...
During the tax years at issue, Taxpayer bought materials exempt,
transferred those materials to customers, charged customers one lump sum
contract price for "service contracts," and charged its customers
sales tax on forty percent of the contract price. The "service
contracts" provide for parts and labor for service repairs and also
include the transfer of drums, toner, waste bottles, fuser units, and/or
staples. Taxpayer was given credit for the sales tax it collected on forty
percent of the contract price, and the Department's assessment only imposed
sales tax on the remaining sixty percent of the contract price that had not yet
been subjected to sales tax.
...As explained in
(a) Where, in conjunction with rendering professional services, personal services, or other services, the serviceman also transfers tangible personal property for a consideration, this will constitute a transaction of a retail merchant unless:
(1) The serviceman is in an occupation which primarily furnishes and sells services, as distinguished from tangible personal property;
(2) The tangible personal property purchased is used or consumed as a necessary incident to the service;
(3) The price charged for tangible personal property is inconsequential (not to exceed 10[percent]) compared with the service charge; and
(4) The serviceman pays gross retail tax or use tax upon the tangible personal property at the time of acquisition.
...
Since Taxpayer's activities under the "service contracts" fail the
ten percent test, Taxpayer does not meet the "service provider"
exception from the collection of sales tax and the entire contract price is
subject to sales tax. Therefore, Taxpayer has failed to meet its burden of
demonstrating that the assessment is incorrect as found under IC § 6-8.1-5-1.
