61 Pa. Code § 58.13

Current through Register Vol. 54, No. 45, November 9, 2024

Section 58.13 - Carpeting and other floor coverings

(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.

61 Pa. Code § 58.13

The provisions of this §58.13 amended through August 6, 1977, effective 8/7/1977, 7 Pa.B. 2191; amended June 15, 1990, effective 6/16/1990, 20 Pa.B. 3160; amended March 19, 1993, effective 3/20/1993, 23 Pa.B. 1322.

This section cited in 61 Pa. Code § 31.11 (relating to definitions).