Sales Tax Articles
Sales Tax State Activity Update - February 2008
Florida Keys a Lock Vendor into Substance over Form
Many states take the position that, when materials are separately stated from the labor to install the tangible personal property, the tangible personal property is usually subject to the sales tax while the labor services are usually exempt.
However, this was not the case concerning a questioning lock vendor in the sunshine state.
The door lock vendor chose to apply sales tax to the total invoice. Based on the particular facts and circumstances, the Department's position indicated that the "Time and Materials" invoice should be treated as an improvement to real property. Accordingly, no sales tax would apply to the total charge. Rather, the vendor should pay tax to their suppliers or accrue tax when no tax was charged on their purchases of locks and related materials.
The state looked to the substance of the transaction, an improvement to the realty, rather than the form of the contract or invoice presented by the installer. Did the taxpayer get a tax refund? How will the installer deal with the tax due on their purchases? The TAA did not provide answers to these questions. That's for another story...
The full text can be accessed on the Florida Department of Revenue Website.
(Florida DOR Technical Assistance Advisement TAA 07A-045 12/19/2007)
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