Were computer-repair labor charges taxable when customers could buy parts separately from another company?

Subject

Computer Repair Labor and Separately Sold Parts

Plain-English summary

Labor-only computer repairs were not taxable when no tangible personal property was transferred. Repair labor also remained independent when the customer could choose whether and where to buy a needed part, and a separate company sold and invoiced that part.

The parts seller had to collect tax on hardware such as adapters or hard drives. The repair company needed records showing that its invoices contained no tangible property.

The ruling described a third, single-invoice maintenance-contract scenario but did not issue a conclusion on it, so this page does not infer one.

Common questions

Q: Was hourly labor alone taxable? No.

Q: Who taxed separately purchased parts? The separate parts seller.

Q: Why did customer choice matter? The customer could avoid or choose the parts seller independently, separating the service from the property sale.

Citations and references

• Fla. Stat. §§ 212.05, 212.02(12), (15), (16), (19) — taxable sales and sales price
• Department of Revenue v. B&L Concepts, Inc., 612 So. 2d 720 (Fla. 5th DCA 1993); Florida Hi-Lift v. Department of Revenue, 571 So. 2d 1364 (Fla. 1st DCA 1990) — optional service-charge test
• Fla. Stat. §§ 212.13(2), 212.12(6), 213.35 — records
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-084

Original ruling text

Dec 01, 1997

Re: Technical Assistance Advisement 97A-084
Sales and Use Tax - Taxability of Computer Repair Services
Sections: 212.05, 212.06, F.S.
Petitioner: XXX (Taxpayer)

Dear :

This is a response to your request dated April 2, 1997, received
April 8, 1997, for the issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced matter
involving Taxpayer and "NewCo" (Company). Your petition has
been carefully examined and the Department finds it to be in
compliance with the requisite criteria set forth in Chapter
12-11, F.A.C. This response to your request constitutes a TAA
and is issued to you under the authority of s. 213.22, F.S.

STATED FACTS

You provide the following facts, in part:

[Taxpayer] is engaged in the business of providing allpurpose computer services, including non-routine repair of
tangible personal property such as computer hardware.
[Taxpayer] enters into service/maintenance indemnification
contracts with some of its clients whereby those clients
pay [Taxpayer] a flat fee for service/maintenance coverage
for a particular period of time. [Taxpayer] provides the
remainder of its clients repair services based upon an
hourly rate for the labor time required to perform such
repairs.

[Taxpayer]'s repair services sometimes involve labor only
where no tangible personal property is provided. Other
times the repair services required the installation of a
new part, such as a network adapter, a video display
adapter, or a hard drive. The shareholder of [Taxpayer]
intends to create a separate and distinct corporation

called [Taxpayer] of North Florida, Inc. [Company].
Commencing after the formation of [Company], only [Company]
will sell parts to its clients. At that point, [Taxpayer]
will no longer sell or provide any parts to its clients or
provide any items of tangible personal property in its
repairs.

For those repairs performed on an hourly basis requiring
labor only, [Taxpayer] will perform the repair and provide
an invoice directly to the customer ("Situation 1"). For
those repairs performed on an hourly basis where labor and
parts are required, [Taxpayer] will perform the labor only
and [Company] will sell the parts separately to the client
(with [Company] and [Taxpayer] providing separate
invoices)("Situation 2"). Finally, for those repairs under
a service/maintenance contract, [Taxpayer] will perform the
labor/services and [Company] will sell the parts to the
client. However, in such event, [Taxpayer] will provide a
single invoice for the parts and labor("Situation 3").

Via telephone interview you add the additional fact that under
no circumstances will the taxpayer require or direct its
customers to go to Company for hardware or parts purchases. You
state that Taxpayer's customer will have an option to purchase
such parts and hardware from Company or any other dealer it
chooses.

REQUESTED ADVISEMENT

You assert:

For Situation 1, [Taxpayer] is not required to collect
sales tax from its clients.

For Situation 2, [Taxpayer] is not required to collect
sales tax from its clients, but [Company] is required to
collect sales tax from its clients on the sale of the parts
and remit such tax to the Department of Revenue.

LAW AND ANALYSIS

Unless specifically exempted, all sales transactions which
involve the sale or use of tangible personal property for a
consideration, are subject to Sales Tax, computed on the sales
price of the transaction.(FN 1) Section 212.05, F.S., provides
for the taxation of the sale of tangible personal property
(TPP), by a person, based upon the sales price of that property.
That section provides, in part:

212.05 Sales, storage, use tax.
It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state,...

(1) ... which tax is due and payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including each and every retail sale.

The terms "Person," "Sale," "Sales Price," and "Tangible
Personal Property," are defined in section 212.02 (12),(15),(16)
and (19), F.S., as:

(12) "Person" includes any individual, firm, copartnership,
joint adventure, association, corporation, estate, trust,
business trust, receiver, syndicate, or other group or
combination acting as a unit and also includes any
political subdivision, municipality, state agency, bureau,
or department and includes the plural as well as the
singular number.

