Information Release

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.

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