agrees to furnish
carpeting to "B" Buyer. "D's" sales invoice includes the notation "installed."
"D" enters into an agreement with "C" Installer for "C" to pick up the
carpeting at "D's" store and install the carpeting in "B's" home. "C's" charge
of $50 to "D" for performing this service is not subject to tax. "D" would be
required to pay the applicable tax upon his purchase price of the
carpet.
Example. "D" Dealer makes a "straight
sale" of carpeting to "B" Buyer. "D" charges "B" the applicable sales tax. The
sales invoice makes no reference to installation. "B," thereafter,
independently contracts with "C" Installer for "C" to install the carpeting in
"B's" home. "C's" charge of $50 to "B" for the installing of the carpet is not
subject to tax.
(g)
Purchases. Purchases by licensed dealers and unlicensed
dealers shall conform with the following:
(1)
Licensed dealer. A licensed dealer may utilize one of the
following procedures with respect to each purchase of floor covering:
(i) Claim the "resale" exemption and not pay
sales tax to the supplier at the time of purchase. The dealer shall tender to
his supplier a properly executed Sales and Use Tax Exemption Certificate (Form
REV-1220), indicating thereon the resale basis for exemption and the dealer's
sales tax license number.
(ii) Pay
the applicable tax to his supplier on the total purchase
price.
(2) A licensed
dealer who either claims an exemption or otherwise makes purchases from a
supplier not licensed by the Department at the time of the purchase, shall
thereafter:
(i) Collect the applicable tax
upon his taxable "straight sales."
(ii) Pay use tax upon the purchase price of
the materials used in his "construction contracts."
(iii) Accept in good faith an exemption
certificate from his customer as to those transactions qualifying as exempt
straight sales. See subsection (h).
(3) A licensed dealer who pays the applicable
Pennsylvania sales tax to his supplier has fulfilled his tax responsibilities
with respect to the use of floor covering and related materials in connection
with his construction contracts. If the licensed dealer sells the floor
covering or related materials as a taxable or exempt straight sale, he is
permitted to take credit for the tax he has paid to his supplier against any
tax he has collected, to the extent of the material sold either as a taxable or
exempt straight sale. See §
58.11 (relating to taxes paid;
purchases resold).
(4)
Unlicensed dealer. A dealer who does not make taxable
"straight sales" of floor covering or taxable sales of other tangible personal
property, is not required to be licensed by the Department. An unlicensed
dealer is required to pay tax upon his purchases of floor covering and related
materials to his supplier. If the dealer's supplier is not licensed with the
Department for the collection and remission of taxes, the unlicensed dealer is
required to obtain a use tax registration number from the Department for the
purpose of paying the applicable tax upon materials used in the performance of
his construction contracts directly to the Department. If an unlicensed dealer
later makes taxable straight sales, the dealer is required immediately to
obtain a sales tax license number from the Department as authority to collect
and remit tax upon his taxable straight sales. If an unlicensed dealer makes an
exempt straight sale of floor covering, the dealer may file a Petition for
Refund with the Department for the recovery of tax paid by him upon the floor
covering transferred in connection with the exempt straight sale or he may
claim the "resale" exemption at the time of purchase. If the unlicensed dealer
claims the "resale" exemption on the material which he will sell exempt from
tax, the dealer shall provide a statement on the exemption certificate which
explains why he is not required to be licensed.
(h)
Exemptions. Exemptions
shall conform with the following:
(1)
Construction contracts. An exemption is not available to a
dealer with respect to construction contracts involving floor covering. Thus, a
dealer is required to pay the applicable tax upon his use of any floor covering
and related materials in the performance of a construction contract,
notwithstanding the fact that his contract is with a school, church, college,
the Commonwealth, the United States Government, municipal authority, hospital,
and the like. Any tax which the dealer is required to pay, nevertheless, may be
included as an ingredient of the total contract price charged to the customer,
provided it is not invoiced as a separately stated item and identified as sales
or use tax.
(2)
Straight
sales. Straight sales shall conform with the following:
(i) A dealer is permitted to make straight
sales of floor covering and related materials to the following organizations
and entities without the collection of tax. The dealer shall obtain a properly
executed Sales and Use Tax Exemption Certificate (Form REV-1220) in lieu of the
applicable tax.
(A) United States Government.
See §
32.22 (relating to sales to the
United States Government or within areas subject to the jurisdiction of the
Federal Government).
(B)
Commonwealth of Pennsylvania, its instrumentalities or its political
subdivisions. Political subdivisions include public schools, school districts
or intermediate units governed by The Public School Code of 1949 (24 P. S.
§§ 1-101-27-2702). See §
32.23 (relating to sales to the
Commonwealth or its political subdivisions and sales by the Commonwealth and
its political subdivisions).
(C)
Ambassadors, ministers and consular officers of foreign governments who are
holders of a United States Department of State Tax Exemption Card. See §
32.24 (relating to sales to
ambassadors, ministers and consular officers of foreign governments).
(D) Federal credit unions organized under the
provisions of the Federal Credit Union Act (12 U.S.C.A. §§
1751 -
1795k). See §
48.4 (relating to credit
unions).
(E) Pennsylvania credit
unions formed and incorporated under
17 Pa.C.S. §§
101-
1504 (relating to the Credit Union Code).
See §
48.4.
(F) Public
authorities formed under the Municipal Authority Acts of 1935 and 1945. See
§
32.23.
(G) Cooperative
agricultural associations required to pay corporate net income tax under the
provisions of the Co-operative Agricultural Association Corporate Net Income
Tax Act (72 P. S. §§ 3420-21-3420-30). See §
44.2 (relating to cooperative
agriculture associations).
(H)
Electric cooperative corporations formed under
15 Pa.C.S. §§
7301-
7359 (relating to the Electric
Cooperative Law of 1990). See §
45.1 (relating to exemption of
electric cooperative corporations).
(I) Another organization claiming exempt
status under a particular statute shall make application to the Department
(Attention: Legal Division) for approval to use the
exemption.
(ii) A dealer
shall be required to collect the applicable sales tax upon the straight sale of
floor covering and related materials to the following organizations or
institutions where the floor covering and related materials are of the type
which require installation as that term is defined in subsection (b).
(A) Religious organizations.
(B) Charitable organizations.
(C) Nonprofit educational institutions such
as private schools, colleges, universities, and the like.
(D) Volunteer fire companies.
Example. "D" Dealer makes a "straight
sale" of rubber backed carpeting to "C" Church. Rubber backed carpeting is
normally installed by means of adhesive. "D" Dealer is required to collect and
remit the applicable tax upon the sale of carpeting to "C" Church.
Example. "D" Dealer makes a "straight
sale" of a persian rug to "U" University. Persian rugs do not require
installation. "D" Dealer may accept a properly executed exemption certificate
from "U" University in lieu of the applicable sales tax.
(iii) A dealer who, within this
Commonwealth, performs work or services upon floor covering which thereafter is
delivered to an out-of-State location in the completion of a "straight sale" or
"construction contract", need not collect sales tax nor pay a use tax upon the
floor covering and materials used out-of-State.
Example. "D" Dealer agrees to furnish
and install carpeting as a "construction contract" at the home of "B" Buyer in
New Jersey. "D" Dealer cuts the carpet at his Commonwealth business location
prior to its delivery and installation within the state of New Jersey. "D"
Dealer need not collect Pennsylvania sales tax nor pay Pennsylvania use tax
upon the carpeting and related materials used in the performance of the
construction contract in New
Jersey.
