ST 1999-01 - Sale and Installation of Computer Cabling -
This Information Release is being issued to announce a change
in the Department of Taxation's application of sales and use
tax to the sale and installation of computer cabling. This
change is made in response to a recent decision of the Ohio
Board of Tax Appeals in the case Newcome Corporation v.
Tracy (December 11, 1998), B.T.A. Case No. 97-M-320.
Prior to this decision, the Department considered computer
cabling installed in a building to be incorporated into the
real property. Any person installing computer cabling within
walls, above ceilings, or under floors of a building was
considered a construction contractor. As a contractor, the
installer was the consumer of all materials purchased for use
in the performance of the contract.
In the Newcome case, the Board
of Tax Appeals determined that computer cabling was not a
type of communication line that was "common to buildings."
The Board also found computer cabling primarily benefits the
business conducted by the occupant of the building rather
than the building itself. Therefore, the Board ruled that
installed computer cabling is a business fixture, within the
meaning of section 5701.03(B) of the Revised Code, and is to
be treated as tangible personal property, not realty.
The effect of this decision is to change the Department's
position on the application of sales and use tax. Since
computer cabling retains its status as tangible personal
property after it is installed, the sale and installation of
such cabling is a sale subject to the sales tax. Persons who
sell and install computer cabling should be licensed as
vendors and collect sales tax from customers on the price of
the cabling and the installation charge unless the customer
provides a valid exemption certificate.
For audit purposes, this interpretation will be applied to
all future transactions involving the sale and installation
of computer cabling. It will also be applied to any past
transactions if, at the time of the transaction, the seller
and installer of computer cabling neither collected tax as a
vendor nor paid tax as a construction contractor. If a seller
and installer of computer cabling that paid tax as a
construction contractor seeks a refund of the tax paid on a
past transaction, that person will be expected to collect and
remit tax from the consumer unless the consumer has a valid
claim of exemption.
The provisions of this release apply only to the sale and
installation of computer cabling. It does not apply to other
communication lines, such as telephone cables, that are
"common to buildings" and serve the realty rather than the
specific business occupant. Such communication lines are not
business fixtures within the meaning of section 5701.03(B) of
the Revised Code. Installation of communication lines is a
construction contract for an improvement to the real
property. Taxpayers whose business consists of installing
both computer cabling and other communication lines
simultaneously are cautioned to identify the portions of the
transaction that relate to each aspect of the installation
and apply the tax accordingly.
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