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increased capacity improvements and taxable services are sold or purchased for a single charge and the portion relating to taxable services represents more than 5.0% of the total charge, the total charge is presumed to be taxable. The presumption may be overcome by the service provider at the time the transaction occurs by separately stating to the customer a reasonable charge for the taxable services. However, if the charge for the taxable portion of the services is not separately stated at the time of the transaction, the service provider or the purchaser may later establish for the comptroller, through documentary evidence, the percentage of the total charge that relates to nontaxable unrelated services. Examples of acceptable documentation include written contracts detailing the scope of work, bid sheets, tally sheets, schedules of values, and blueprints. (5) When both increased capacity improvements and taxable services are being performed under the same
contract, the parties to the contract should separately identify taxable from nontaxable labor in a contract and the charges applicable to each or the entire contract will be presumed to be for taxable services. Documentation which clearly defines the work being performed should be retained by both parties to show that had the increased capacity improvements and taxable services been done independently of each other, the cost of each would be reasonably near the allocation of charges. Examples of acceptable documentation include written contracts which detail the scope of work, bid sheets, tally sheets, schedules of values, and blueprints. If there is not a written contract signed by both parties clearly showing agreement as to the taxable and nontaxable work being performed, the customer and the service provider must prepare, at the time of the transaction, a written certification verifying the allocation of charges for increased capacity improvements and taxable services. The
comptroller may recalculate the charges if the allocation appears unreasonable and either party may be held responsible for the additional tax due. (6) A service provider's customer must be able to substantiate by way of documentary evidence that repair, remodeling, restoration, or modification services performed on a production unit increase the unit's capacity as defined in subsection (a)(5) of this section. If the person performing the service does not have the certification set out in paragraph (5) of this subsection, the service provider must presume that the service is taxable and collect tax. If the service provider's customer has documentation to prove that the labor increases the capacity of a production unit, the customer may issue an exemption certificate in lieu of paying tax to the service provider. The certificate must state that the labor increases the production unit's capacity as defined in subsection (a)(5) of this section, and
that the customer will be liable for any additional tax due in the event that it is determined that taxable services were performed. A service provider who accepts such a certificate should follow the guidelines set out in paragraph (1) of this subsection and §3.291 of this title (relating to Contractors).
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