(15) "Sale" means and includes:

(a) Any transfer of title or possession, or both, exchange,
barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever, of
tangible personal property for a consideration....

(16) "Sales price" means the total amount paid for tangible
personal property, including any services that are a part
of the sale, valued in money, whether paid in money or
otherwise, and includes any amount for which credit is
given to the purchaser by the seller, without any deduction
therefrom on account of the cost of the property sold, the
cost of materials used, labor or service cost, interest
charged, losses, or any other expense whatsoever....

(19) "Tangible personal property" means and includes
personal property which may be seen, weighed, measured, or
touched or is in any manner perceptible to the senses...
(E.S.)

The question when services are included in the computation of
Sales tax on the sale of tangible personal property has been
addressed by the Florida courts. In Department of Revenue v.
B&L Concepts, Inc., 612 So. 2d 720, (Fla. 5th DCA 1993), the
court held:

We hold that in the context of this problem, the proper
line of demarcation is that if service charges or fees
incidental to the sale or lease are imposed at the option
of the vendor or lessor, those service charges or fees are
a part of the "sales price" and are subject to the sales
tax, but if such service charges or fees are separately
itemized and applied at the sole option or election of the
vendee or lessee, or can be avoided by decision or action
on the part of the vendee or lessee alone, then those
charges and fees are only incidental to the sale, are not
part of the "sales price" and are not subject to sales tax.
(E.S.)

See also Florida Hi-Lift v. Department of Revenue, 571 So.2d
1364 (Fla. 1st DCA 1990).

CONCLUSION

Situation 1.

The Department agrees that Taxpayer is not required to collect

Sales tax from its clients for labor only transactions where
absolutely no tangible personal property is part of the
transaction. That transaction is a service that has not been
taxed by the legislature. Your records must indicate that no
tangible personal property is included in the transaction.

Situation 2.

The Department agrees that Taxpayer does not have to collect tax
on those hardware and parts purchases made from another entity
like Company, separately invoiced by that entity, and at the
option of the customer. The service transaction performed by
Taxpayer without tangible personal property, is independent from
the purchase of hardware and parts from another entity like
Company.

This conclusion is consistent with the court's test in B&L
Concepts above.

RECORD KEEPING

According to Florida law, every taxpayer has the duty to
maintain adequate books and records.

Section 212.13(2), F.S., provides in part:

(2) Each dealer, as defined in this chapter, shall secure,
maintain, and keep as long as required by s. 213.35 a
complete record of tangible personal property or services
received, used, sold at retail, distributed or stored,
leased or rented by said dealer, together with invoices,
bills of lading, gross receipts from such sales, and other
pertinent records and papers as may be required by the
department for the reasonable administration of this
chapter; all such records which are located or maintained
in this state shall be open for inspection by the
department at all reasonable hours at such dealer's store,
sales office, general office, warehouse, or place of
business located in this state.... Any dealer subject to
the provisions of this chapter who violates these
provisions is guilty of a misdemeanor of the first degree,

punishable as provided in s. 775.082 or s. 775.083. (E.S.)

Section 213.35, F.S., provides:

Each person required by law to perform any act in the
administration of any tax enumerated in s. 72.011 shall
keep suitable books and records relating to that tax, such
as invoices, bills of lading, and other pertinent records
and papers, and shall preserve such books and records until
expiration of the time within which the department may make
an assessment with respect to that tax pursuant to s.
95.091(3). (E.S.)

Section 212.12(6), F.S., expressly provides, in part:

(6)(a) ... It shall be the duty of every person required to
make a report and pay any tax under this chapter,... to
keep and preserve suitable records of the sales, leases,
rentals, license fees, admissions, or purchases, as the
case may be, taxable under this chapter; such other books
of account as may be necessary to determine the amount of
the tax due hereunder; and other information as may be
required by the department.... (E.S.)

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect confidential

information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Should you have any further questions concerning this matter,
please do not hesitate to contact me.

Sincerely,

Eric A. de Moya, Esq.
Tax Law Specialist
Technical Assistance and Dispute Resolution
(904) 922-4714

NOTICE UNDER THE AMERICANS WITH DISABILITIES ACT

Persons needing an accommodation to participate in any
proceeding before the Department of Revenue, should contact the
Department at (904)488-0717 (voice), or 1-800-DOR-8331 (TDD), at
least five working days before such proceeding. You may also
call via the Florida Relay System at 1-800-955-8770.

Control No. 28618

FOOTNOTE 1: Sales tax is also imposed at the rate of 6 percent
of the total sales price or cost price of certain service
transactions in Florida such as: nonresidential pest control
services described in Rule 12A-1.009, F.A.S., nonresidential
cleaning services described in Rule 12A-1.0091, F.A.C.; and
detective, burglar protection, and other protection services
described in Rule 12A-1.0092, F.A.C.