| (2) Improvements to real property. Items such as programmable
thermostats, central air conditioning units, ceiling fans and built-in
refrigerators and dishwashers that are plumbed, wired or otherwise
permanently attached to a building structure are improvements to real
property. For items that become improvements to real property, the
taxability of the installation labor is determined by the type of
jobsite: residential, new construction or nonresidential repair or
remodeling.
(A) Residential and new construction. No tax is due
on charges for labor to install items such as ceiling fans, programmable
thermostats or central air conditioning units in residential property
or during a new construction project. See §3.291 of this title
(relating to Contractors).
(B) Nonresidential repair and remodeling. Nonresidential
repair and remodeling is a taxable service. Therefore, tax is due
on charges for labor to install ceiling fans, built-in appliances,
programmable thermostats and central air conditioning units in existing
nonresidential real property, regardless of when the installation
is performed. Charges for installation labor performed on existing
nonresidential real property should be separately stated on the invoice
from the sales price of qualifying energy-efficient or WaterSense
products. Separately stated charges for products that may conserve
water but that are not water-conserving products because they are
installed in nonresidential real property are taxable. A lump sum
charge for the purchase of a qualifying product and installation labor
is subject to tax as the purchase of nonresidential repair and remodeling.
See §3.357 of this title (relating to Nonresidential Real Property
Repair, Remodeling, and Restoration; Real Property Maintenance).
(g) Purchases by real estate developers, dealers, service
providers and contractors. Real estate developers, dealers, service
providers and contractors may purchase qualifying products tax-free
during the sales tax holiday as discussed in this subsection.
(1) An exemption or resale certificate is not required
for purchases of energy-efficient or WaterSense products.
(2) A resale certificate must be provided for purchases
of water-conserving products that will be subsequently resold to customers
or incorporated into customers' real property under a separated contract.
(3) An exemption certificate or resale certificate
may not be provided for purchases of products that may conserve water
but will be incorporated into real property under a lump-sum contract.
(4) There is no limit to the number of qualifying products
a person may purchase tax-free during the exemption period.
(5) Held in inventory. Qualifying products purchased
tax-free during the exemption period may be held in inventory until
ready for use as discussed in this subsection.
(A) No use tax is due if an energy-efficient product
or WaterSense product purchased tax free during the exemption period
by a contractor, developer, etc., is subsequently incorporated into
the realty of a contractor's customer under a lump sum contract for
new construction or residential repair and remodeling. See §3.291
of this title. Use tax is due on products that may conserve water
but do not meet the definition of water-conserving products provided
in subsection (a)(7) of this section because the products were incorporated
into real property under a lump sum contract.
(B) Sales tax is due on sales of energy-efficient or
WaterSense products transferred to customers as part of a nonresidential
repair and remodeling contract preformed after the exemption period.
Nonresidential repair and remodeling service providers are responsible
for collecting sales tax from customers on sales of energy-efficient
or WaterSense products under a separated contract or under a lump
sum contract for nonresidential repair and remodeling, unless the
transaction (the sale of the energy-efficient or WaterSense product)
between the customer and service provider, dealer or contractor occurs
during the exemption period under a separated contract. See §3.357
of this title.
(h) Discounts and coupons. An Energy Star qualified
air conditioner must be priced at $6,000 or less in order to qualify
for the exemption. An Energy Star qualified refrigerator must be priced
at $2,000 or less to qualify for the exemption. A seller may offer
a discount or a coupon that reduces the sales price of an Energy Star
qualified air conditioner or refrigerator. A discount or a coupon
affects the application of the exemption as explained in paragraphs
(1) and (2) of this subsection. The total sales price of the product
includes delivery and installation charges as explained in subsections
(e) and (f) of this section. See §3.301 of this title.
(1) Discounts. If a discount reduces the sales price
of an Energy Star qualified air conditioner to $6,000 or less, or
reduces the sales price of an Energy Star qualified refrigerator to
$2,000 or less, the air conditioner or refrigerator qualifies for
the exemption under this section. For example, a person buys an Energy
Star qualified free-standing refrigerator that has a sales price of
$2,050, including shipping, handling and installation of tangible
personal property, from a seller who offers a 10% discount. After
application of the 10% discount, the final sales price of the refrigerator
is $1,845. The refrigerator is exempt because its sales price does
not exceed $2,000.
(2) Coupons. When sellers accept a manufacture's or
other coupon as a part of the sales price of any taxable item, the
value of the coupon reduces the sales price, the same as a cash discount,
regardless of whether the retailer is reimbursed for the amount that
the coupon represents. Therefore, a coupon can be used to reduce the
sales price of an Energy Star qualified air conditioner to $6,000
or less, or to reduce the sales price of an Energy Star qualified
refrigerator to $2,000 or less. The item then qualifies for exemption
under this section. For example, a person buys an Energy Star qualified
free-standing refrigerator that has a sales price of $2,050, including
shipping, handling and installation of tangible personal property,
with a coupon worth $100. After application of the $100 coupon, the
sales price of the refrigerator is $1,950. The refrigerator is exempt
because its sales price does not exceed $2,000.
