Taxpayer repaired a pump for an Indiana customer. Taxpayer
charged the customer $1,960 but did not charge or collect sales tax. The audit
concluded that the Taxpayer should have collected the tax and assessed use tax
on the $1,960 transaction. Taxpayer disagrees stating that the $1,960 included
the price of both labor ($1,850) and materials ($110) and that Taxpayer
self-assessed sales tax on the value of the materials used in fulfilling the
contract.
…
Taxpayer claims that the pump repair was billed pursuant to
a "lump sum contract." A "lump sum contract" is defined as
"a contract in which all of the charges are quoted as a single
price." Sales Tax Information Bulletin 60 (April 2011), 20110427 Ind. Reg.
045110247NRA.
…
However, the authorities on which Taxpayer relies are those
which address instances in which a contractor undertakes to "improve real
property." In this instance, Taxpayer repaired a pump; Taxpayer has not
established that it undertook to improve real property. As such, the issue is
not whether Taxpayer's customer paid money pursuant to either a "lump sum
contract" or a "time and material contract." Taxpayer simply
billed its customer for both services and tangible personal property on one
invoice.
Taxpayer has supplied copies of ST-103 sales tax returns.
Taxpayer argues that the returns demonstrate that it paid sales tax on the $110
in materials and that it should not have been assessed tax on the entire
transaction. The returns do not contain an amount listed as "use"
tax, but Taxpayer's records are sufficient to establish that the $1,960
reported on the return incorporated $110 in materials and that Taxpayer had
self-assessed use tax on those materials.
However, resolution of the issue does not turn on whether or
not Taxpayer self-assessed use tax on the materials used to repair the pump.
The issue is whether Taxpayer should have collected sales tax from its
customer. In this case, Taxpayer charged its customer one price for the cost of
the labor and the cost of the materials. As such, the transaction is a "unitary
transaction" as set out in IC § 6-2.5-1-1 as follows:
(a) Except as provided in subsection (b), "unitary
transaction" includes all items of personal property and services which
are furnished under a single order or agreement and for which a total combined
charge or price is calculated.
(b) "Unitary transaction" as it applies to the
furnishing of public utility commodities or services means the public utility
commodities and services which are invoiced in a single bill or statement for
payment by the consumer.
The regulation, 45 IAC 2.2-1-1(a),
explains that sales tax is imposed on the total value of the unitary
transaction.
For purposes of the state gross retail tax and use tax, such
taxes shall apply and be computed in respect to each retail unitary
transaction. A unitary transaction shall include all items of property and/or
services for which a total combined charge or selling price is computed for
payment irrespective of the fact that services which would not otherwise be
taxable are included in the charge or selling price. (Emphasis added).
The audit was correct when it assessed Taxpayer sales tax on
the $1,960 unitary transaction. Taxpayer is entitled to a "credit" on
the amount of self-assessed use tax but – nonetheless – Taxpayer was required
to collect tax on the price charged its customer.
