ST 1994-01 - Sale & Installation of Carpet and Other
Floor/Wall Coverings - June, 1994
This release is to reiterate the Department's position
regarding the sale and installation of carpet and other types
of floor coverings. Since, by law, carpet is treated
differently than other types of floor/wall coverings, we will
address them as separate issues.
CARPET
Under Ohio sales tax law, the sale and installation of carpet
(on floors and/or walls in a home, building or structure) is
never considered a construction contract. Therefore, the sale
and installation of carpet is considered a retail sale that
is subject to the sales or use tax.
If a carpet dealer enters into an agreement (with the
property owner, lessee, developer, construction contractor,
etc.) to sell and install (or arrange for installation by a
third party) carpet, the dealer is making a retail sale that
is subject to the sales tax. Sales tax must be calculated on
the total amount charged for the carpet, installation
materials, and installation labor, unless the purchaser is
never subject to the sales tax or provides a properly
completed exemption certificate indicating a valid statutory
basis for claiming exemption.
If a carpet dealer merely sells carpet to someone who will
install (or make the arrangements for installation by a third
party) their own carpet, the dealer is making a retail sale
of carpet and it is a sale that is subject to the sales tax,
unless the purchaser can claim exception or exemption. If the
purchaser installs the purchased carpet, there will not be a
charge for the installation labor; therefore, no tax will be
due on installation labor. If the purchaser arranges for the
installation of the carpet by a third party, the installer
must charge tax on the amount charged for installation labor.
If a carpet dealer sells carpet to someone else who will then
sell and install the carpet (or arrange for installation by a
third party), the purchaser can claim exception from the tax
based on the "resale" exception. The purchaser would be
considered a retailer and would be responsible for collecting
tax on the sale and installation of carpet.
If a person is in the business of installing carpet sold by
someone else, this person must charge tax on the installation
of the carpet, unless the installation is being sold to a
carpet dealer who is charging for the sale and
installation of the carpet.
If a home, building, or other structure is being sold with
installed carpet, the seller of the home, building, or other
structure is selling real property not installed
carpet.
If the owner or developer of property has contracted to have
a home, building, or other structure built, expanded, or
remodeled and this contract includes the installation of
carpet, we would consider the contractor to be the consumer
of the installed carpet so long as the contractor does not
separately state, in the contract or billing, a specific
amount for the sale and installation of the carpet from other
component parts of the contract. Again, we would say that the
contractor is not selling
installed carpet but is consuming the carpet in transferring
the completed, expanded, or remodeled home, building, or
other structure to the owner or developer. When, however, a
general contractor separately states, in the contract or
billing, a specific amount for the sale and installation of
carpet from other component parts of the contract, the
general contractor has entered into a mixed contract and
is both a construction
contractor and a vendor. In this
case, the general contractor must collect tax from the owner
or developer of the property on the amount separately stated
for the sale and installation of the carpet and remit this
collected tax under a vendor's license. When the general
contractor is acting as a vendor of installed carpet, the
"resale" exception may be claimed on the purchase of the
carpet and any purchased installation labor.
If the owner of property has contracted to have a home,
building, or other structure redecorated, the decorator has
probably entered into a mixed contract. The decorator may
make or arrange for improvements to the real property
(painting, wallpapering; adding/changing light fixtures,
moldings, cabinets; removing, moving or adding walls;
installing floor coverings other than carpet, etc.) and make
retail sales (new furniture or recover/refinish old
furniture; provide pictures, pillows, works of art; and
install carpet). In this case, the decorator is acting as a
construction contractor and a vendor. Sales
or use tax must be paid by the decorator (contractor) or any
sub-contractor on the purchase of all materials (paint,
wallpaper, light fixtures, moldings, cabinets, floor covering
other than carpet) that become part of the real property. The
decorator (vendor) must collect sales tax (or obtain an
exemption certificate) on the sale of the furniture,
pictures, pillows, works of art, and the installation of
carpet. The decorator may claim "resale" on the purchase of
the furniture, pictures, pillows, works of art and the
installed carpet.
OTHER TYPES OF FLOOR AND/OR WALL COVERINGS
Unlike carpet, the installation of other types of floor
and/or wall coverings (linoleum, tile, wood, wallpaper, etc.)
is considered a construction contract when incorporated into
real property. The purchaser of the materials necessary for
the installation of these types of floor/wall coverings would
be the consumer of the materials and would owe sales or use
tax on the purchase of the materials.
If a dealer is selling and installing (or arranging for
installation by a third party) floor/wall coverings, other
than carpet, the dealer is considered a construction
contractor and the dealer owes sales or use tax on the
purchase of all materials. As a construction contractor, the
contractor will not charge sales
tax on the materials and installation labor but will, of
course, recover the taxes paid as part of the contract. The
taxes paid by the contractor are part of the contractor's
cost of doing business.
If a dealer has entered into a contract that calls for the
installation of carpet and other types of
floor coverings, the dealer is acting as a vendor
and
a construction contractor. The dealer must charge sales tax
on the sale and installation of the carpet and the dealer
must pay sales or use tax on the materials purchased for the
installation of the other types of floor coverings.
If a dealer is merely selling the floor/wall covering
materials to someone else (construction contractor) who has a
contract to install the floor/wall covering, the dealer will
charge sales tax on the sales of the materials purchased by
the contractor, unless the contractor provides a properly
completed construction contract exemption certificate.
If you have any questions regarding this matter, you should
call us at 1-888-405-4039.
OHIO RELAY SERVICES FOR
THE HEARING OR SPEECH IMPAIRED
Phone: 1-800-750-0750