NJ sales tax on HVAC

[loch]

Hi all,

What does this phrase from the NJ sales tax guidance mean?

"The purchase and installation of an air conditioner is taxable when the unit is placed into an existing space or metal casing that is part of a structure. An air conditioner that can be removed from its casing by the owner is not a capital improvement and remains tangible personal property."

When is an central air conditioner not put into an 'existing space'? Every AC unit, brand new or a replacement is put into an existing space, not into outer space or something.

So if we replaced a 20 year old unit with new compressor, blower, condenser - are we supposed to pay sales tax?

[dpb]

My interpretation is window unit vs permanent installation.

The distinguishment between capital improvement and personal property seems peculiar for sales tax assessment, however; I'd have to read actual law/regulation to judge what it really means more conclusively.

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[salty]

Yes. The exemption you describe is for wall mount units that slide into a permanently mounted sleeve.

[alta47]

I think it means that if you purchase a window air conditioner unit (for example), you DO have to pay sales tax on the unit itself and on the cost of having a contractor put it in (if you used a contractor).

But, if you replace a 20 year-old HVAC unit with a new compressor, blower, condenser, you DO NOT have to pay sales tax on the unit or on the cost of having the contractor put it in. That would be considered an exempt capital improvement, and no sales tax is due.

Here's a link that may help:

Paying a 7% sales tax for work done by contractors is fairly new in New Jersey (enacted about a year or two ago). And, guess what...., if your contractor does not charge you a sales tax when one is due, you are obligated to pay it anyway. And, if you do not pay it, the state can hold YOU responsible for it because you allowed the contractor to not charge the tax This only applies to contractor work that the 7% sales tax applies to, not to work such as replacing the HVAC because that is an exempted capital improvement which is not subject to the sales tax.

[alta47]

I think you may have that backwards, although the OP's wording in the original post was a little ambiguous.

A wall unit that slides into an existing space or sleeve can be removed and it is therefore not a capital improvement -- it is tangible personal property. It is taxable as would be the cost of paying a contractor to put it in.

[bigjimpack]

[loch]

Sorry. My case is a full central air unit. We were charged sales tax and wonder if we should get a refund.

[alta47]

I am not sure if you were responding to my post or to someone else's post. But, looking back at what I wrote, I think I made a mistake.

I posted the following link:

I misread it before. The form at the above link says that the contractor is to charge sales tax for "labor and services" unless the form is filled out by the homeowner and contractor documenting that the work that was done was a capital improvement (such as installing an HVAC system). But, at the top of the form it says, "MAY NOT BE ISSUED FOR THE PURCHASE OF MATERIALS". In other words, you DO pay sales tax on the equipment materials), but you DO NOT have to pay sales tax to a contractor for labor and services when the work is for a capital improvement (such as an HVAC system).

Do you mean you paid says tax on the labor for installing a full central air unit, or do you mean you paid sales tax on the purchase of the unit itself?

[loch]

Both. If you read the SU2 guidance at the same website you mention, it seems clear that that statement you quote is talking about the contractor buying the unit from the supply house. the end customer pays no sales tax at all.

[alta47]

So, what turned out to be the final answer? Did you ever get that figured out?

I tried reading as much as I could and I couldn't figure it out. To me, the wording on everything I read is ambiguous, and I know from experience that trying to find an actual answer regarding tax questions on the New Jersey website is virtually impossible. Calling the State is even worse.

If I have a new HVAC system installed to replace an old one: 1) do I have to pay tax on the equipment?; 2) does the tax question depend on whether I buy the equipment or the contractor buys it?; and, 3) do I have to pay tax on the contractor's labor to install it?

Thanks.

Both. If you read the SU2 guidance at the same website you mention, it seems clear that that statement you quote is talking about the contractor buying the unit from the supply house. the end customer pays no sales tax at all.

[Edwin Pawlowski]

Can't speak for NJ, but I just bought a new thermostat for my heat. No sales tax. Surprised me, actually, since CT taxes things like breathing and blinking your eyes.

[RicodJour]

I think the existing space means a space for the air conditioner, like an existing through-wall sleeve or a window if it's a window unit.

That's essentially a new system, except for the duct work. I don't believe it falls under maintenance or repair and that the work would qualify as a capital improvement, but you really should call one of the phone numbers on the capital improvement certificate to definitely determine the status. The SU-2

If an owner gives a completed capital improvement certificate to a contractor it removes the contractor's burden on collecting sales tax based on the owner's say so. If at a later date the work is found to be taxable, the owner is on the line for payment and penalties, not the contractor.

If you've already paid the sales tax it will be much harder to get the money back from the contractor. They may have already sent it in to NJ.

R