Information Release

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