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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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we have kiosks located in a big box chain across most states.

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we have kiosks located in a big box chain across most states. Until recently we carried out all service and repair ourselves. We have now contracted a third party on a labor only basis as we own all the kiosks so there a no billable parts. Do we pay tax on the labor?

LEV :

Hi and welcome to Just Answer!

LEV :

Several issues...
The first - we need to know if you hire employees in these locations or you hire self-employed contractors and pay them for services.
Then - we need to know what type of services these persons provide to your business.
Then - we need to know states in which service and repair are provided - sales tax laws are different for each state - and same service and repair may be taxable in some states and not taxable in others.

Customer:

-1- We do not hire the people who do the repairs. We have a contract with a company and they employ as they wish. This service provider now wants to charge sales tax. We have worked with several others previously who did not charge sales tax.

Customer:

-2- Break fix and preventative maintenance. If any parts are required, we supply the parts to the persons doing the service.

Customer:

-2- Also, there is no billable parts from the service provider. We built the equipment. We always retain ownership of the equipment. We instruct the service provider on how to repaid and perform preventative maintenance. We tell the service provider where and when to send their personnel.

Customer:

-3- It's nearly every state. We have a machine in every OfficeMax store in the United States, Puerto Rico, and VI.

LEV :

So - you pay another company for repair and preventative maintenance services.
I am still not clear if these are services for real property? equipment? what type of property you are repairing?
Again - each state has its own sales tax laws and rates - so to be précised - we need to research EVERY state - and that might be very time consuming.
Five US states have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.
I might suggest you to use this page - http://www.taxadmin.org/fta/pub/services/online/default_07.html
You will select the state in question on the left and the service you purchase on the right side - and will determine if a particular service is taxable in the specified state.

Customer:

Equipment not real property. These are semi-automated computer controlled Ink Refill machines (shoppers bring empty ink cartridges to the store to be refilled instead of purchasing a new ink cartridge).

Customer:

Again, we worked with several companies spanning several years who never brought up sales tax. Several months ago we switched service providers and this new one brings up the sales tax issue.

LEV :

The sales tax liability is based on each state law - not on the federal law.
Nowadays states are short on revenue and are more aggressive on all collection efforts - including enforcing the sales tax laws.
As I mentioned above - five US states have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon - so you should not be charged sales taxes for services in these states.
For others - we need to verify separately for each state - and I suggest to use the sales tax database - see the link above.

LEV :

You need clearly identify the type of services you are provided in the right pane.

Customer:

we will try that, thank you for you help.

Lev and 2 other Tax Specialists are ready to help you

Here is the URL to the page - http://www.taxadmin.org/fta/pub/services/online/default_07.html

 

If you will not be able to find more specific code for your services - use code "174" Labor charges - repairs other tangible property.