Ruling 96-3, Sales and Use Taxes / Installation / Services to Real Property
FACTS:
The Company sells and installs, and sometimes relocates, telephone and networked data and voice communication systems in new and existing business locations in Connecticut. Such systems consist of equipment, such as telephone sets, computer network equipment and other computer hardware, as well as cable wiring used to connect the hardware items within a building and to outside telephone lines. A typical installation or relocation of cable is accomplished as follows:
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Cable is run from each room or office of a building above the dropped ceiling found in most business offices.
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In order to prevent the cable from resting directly on top of the dropped ceiling, the cable is fastened to any available piping or conduits above the ceiling by the use of plastic tie wraps. In certain buildings, cables alternatively can be snaked through existing conduit tubes used for other wiring.
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Cable is then snaked down the wall studs of a particular room or office and guided down towards the hardware to which it will be connected.
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An opening is made at a convenient location in the wall for the cable to be connected to a faceplate. The faceplate is then mounted into the wall opening. The equipment (e.g. personal computer or telephone) is then connected to the faceplate.
The cable is often moved or replaced after installation by disconnecting the cable from the faceplate and pulling the cable back up through the holes in the wall studs and through the plastic tie wraps.
Whether the cable installation and relocation services provided by the Company are taxable services enumerated in Conn. Gen. Stat. §12-407(2)(i)(I) as services to industrial, commercial or income-producing real property, or are excludible from the gross receipts and sales price for the sale of the equipment under Conn. Gen. Stat. §§12-407(8) and (9) as charges for the installation of tangible personal property.
The definitions of "sales price" and "gross receipts" in Conn. Gen. Stat. §§12-407(8) and (9), respectively, exclude "the amount charged for labor rendered in installing or applying the property sold, provided such charge is separately stated and exclusive of such charge for any service rendered within the purview of [Conn. Gen. Stat. §12-407(2)(i)(I)]." Subsection (c) of Conn. Agencies Regs. §12-426-18 elaborates on this rule with regard to the installation of tangible personal property into real property:
[The regulation] is not applicable to sales contracts whereby a person, whether he is a contractor, subcontractor or otherwise, acts as a retailer selling tangible personal property in the same manner as other retailers and is required to install a complete unit of standard equipment, requiring no further fabrication but simply installation, assembling, applying or connecting services. In such instances, the contract will not be regarded as one for improving, altering or repairing real property. For example, the retailer of an awning or blind agrees not only to sell it but to hang it; an electrical shop sells electrical fixtures and agrees to install them; a retailer sells an electric washing machine and contracts to install the same; a dealer sells cabinets and agrees to install them. A person performing such contracts is primarily a retailer of tangible personal property and should segregate the full retail selling price of such property from the charge for installation, as the tax applies only to the retail price of the property.
Section §12-407(2)(i)(I) enumerates as taxable services "services to industrial, commercial or income-producing real property, including but not limited to such services as management, electrical, plumbing, painting and carpentry. . . ." The complete wiring or rewiring of a structure, or an upgrade to the electrical service of a structure, is a service to real property and is taxable when rendered to existing industrial, commercial or income-producing real property. Similarly, the permanent installation of telephone wiring and alarm systems, in which the wire, keypads or control boards and sensor devices are built into the real property, is considered to be a service to real property. See IP 95(1.1), Guide for Building Contractors, pp. 23, 27, 44. Also, the repair and maintenance of wiring is considered to be a service to real property. Conn. Agencies Regs. §12-407(2)(i)(I)-1(b)(2).
These conclusions are based on a simple rule--where wiring or cabling is run behind a wall, so that its location is not obvious and it is not readily accessible, its installation is a service to real property, and not the installation of tangible personal property. In addition, for the same reason, the removal of such wiring or cabling is also a service to real property. Therefore, the installation or removal of wiring or cabling, whether it is part of a structure's electrical system, climate control system or communications system, is taxable if performed on existing industrial, commercial or income-producing real property. These installations can be contrasted to installations where, for example, telephone wires are run along the edges of rooms and are stapled in place. The wires remain visible after installation and can be easily pulled up by removing the staples. Services rendered in such installations are considered "simply installation, assembling, applying or connecting services" within the meaning of Conn. Agencies Regs. §12-426-18(c), and, when performed in connection with the sale of the telephone equipment, the separately stated charges therefore are excludible from the measure of tax.
The cable installation and relocation services provided by the Company are taxable services enumerated in Conn. Gen. Stat. §12-407(2)(i)(I) when rendered to existing industrial, commercial or income-producing real property.
LEGAL DIVISION
Issued March 18, 1996