W. Va. Code R. § 110-15-111

Current through Register Vol. XLI, No. 45, November 8, 2024

Section 110-15-111 - Installation of Tangible Personal Property

111.1. General rule. - Installation of tangible personal property can either be a taxable service or contracting. Installation of tangible personal property is generally considered to be a taxable service, unless it results in a capital improvement to a building, structure, or real property or is performed "on or connected with" new construction, reconstruction, alteration, expansion, or remodeling of real property or structures which itself results in a capital improvement. When an installation of tangible personal property results in a capital improvement to a building, structure, or real property or is performed "on or connected with" new construction, reconstruction, alteration, expansion, or remodeling of real property or structures, constituting a capital improvement, it is considered to be contracting. Guidelines for determining whether these situations exist are given below.

111.2. Factors For Determination of Capital Improvement. - In determining whether an installation of tangible personal property results in a capital improvement to a building or other structure or to real property, the following factors shall be considered. If either of the criteria is met, the installation will be considered to be a capital improvement to a building, structure, or real property, and will be considered to be contracting.

111.2.1. The installation results in a significant increase in the capital value of the building or other structure or of the real property, and the tangible personal property becomes part of the building or structure or real property or is permanently affixed to or attached to the building or structure or real property so that its removal would cause material damage to the article being removed or to the building or structure or real property itself, and the tangible personal property is intended to become a permanent installation or to remain for an indefinite period of time.

111.2.2. The installation results in an appreciable increase in the original useful life of the building or other structure or of the real property and the tangible personal property becomes part of the building or structure or real property or is permanently affixed to or attached to the building or structure or real property so that its removal would cause material damage to the article being removed or to the building or structure or real property itself, and the tangible personal property is intended to become a permanent installation or to remain for an indefinite period of time.

111.3. New Construction, Reconstruction, Alteration, Expansion or Remodeling. - The installation of tangible personal property is contracting when it is performed "on or connected with" new construction, reconstruction, alteration, expansion or remodeling of real property or structures which itself results in a capital improvement to a building, structure, or real property.

111.3.1. The term "on or connected with" as used in Section 111.3 is broad and conveys its generally accepted meaning. Therefore, in a specific situation, the facts relating thereto are controlling in determining whether the service is contracting or is a taxable service. "On or connected with" does not connote that things connected have to be primary or subsidiary to the construction, reconstruction, alteration, expansion or remodeling of the building or other structure, or real property.

111.3.1.1. An incidental relationship can qualify the activity as contracting if the relationship forms an immediate connection with the construction activity.

111.3.1.2. The presence of a time relationship can also be a factor in determining the applicability of the contracting exemption.

111.3.1.3. The motive behind the activity and the course of events that could reasonably be expected to occur would be further consideration in determining if an exempt contracting service is involved.

111.3.1.4. A physical relationship is also a factor that should be evaluated. If a building is constructed to house machinery, any enumerated services relating to the installation of that machinery would be an exempt contracting service. For example, piping joining two pieces of equipment housed in separate buildings would be treated as tax exempt contracting if the equipment in either building was installed while such new construction, reconstruction, alteration, expansion or remodeling of the structure was also taking place to house the equipment.

111.4. Installation Activities Not Constituting Capital Improvement. - On the other hand, a capital improvement does not include a contract providing only for the sale and installation of tangible personal property that remains tangible personal property after its installation. Generally, tangible personal property that is not a capital improvement can be moved without causing damage or injury to itself or to the structure, does not bear the weight of the structure, and does not in any other manner constitute an integral part of the structure. Installation of tangible personal property that does not constitute a capital improvement is considered to be a taxable service.

111.5. Property Remaining Tangible Personal Property After Installation. The following is a list of property which, under normal conditions, remains tangible personal property after installation and does not constitute a capital improvement. This list is non-exclusive and is offered for illustrative purposes only:

111.5.1. Furnishings, radio and television sets and antennas, washers and dryers, portable lamps, home freezers, portable appliances and window air conditioning units.

111.5.2. Portable items such as tables, counters, cabinets, lockers, athletic and gymnasium equipment and other similar items.

111.5.3. Freestanding machinery and equipment, tools, appliances, and materials used exclusively as such by manufacturers, industrial processors and other persons performing a processing function with the items.

111.5.4. Freestanding furniture and equipment, including freestanding office machines, used in offices and banks.

111.6. Property Becoming Part of Realty After Installation. - The following is a list of property which, under normal conditions becomes a part of realty and would be considered to be a capital improvement, and would be treated as contracting. This list is non-exclusive and is offered for illustrative purposes only:

111.6.1. Boilers and furnaces for space heating.

111.6.2. Built-in household items such as kitchen cabinets, dishwashers, sinks (including faucets), fans, garbage disposals and incinerators.

