Tangible personal propertythat is not classi�ed as real pro - PDF document

Rev. 9/17 Sales Tax and Home ImprovementsTax Topic BulletinS&U-2 Introduction When you have work done on your real property (building or land), this work can be a General Information contractoris an individual or business entity engaged in the business of improving, altering, or repairing land, buildings, or other real property of others. Sales of materials and , Contractors and New Jersey Taxes. Real property means land and buildings and any property permanently attached to the land and/or buildings in such a way that its removal would result in substantial damage to the real property. Tangible personal property Sales Tax and Home Improvements ��Rev/17 Construction materials are items purchased bya contractor that will become part of the realproperty. For example, a 2×4 used as a studwill become part of the wall and is consideredconstruction material. Capital improvement means an installation oftangible personal property that increases thecapital value or useful life of the real property(land or buildings). The item(s) installed mustbe permanently attached to the real property. Capital improvements are exempt from taxwith the exception of the following: certainlandscaping services, carpet and other floorcovering installations, and hardwired alarm orsecurity system installations.Examples of exempt capital improvementsinclude:All new construction* Porch enclosureNew siding New heating systemNew kitchen cabinets New electrical outletsNew kitchen fixtures Storm doors andwindowsPaving driveway New doorsNew central air conditioner Flagpole (in concrete)Clearing land for construction New roofNew attic ventilation fan New guttersNew fence RewiringElectronic garage door opener New elevatorsBarbecue pit New hot water heaterSolar energy window film New door locksground swimming pool New bathroom fixturesNew awnings New tiled bathFireplace New deckShed/gazebo (cement footings)Initial painting ofnew construction systUnderground water sprinkler system *Other than the exceptions listed below.Examples of taxable capital improvementsinclude:Planting shrubbery, trees, hedges, plants, etc.Seeding, sodding, grass plugging of new lawnClearing and filling land associated with seeding, sodding,etc. of new lawn or planting shrubbery, trees, etc.,including tree and/or stump removal Sales Tax and Home Improvements ��Rev/17Installing hardwired security, burglar, or fire systemInstalling carpeting and other flooring Repair (to real property) means work that restoresproperty to working condition; it does notadd to the value or prolong the life of the property. Maintenance services preserve the existingcondition of real property. Examples of repairsinclude:Fixing loose bath tiles Repairing guttersFixing faulty plumbing Pointing bricksPatching driveway potholes Replacing torn screenRepairing cracked patio floor Fixing leaks in cellarFixing faulty electrical outlets Fixing leaky roofIn some situations, thedifference between a repairand a capital improvement is the extent the work that is done. For example, replacing afew loose bath tiles or a portion of a leaky roofis a repair to the existing real property. However,replacing all of the tiles or the entire roofwith upgraded or improved materials would bean exempt capital improvement.Examples of maintenance servicesinclude:Mowing lawns Snow shovelingTrimming trees Powerwashing exteriorPainting interior or exterior of house Paying Sales Tax on HomeImprovements Taxable Services. A contractor’s bill shouldseparately state the charges for materials andfor labor. The contractor charges Sales Tax onthe labor portion of the bill only when he/sheperformsa taxable capital improvement, repair,maintenance, or installation service. (There isno Sales Tax due on the charge for labor whenthe contractor’swork results in an exemptcapitalimprovement. See Exempt CapitalImprovement Services .) The contractormay not charge you Sales Tax on the cost ofthe materials and supplies used for the job.However, if the ontractor charges you a lumpsum for the taxable capital improvement, repair,maintenance,or installation service withoutseparating the charge for materials from thecharge for labor, you are required to pay theSales Tax on the total amount of the bill. Certain service providers that work on, but donot alter, real property (e.g., janitorial or cleaningservices, pest control services) are not consideredto be “contractors” for New Sales Tax and Home Improvements ��Rev/17Jersey SalesTax purposes. These businesses must charge youSales Tax on the total amount of your bill.Repairs or services to tangible personal property(e.g., washing machines, television sets,utomobiles)are not repairs to real property.tradesperson such as a TV repairperson is not a“contractor” for New Jersey Sales Tax purposesbecausethe work is not being done to the landor buildings of others. The repairperson isrequired to charge you Sales Tax on both thelabor and the parts used for the repair. Exempt Capital Improvement Services. Whenthe work performed on your real propertyresultsin an exempt capital improvement, thecontractor may not collect Sales Tax from youon any charges (materials or labor) if you givethe contractor a completed Certificate of ExemptCapital Improvement Form ST ). You mustcomplete all fields on the exemption certificatein order to claim the exemption. Residential Heating Systems The contractor may not charge you Sales Tax foreither parts or labor when maintaining, ervicing,or repairing a residential heating systemunit if the heating system serves no morethanthree families who live independently of eachother and do their own cooking on the premises. Yourself Work When you work on real property yourself,you are required to pay Sales Tax on the materialsand supplies that you purchase. Anyonepurchasing construction materials from asupplier, whether a contractor or propertyowner, must pay Sales Tax, regardless of thenature of the job (repair or capital improvement).The capital improvement exemptionapplies only to the contractor’s labor chargesbilled to the homeowner when the work resultsin an exempt capital improvement. Floor Covering The retail sale of floor covering is always subjectto Sales Tax. Anyone (contractor, developer,or property owner) purchasing floor covering(carpeting, linoleum, tile, hardwood, marble,and padding, etc.) from a dealer (retailer) paysSales Tax on the purchase price of the floorcovering. This is true whether or not the dealerdoes the installation. When a dealer sells andinstalls floor covering, the sale of the floorcovering and the sale of the installation are Sales Tax and Home Improvements ��Rev/17always treated as two separate transactions, andtax is collected on both the sales price of thefloor covering and the installation charge.For more information on floor covering dealersand New Jersey Sales Tax, see publicationANJ , Floor Covering Dealers & New JerseySales Tax. Landscaping Landscapers are considered contractors becausethey work on the land or buildings of others.They follow the same New Jersey Sales Taxrules as other contractors. If the landscaper’swork results in an exempt capital improvement(e.g., clearing land for new construction, installingdecks, patios, fountains, low voltagelighting), there will be no Sales Tax. If the workis a taxable landscaping service (e.g., plantingtrees, shrubs, plants; laying sod; seeding alawn) the landscaper charges Sales Tax on thelabor portion of the bill. If the work performedby the landscaper is a repair or maintenanceservice (e.g., pruning, fertilizing, mowing),the landscaper charges Sales Tax on the laborportion of the bill.For more information on landscapers, seepublication ANJ , Landscapers & New Jersey Sales Tax. For More Information OnlineDivision of Taxation website ; Email general State tax questions Do not include confidential information such as Social Security or federal tax identification numbers, liability or payment amounts, dates of birth, or bank account numbers in your email; Subscribe to NJ Tax ENews , the Division of Taxation’s online information service By PhoneCall the Division of Taxation’s Customer Service Center at 2926400Text Telephone Service (TTY/TDD) for HearingImpaired Users: 800286(tollfree within NJ, NY, PA, DE, and MD) or 6097300.These numbers are accessible onlyfrom TTY devices. Submit a text message on any New Jersey tax matter and receive a reply through NJ Relay Services (711). Sales Tax and Home Improvements ��Rev/17In PersonVisit a New Jersey Division of Taxation RegionalInformation Center. For the address of the center nearest you, visit our website call the Automated Tax InformationSystem at 1800 3234400. Forms and Publications Visit theDivision of Taxation’s website for formsand publications ; Call the Forms Request System at 8003234400(within NJ, NY, PA, DE, and MD) or8264400(touchtone phones only) to have printed forms or publications mailed to you.OTEDue to budgetary constraints, supplies are limited and only certain forms anpublicationscan be ordered through this ystem. Sales Tax and Home Improvements ��Rev. 9/17In PersonVisit a New Jersey Division of Taxation RegionalInformation Center. For the address of the center nearest you, visit our website call the Automated Tax InformationSystem at 1800 3234400. Forms and Publications Visit theDivision of Taxation’s website for formsand publications ; Call the Forms Request System at 1-8003234400(within NJ, NY, PA, DE, and MD) or8264400(touchtone phones only) to have printed forms or publications mailed toyou.OTEDue to budgetary constraints, supplies are limited and only certain forms anicationscan be ordered through this ystem.