(i) Rebates.
(1) Rebates given at the time of sale. Rebates provided
by a seller are cash discounts when given at the time of sale and
as such are excludable from the tax base. The rebate, like a discount
when taken at the time of the sale, is a reduction in the amount subject
to tax.
(2) Rebates that occur after the sale. Rebates that
are paid to a purchaser after the exemption period do not affect the
sales price of an item purchased for purposes of determining whether
an item qualifies for exemption under this section. The full amount
of the sales price, before the rebate, is used to determine whether
the exemption applies. For example, if a person purchases an Energy
Star qualified air conditioner for $6,050 and receives a $300 mail-in
rebate from the manufacturer, the seller must collect tax on the $6,050
sales price of the air conditioner.
(j) Layaway sales and purchases by means other than
in person.
(1) the sale of an energy-efficient product, WaterSense
product, or water-conserving product under a layaway plan or purchased
by mail, telephone, email, internet, custom order, or any other means
other than in person qualifies for exemption when:
(A) the purchaser places the item on layaway during
the exemption period and the seller accepts the order for immediate
delivery upon full payment, even if delivery is made after the exemption
period;
(B) the purchaser places the order and the seller accepts
the order during the exemption period for immediate shipment, even
if delivery is made after the exemption period; or
(C) final payment on a layaway order is made by, and
the merchandise is given to, the purchaser during the exemption period.
(2) For purposes of this subsection, the seller accepts
an order when the seller has taken action to fill the order for immediate
shipment. Actions to fill an order include placement of an "in date"
stamp on a mail order, or assignment of an "order number" to a telephone
order. An order is for immediate shipment notwithstanding that the
shipment may be delayed because of a backlog of orders or because
stock is currently unavailable to, or on back order by, the seller.
(k) Rain checks. Qualifying products that are purchased
during the exemption period with use of a rain check qualify for the
exemption regardless of when the rain check was issued. However, issuance
of a rain check during the exemption period will not cause the purchase
of a qualifying product to be exempt if the item is actually purchased
after the exemption period.
(l) Exchanges.
(1) If a person purchases a qualifying product during
the exemption period, and, after the exemption period has ended, exchanges
the item for a qualifying product of equal or lesser value, no additional
tax is due. For example, a person purchases a $60 qualifying dehumidifier
during the exemption period. After the exemption period, the person
exchanges it for a $60 qualifying dehumidifier of a different brand.
Tax is not due on the $60 sales price of the new dehumidifier.
(2) If a person purchases a qualifying product during
the exemption period, and after the exemption period has ended, exchanges
the product for a qualifying product of greater value, tax is due
on the difference between the prices of the two products. For example,
assume a person purchases a $60 qualifying dehumidifier during the
exemption period. After the exemption period, the person exchanges
it for $70 in qualifying light bulbs. Tax is due on the $10 difference
between the two sales prices.
(3) If a person purchases a qualifying product during
the exemption period, and after the exemption period has ended, exchanges
the products for a nonqualifying item, tax is due on the original
sales price of the nonqualifying item. For example, assume a person
purchases a $60 qualifying dehumidifier during the exemption period.
After the exemption period, the person exchanges it for a $60 nonqualifying
microwave. Tax is due on the $60 sales price of the nonqualifying
microwave.
(4) If a person purchases a qualifying product before
the exemption period, but, during the exemption period, returns the
product and receives credit on the purchase of a different qualifying
product, no sales tax is due on the sale of the new product if the
new item is purchased during the exemption period. For example, assume
a person purchases a $60 qualifying dehumidifier before the exemption
period. During the exemption period, the person returns the dehumidifier
and receives credit on the purchase of a $70 qualifying ceiling fan.
No tax is due on the sale of the ceiling fan if it is purchased during
the exemption period.
(m) Returned merchandise. When a person returns an
item that would qualify for the exemption, no credit for or refund
of sales tax shall be given unless the person provides a receipt or
invoice that shows tax was paid, or the retailer has sufficient documentation
to show that tax was paid on the specific item.
(n) Documenting exempt sales.
(1) A seller is not required to obtain an exemption
certificate on sales of energy-efficient or WaterSense products during
the exemption period; however, the retailer's records should clearly
identify the type of item sold, the date on which the item was sold,
and the sales price of the item.
(2) A seller is not required to obtain an exemption
certificate on sales of items identified as examples of water-conserving
products in subsection (a)(7)(B) of this section; however, the retailer's
records should clearly identify the type of item sold, the date on
which the item was sold, and the sales price of the item. A seller
should obtain an exemption certificate on sales of items that do not
clearly meet the definition of a water-conserving product.
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