ST 1995-09 - Water Conditioning Equipment and Water Treatment
Chemicals - March, 1995
The purpose of this release is to reiterate the Department's
position regarding the application of Ohio sales and use
taxes to water conditioning equipment and supplies. The
release is divided into five general sections: (1) permanent
improvements, (2) rental and leases, (3) plumbing charges,
(4) business usage, and (5) treatment chemicals. The
taxability of each is described below.
For purposes of this information release, water conditioning
equipment includes, but is not limited to, manually or
automatically operated softeners, brine tanks, and exchange
tanks.
PERMANENT IMPROVEMENTS
The sale and installation of water conditioning equipment for
residential or commercial buildings is a construction
contract when title to the equipment transfers and the water
conditioning equipment becomes a permanent part of real
property which benefits the general occupancy of the
building. Therefore, the construction contractor would not
charge sales tax on the contract amount but would pay sales
or use tax on the purchase of all materials used in
completion of the contract, unless the contractor can provide
the supplier with a properly completed construction contract
exemption certificate. As part of the contract amount, the
contractor may recover (as an expense) the amount of sales or
use tax paid. Repairs and/or maintenance to such equipment
would be similarly taxed.
RENTALS AND LEASES
The rental/lease and installation of water conditioning
equipment is considered a retail sale of tangible personal
property since title to the water conditioning equipment does
not
transfer and the water conditioning equipment does
not become
a permanent part of real property. Consequently, the
rental/lease and installation charges are subject to the
sales or use tax, unless the purchaser is entitled to claim
exemption and provides a properly completed unit or blanket
exemption certificate. Repairs and/or maintenance to such
equipment would be similarly taxed. The seller may purchase
the water conditioning equipment and repair parts exempt from
the sales or use tax based on the "resale" exemption.
PLUMBING CHARGES
Water conditioning equipment (purchased, rented, or leased)
must be attached to incoming and outgoing water lines. If the
installer of the water conditioning equipment does (or
arranges for) the necessary plumbing work (which will be
permanent), this plumbing work is a construction contract as
the water lines become part of real property. The amount
charged for the plumbing work, if separately stated, is
not
subject to the sales tax. If the amount charged for the
plumbing work is not separately stated from the charges for
installation of the rental/lease units, the entire
installation charge is subject to the sales tax. In either
case, the plumbing materials are subject to the sales or use
tax when purchased, unless the contractor can provide the
supplier with a properly completed construction contract
exemption certificate.
BUSINESS USAGE
Water conditioning equipment used to treat water for a
business use (i.e. conditioned water used in food processing,
conditioned water used in the production of beer, etc.)
remains tangible personal property after installation since
the unit primarily benefits the business,
not the
occupancy of the building. The installer should either
collect tax or obtain an exemption certificate if the
equipment will be used in an exempt manner. The installer may
claim exception on the purchase of the water conditioning
equipment based on "resale."
CHEMICALS
The sale of water conditioning chemicals and any installation
charge is a sale and installation of tangible personal
property subject to the sales or use tax, unless the
purchaser provides a properly completed unit or blanket
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