Building materials and supplies are tangible personal property when purchased. They become real property when they are incorporated into and intended to be of permanent benefit to a building or structure. Examples include:
Bathroom fixtures
Gutters and downspouts
Ceilings
Insulation
Central air conditioning (for space cooling)
Kitchen cabinets
Concrete
Lighting fixtures
Doors
Lumber, sheetrock
Electrical system
Plumbing
Flooring
Sewer/septic system
Furnaces, boilers, and heating systems (for space heating)
Permanently incorporates tangible personal property into real property
Constructs a building or structure intended to be permanent
Fabrication Labor
Fabrication labor:
makes or creates tangible property
alters existing tangible property into a new or changed product
Fabrication labor is taxable when the customer:
provides no materials
directly provides materials
indirectly provides materials
Installation Labor
Labor to set an item into position, or to connect, adjust, or program it for use. If the item being sold is taxable, charges to install it are also taxable.
Present use means the item benefits the building or structure and the function for which the space is intended to be used at the time the item is incorporated.
Examples of items that benefit the building or structure for its present use when the items are incorporated into the building or structure:
The sale of building materials, supplies, equipment, or other tangible items that are not incorporated into real property by the seller or seller’s agent. See Guidelines for Contractors-Retailers.
Substantial damage means removal of the fixture or improvement will physically impair the present function of the building or structure. Substantial damage does not include minor cosmetics such as patching a hole in the wall.
Generally, substantial damage has to meet one of the following:
Physical damage. The removal of the fixture or improvement causes impairment (destruction) to the building or structure, requiring reconstruction and reinstalling building materials and fixtures.
Functional damage. The removal of the fixture or improvement reduces or removes the present usefulness and functionality of the building or structure, requiring the replacement of the improvement or fixture.
Tangible personal property means personal property that can be seen, weighed, measured, felt, or touched, or that is in any other manner perceptible to the senses.
Tangible personal property includes, but is not limited to: