Division of TaxationTaxability of Purchases of Tangible Personal Property and Services Associated with Disaster Recovery Efforts
Unless a sale is exempted/excluded by the Sales and Use Tax Act, New Jersey imposes a tax of 6.625% upon the receipts from every retail sale of tangible personal property. Generally, the maintaining, servicing, or repairing of real property is taxable unless the service results in an exempt capital improvement. A repair service is a service which maintains the existing value of property. A maintenance service is a service which preserves the existing condition of property. A capital improvement is an installation of tangible personal property which results in an increase of the capital value of real property or a significant increase in the useful life of property. If a service results in an exempt capital improvement, the property owner must provide the contractor with a fully completed Certificate of Exempt Capital Improvement (Form ST-8) to claim the exemption.
After Super Storm Sandy, the Division of Taxation received many inquiries regarding the taxability of sales of tangible personal property and services sold in connection with disaster recovery efforts. The Division compiled this list of frequently asked questions posed by property owners and contractors to address some of the Sales and Use tax concerns regarding the purchase of tangible personal property and services associated with disaster recovery.
Frequently Asked Questions from Property Owners:
Answer: No. Charges for demolition services are not subject to tax.
Answer: Yes. Debris removal services are servicing or maintaining real property and, as such, the charges are subject to tax.
Answer: No. Charges for the removal of a tree stump and roots are not subject to tax, unless performed in conjunction with landscaping services. Landscaping services include the clearing of land associated with landscape improvements such as the seeding, sodding, grass plugging of new lawns, planting trees, shrubs, hedges, plants, etc. For additional information on landscaping services see publication ASexyÕæÈË-4, Landscapers & New Jersey Sales Tax .
Answer: No. The construction of a garage is an exempt capital improvement and as such the charges are not subject to tax. The property owner must issue the contractor a fully completed Certificate of Exempt Capital Improvement (Form ST-8) to document this exemption.
Answer: ÌýYes. The purchase of materials and supplies is subject to tax. This is true regardless of whether the property owner or contractor purchases or makes use of the materials and/or supplies.
Answer: ÌýYes. Installation of replacement shingles is repairing real property and as such the charges are subject to tax.
Answer: No. The installation of a new roof is an exempt capital improvement and as such the charges are not subject to tax. The property owner must issue the contractor a fully completed Certificate of Exempt Capital Improvement (Form ST-8) to document this exemption.
Answer: Yes. Charges for carpet cleaning services are subject to tax.
Answer: Yes. Charges for the installation of floor covering are subject to tax. For additional information on the installation of floor covering see publication ASexyÕæÈË-5 Floor Covering Dealers & New Jersey Sales Tax .
Answer: Yes. The removal of water and sand from real property are servicing and maintaining real property and as such the charges are subject to tax. For additional information see Technical Advisory Memorandum TAM-2012-3 Charges for Water Damage Restoration Services .
Answer: Yes. The cleaning of household goods such as furniture, decorative items, and personal items is maintaining or servicing tangible personal property and, as such, the charges are subject to tax. For additional information see Technical Advisory Memorandum TAM-2012-3 Charges for Water Damage Restoration Services .
Answer: No. Charges for mold inspection or detection services are not subject to Sales Tax.
Answer: Yes. Mold removal services (e.g., spraying of walls to treat mold) are repairing or servicing real property and the charges are subject to tax.
Answer: ÌýYes. Mold remediation services are servicing of real property and are subject to tax.
Answer: No. The removal and replacement of all the walls and insulation is an exempt capital improvement. The property owner must issue the contractor a fully completed Certificate of Exempt Capital Improvement (Form ST-8) to document the exemption.
Answer: No. The initial painting or staining of a structure is an exempt capital improvement. The property owner must issue the contractor a fully completed Certificate of Exempt Capital Improvement (Form ST-8) to document the exemption.
Answer: Yes. Repainting the exterior of a structure such as a house is servicing or maintaining real property and, as such, the charges are subject to tax.
Answer: Yes. Pressure washing the exterior of a home is the servicing and maintaining of real property, and the charges are subject to tax.
Answer: Yes. The purchase of a portable generator is subject to tax.
Answer: Yes. The purchase of a generator is subject to tax.
Answer: No. The installation of a generator which will be permanently affixed to the property is an exempt capital improvement. The property owner must issue the contractor a fully completed Certificate of Exempt Capital Improvement (Form ST-8) to document the exemption.
Answer: No. Lifting a home is an exempt capital improvement. The property owner must issue the contractor a fully completed Certificate of Exempt Capital Improvement (Form ST-8) to document this exemption.
Answer: Yes. The purchase of household goods is subject to tax.
Answer: Yes. The purchase of a vehicle is subject to tax.
Frequently Asked Questions from Contractors:
Answer: No. As the contractor, you are the end-user of any materials and supplies purchased for the job and should pay tax on all materials and supplies. When you build a detached garage you should not charge the customer Sales Tax on the cost of materials and supplies used for the job. For additional information see tax topic bulletins S&U-2 Sales Tax and Home Improvements and S&U-3 Contractors and New Jersey Taxes .
Answer: Yes. Labor charges for repair services to real property are subject to tax.
Answer: Yes. The purchase, lease, or rental of equipment by a contractor is subject to tax.
Answer: ÌýNo. The rental of a crane with an operator to lift a house is not subject to tax. For more information on the rental of equipment with an operator see Notice Rental of Equipment with an Operator
Answer: No. The rental of a room by a person who has occupied the room for at least 90 consecutive days is not subject to Sales Tax. However, unless an upfront agreement exists between the hotel and the occupant, the hotel must collect the tax until the occupancy reaches 90 consecutive days. After 90 consecutive days, the hotel is no longer required to collect the tax and the occupant is entitled to a refund of the Sales Tax already collected. If the hotel does not refund the Sales Tax, you may apply for a refund directly to the Division using Form A-3730 .
Answer: No. The law allows for an exemption from tax on the purchase of materials and supplies for the exclusive use in fulfilling a contract with an exempt organization. In order to document the Sales Tax exemption, you must obtain a copy of the qualified exempt organization’s Form ST-5 and issue Contractor’s Exempt Purchase Certificate (Form ST-13) to the supplier when making purchases of materials and supplies.
For additional information on purchases by contractors fulfilling contracts with exempt organizations, see Technical Bulletin-67 Contractor Exemption for Improving, Altering, or Repairing the Real Property of Qualified Exempt Entities .
Additional Information
For additional information, see tax topic bulletins S&U-2 Sales Tax and Home Improvements and S&U-3 Contractors and New Jersey Taxes .