Sales Tax Articles
Sales Tax State Activity Update - June 2007
Double Double Taxation and Trouble in the Garden State
The New Jersey Tax Court ruled that a contractor was liable for use tax on the materials used to service its customers' heating and cooling units, which are considred real property.
The contractor sold service contracts for all necessary maintenance and repair of heating and cooling systems. Service contracts are billed lump sum by the contractor, with sales taxes collected and remitted to the State. Contractors performing repair to heating and cooling systems are consumers of the parts used in the repair and owe sales or use tax on the purchase of the parts.
The contractor argued double taxation occurs if sales tax were paid on the purchase of the parts and charged on the selling price of the service contract. The Tax Court indicates the regulation is clear and tax is owed on the parts used in repairing and maintaining real property. The fact that the contractor billed sales tax on the service contract has no bearing on the regulation. The Tax Court concluded use tax is owed on the materials used in the performance of the service contracts.
This full text can be viewed at Rutgers School of Law website.
(New Jersey Tax Court, Docket No. 007698-2004, April 3, 2007)
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