Taxpayer is a company that services appliances. The Indiana
Department of Revenue ("Department") conducted a sales and use tax
audit for the tax years 2010 and 2011. As a result of the audit, the Department
issued proposed assessments for sales tax and interest.
...
The Audit Report states:
When the taxpayer billed their customers for appliance
repairs they typically charged a separate "diagnostic/trip" charge
but then did not further separate charges for parts and labor. The taxpayer
used a line item charge that included replacement part and labor to install it.
Using as an example a repair part ("compressor")
that cost $685.61, the Audit Report states: "The taxpayer charged the
sales tax on the portion of the $685.61 that they determined was the parts
portion of the 'replace compressor' charge."
IC § 6-2.5-4-1(b) states that:
A person is engaged in selling at retail when, in the
ordinary course of his regularly conducted trade or business, he:
(1) acquires tangible personal property for the purpose of
resale; and
(2) transfers that property to another person for
consideration.
Regarding a "unitary transaction," IC § 6-2.5-1-1
states in part:
(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.
And the Department also notes that 45 IAC
2.2-4-2 states:
(a) Professional services, personal services, and services
in respect to property not owned by the person rendering such services are not
"transactions of a retail merchant constituting selling at retail",
and are not subject to gross retail tax. 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 constituting selling at retail
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.
(b) Services performed or work done in respect to property
and performed prior to delivery to be sold by a retail merchant must however,
be included in taxable gross receipts of the retail merchant.
(c) Persons engaging in repair services are servicemen with
respect to the services which they render and retail merchants at retail with
respect to repair or replacement parts sold.
(d) A serviceman occupationally engaged in rendering
professional, personal or other services will be presumed to be a retail
merchant selling at retail with respect to any tangible personal property sold
by him, whether or not the tangible personal property is sold in the course of
rendering such services. If, however, the transaction satisfies the four (4)
requirements set forth in 6-2.5-4- 1(c)(010), paragraph (1) [subsection (a) of
this section], the gross retail tax shall not apply to such transaction.
Taxpayer, per the Audit Report, "billed their customers
for appliance repairs" without separately charging for the parts and
labor. Taxpayer only charged sales tax on the purported cost of the parts, but
the parts were not separately and specifically listed. Taxpayer argues that
although it quoted one price for labor and parts to its customers, that it
nonetheless showed its customers a "tax schedule" which showed its
customers what the tax amount on a part would be. Taxpayer further argued that
the invoice has the part number on it, and that its customers could figure out
how much the part cost by looking it up on the internet.
The Department finds that Taxpayer's invoices list the price
of the labor and repair parts as one price, and thus this constitutes a unitary
transaction. Taxpayer's protest is denied.