111.6.3. Buildings and structural and other improvements to buildings, including awnings, canopies, foundations, for machinery, floors (including computer room floor), walls, general wiring and lighting facilities, roofs, stairways, stairlifts, sprinkler systems, storm doors and windows, door controls, air curtains, loading platforms, central air conditioning units, building elevators, sanitation and plumbing systems, and heating, cooling and ventilation systems.

111.6.4. Fixed year-round wharfs and docks.

111.6.5. Improvements to land including retaining walls, roads, walks, bridges, fencing, railway switch tracks, ponds, dams, ditches, wells, underground irrigation systems, drainage, storm and sanitary sewers, and water supply lines for drinking water, sanitary purposes and fire protections.

111.6.6. Telephone switching equipment and wiring.

111.6.7. Residential water heaters, water softeners, intercoms, garage door opening equipment when it satisfies the requirements of Section 117.8 of these regulations, pneumatic tub systems and music and sound equipment (except portable equipment).

111.6.8. Drive-up and walk-up windows, night depository equipment, remote TV, autoteller systems, vault and vault doors, and camera security equipment (except portable equipment).

111.6.9. Seating in auditoriums and theatres and theatre stage lights (except portable seating and lighting).

111.6.10. Silos and grain storage bins.

111.6.11. Storage tanks constructed on the site.

111.6.12. Swimming pools (the framework or walls of which are wholly and partially underground (except portable pools)).

111.6.13. Truck platform scale foundations.

111.6.14. Walk-in cold storage units becoming a component part of a building.

111.7. Tangible Personal Property Which Become Structures by Their Basic Nature. - Items which are manufactured as tangible personal property can, by their very nature, become structure and will be considered to constitute a capital improvement to a building, structure, or real property. Installation of these items will be considered to be contracting. However, the determination is factual and must be made on an item by item basis. The following is a list of criteria to be used in making such a determination:

111.7.1. The degree of architectural and engineering skills necessary to design and construct the structure.

111.7.2. The overall scope of the business and the contractual obligations of the person designing and building the structure.

111.7.3. The amount and variety of materials needed to complete the structure, including the identity of materials prior to assembly and the complexity of assembly.

111.7.4. The size and weight of the structure.

111.7.5. The permanency or degree of annexation of the structure to other real property which would affect its mobility.

111.7.6. The cost of building, moving or dismantling the structure.

Example. A farm silo, which is a prefabricated glass lined structure, is intended to be permanently installed. The prefabricated glass lined structure is 70 feet high, 20 feet around, weighs 30 tons, and it is affixed to a concrete foundation weighing 60 tons, and it is set in the ground specifically for the purpose of supporting the silo. The assembly kit includes 105 steel sheets and 7,000 bolts. The silo can be removed without material damage to the realty or the unit itself at a cost of $7,000. In view of its massive size, the firm and permanent manner in which it is erected on a most substantial foundation, its purpose and function, the expense and size of the task and the difficulty of removing it, it is considered a structure and not machinery and equipment.

111.7.7. The above criteria is intended only to be summation of factors which the Tax Commissioner will consider in determining whether or not a project involves contracting.

111.8. Installation of Tangible Personal Property By Retailer. - Special rules apply to the sale of certain tangible personal property by a retailer involving incidental hookup, connection or installation. These sales may be treated as a retail sale to the consumer. See Section 114 of these regulations for more detailed information concerning these transactions.

111.9. Taxability of Sales. - To determine whether consumers sales and service tax should be collected from the customer and remitted, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in this section.

111.9.1. Sales of Contracting. - A person who engages in contracting does not charge consumers sales and service tax to the customer. The sale of contracting is exempt from sales and use tax as set forth in Section 9.2.17 of these regulations.

111.9.2. Sales of Service. - A person who engages in providing of taxable service must collect consumers sales and service tax from the customer and remit it to the state or obtain an exemption certificate, or direct pay permit from the customer.

111.10. Taxability of Purchase. - In order to determine whether consumers sales and use tax should be paid on purchases for use in these types of activities, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in this section.

111.10.1. Taxability of Purchases for Use in Contracting Activity. - Beginning March 1, 1989, except as outlined in Section 108 of these regulations and relating to transition rules and Section 109 of these regulations relating to the exemption for material used in government contracts, a person who engages in contracting must pay consumers sales or use tax on his purchases for use in the contracting activity. This includes machinery, equipment, materials, and services used in the contracting activity. It does not include labor provided by employees of the contractor. Transition rules are provided in Section 108. Special rules are provided in Section 109 of these regulations for contracts with the United States the State of West Virginia, its political subdivision, or corporate entities created by the West Virginia Legislature.

111.10.2. Taxability of Purchases for Use in Service Activity. - On or after July 1, 1989, a person who engages in the providing of a service is taxable on purchases for use in his taxable service activity, except for purchases for resale.

W. Va. Code R. § 110-15-111