When are purchases and installation of ATMs, bank vaults, teller systems, and similar bank equipment taxable in New Jersey?

Plain-English summary

New Jersey taxed the purchase of bank equipment and materials, but installation labor depended on whether the installed item remained movable tangible property or became a permanent capital improvement.

Who paid tax on materials and equipment

If a contractor purchased materials and supplies for permanent installation, the contractor was the retail purchaser and paid tax. If the bank bought the materials for the contractor to install, the bank paid tax.

When installed property remained tangible personal property, an installer could buy it with a resale certificate and then charge the bank Sales Tax on the property.

Installation rule

Installation of tangible personal property was taxable unless it produced an exempt capital improvement to real property. A capital improvement had to be permanently affixed and increase the property's capital value or significantly extend its useful life.

The customer had to give the contractor a completed Form ST-8 for exempt capital-improvement labor. A commercial tenant could issue Form ST-8 when a written agreement with the owner said the improvement would remain with the property after the tenancy; the agreement should be attached and retained.

Results for common bank installations

• Free-standing ATM: taxable installation because it remained tangible personal property.
• Through-the-wall ATM: exempt capital-improvement installation.
• Bank vault: exempt capital-improvement installation.
• Safety-deposit box installed in a wall or vault: exempt capital-improvement installation.
• Drive-through window: exempt capital-improvement installation.
• Drive-through teller equipment with a tube system: exempt capital-improvement installation.
• Night depository installed in a wall: exempt capital-improvement installation.

What this means for you

Banks and similar establishments

Classify each item by how it is installed. A movable free-standing machine and equipment integrated into the building received different treatment.

Contractors and installers

Determine who purchased the materials, use a resale certificate only for property that remains tangible personal property, and retain Form ST-8 plus any required landlord-tenant agreement for capital-improvement labor.

Commercial tenants

The TAM required a written agreement that the improvement would remain with the real property after the lease ended before the tenant used Form ST-8.

Common questions

Q: Was installing a free-standing ATM taxable?
A: Yes, because the ATM remained tangible personal property.

Q: Was installing a through-the-wall ATM taxable?
A: No. The TAM treated it as an exempt capital improvement.

Q: Were vaults and wall-mounted night depositories treated the same way?
A: Yes. Their installation was treated as an exempt capital improvement.

Q: Who paid tax when the contractor bought permanently installed materials?
A: The contractor, as the retail purchaser.

Q: What supported the labor exemption?
A: A fully completed Form ST-8 and, for a commercial tenant, the written owner-tenant agreement described in the TAM.

Citations and references

• N.J.S.A. 54:32B-3(a) — purchases of tangible personal property
• N.J.S.A. 54:32B-2(e)(2) — contractors as retail purchasers
• N.J.S.A. 54:32B-3(b)(2) and (4) — installation services and real-property work
• N.J.A.C. 18:24-5.6(c) — capital-improvement standard

Source

• Landing page: https://www.nj.gov/treasury/taxation/tam-pubs.shtml
• Original PDF: https://www.nj.gov/treasury/taxation/pdf/pubs/tams/tam2013_1.pdf

Original ruling text

Purchase & Installation of Automated Teller Machines & Similar Equipment
TAM – 2013-1 – Issued July 3, 2013
Tax: Sales and Use Tax
This TAM addresses the purchase and installation of automated teller machines (“ATM”) and
similar equipment by a bank or similar establishment.
PURCHASE OF MATERIALS, SUPPLIES, AND EQUIPMENT
The purchase of tangible personal property, including materials, supplies, and equipment, to be
permanently installed in a bank is subject to tax. N.J.S.A. 54:32B-3(a). Depending on whether the
bank itself or the contractor purchases the materials will determine which party is responsible
for paying the tax. Contractors are considered to be the retail purchasers of materials and
supplies used on the job. N.J.S.A. 54:32B-2(e) (2). Thus, if the contractor is purchasing the
materials, the contractor will pay the tax at the time of purchase. On the other hand, if the bank
is purchasing the materials for the contractor to install, the bank will pay the tax at the time of
purchase.
When an installer purchases tangible personal property which remains tangible personal
property once installed, the installer may issue a fully completed resale certificate to the seller
and not pay tax on these materials. In this instance, the installer charges tax to the bank on the
charge for the tangible personal property.
INSTALLATION OF MATERIALS, SUPPLIES, AND EQUIPMENT
The Sales and Use Tax Act imposes tax on the service of installing tangible personal property.
N.J.S.A. 54:32B-3(b) (2). Unless the installation of tangible personal property results in an exempt
capital improvement to real property, the installation of tangible personal property is subject to
tax. N.J.S.A. 54:32B-3(b) (4). A “capital improvement” occurs when tangible personal property is
permanently affixed to real property (land or buildings) and becomes a permanent part of the
real property.
To qualify as a capital improvement, the installation must increase the capital value of the
property or significantly increase the useful life of the property. N.J.A.C. 18:24-5.6(c). If the work
performed on the real property results in an exempt capital improvement, the contractor does
not collect Sales Tax on the labor portion of the bill, provided the customer issues the contractor
a fully completed Certificate of Exempt Capital Improvement (Form ST-8).
A tenant leasing commercial property may issue Form ST-8 so long as there is a written
agreement between the property owner and the tenant indicating that any capital
improvements to the leased property will remain with the real property once the tenancy is
terminated. The agreement should be attached to the Certificate of Exempt Capital
Improvement and retained by the contractor to document the exemption from Sales Tax.

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COMMON INSTALLATIONS OCCURRING AT A BANK
FREE-STANDING ATM
A free-standing ATM which is installed is not considered to be permanently affixed to the real
property since the ATM remains tangible personal property. Thus, charges to install a
freestanding ATM are subject to tax.
“THROUGH-THE-WALL” ATM
An ATM which is installed in the wall is considered to be permanently affixed to the real
property. Thus, charges to install a “through-the-wall” ATM are exempt from tax as an exempt
capital improvement to real property.
BANK VAULT
A bank vault is considered to be permanently affixed to the real property. Thus, charges to
install a bank vault are exempt from tax as an exempt capital improvement to real property.
SAFETY DEPOSIT BOX
A safety deposit box in the wall or a vault is considered to be permanently affixed to the real
property. Thus, charges to install a safety deposit box are exempt from tax as an exempt capital
improvement to real property.
DRIVE-THROUGH WINDOW
A drive-through window is considered to be permanently affixed to the real property. Thus,
charges to install a drive-through window are exempt from tax as an exempt capital
improvement to real property.
DRIVE-THROUGH TELLER EQUIPMENT WITH TUBE SYSTEM
Drive-through teller equipment with a tube system is considered to be permanently affixed to
the real property. Thus, charges to install drive-through teller equipment with a tube system are
exempt from tax as an exempt capital improvement to real property.
NIGHT DEPOSITORY
A night depository installed in the wall is considered to be permanently affixed to the real
property. Thus, charges to install a night depository are exempt from tax as an exempt capital
improvement to real property.

Note: A Technical Advisory Memorandum (“TAM”) is an informational statement of the law,
regulations, or Division policies. It is accurate on the date issued. Subsequent changes in the law
or regulations, judicial decisions or changes in Division policies could affect the validity of the
information presented in a TAM.

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