Maintaining, Servicing, or Repairing Tangible Personal Property

115.1. General rule. - Maintaining, servicing and repairing are terms used to cover all activities that relate to keeping tangible personal property in a condition of fitness, efficiency, readiness, or safety or restoring it to such condition. The activity of maintaining, servicing, or repairing of tangible personal property can either be a taxable service or contracting. The activity of maintaining, servicing or repairing of tangible personal property is generally considered to be a taxable service, whether or not any tangible personal property is transferred in conjunction with the service. However, the maintaining, servicing or repairing of tangible personal property will be considered to be contracting if it involves either a capital improvement or is performed on or connected with new construction, reconstruction, alteration, expansion, or remodeling which itself results in a capital improvement to a building, structure or real property. Guidelines for determining whether these situations exist are given below.

115.1.1. Capital Improvement. - The maintenance, service or repair of tangible personal property is considered to be contracting if both of the following two conditions are met:

115.1.1.1. Tangible Personal Property was Capital Improvement. - The maintenance, service or repair is performed on tangible personal property which constituted a capital improvement to a building, structure, or real property when installed, (See Section 111 of these regulations for detailed information regarding when installation of tangible personal property constitutes a capital improvement to a building, structure or real property) and;

115.1.1.2. Maintenance, Service or Repair Constitutes Capital Improvement. - The maintenance, service or repair itself constitutes a capital improvement to the building, structure, or real property to or in which the tangible personal property is affixed or incorporated.

115.1.1.3. Factors for Determination of Capital Improvement. - In determining whether maintaining, servicing or repairing tangible personal property results in a capital improvement to a building or other structure or to real property to or in which the tangible personal property is affixed or incorporated, the following factors shall be considered. If either of the criteria is met, the maintenance, service or repair will be considered to be a capital improvement and will be considered to be contracting.

115.1.1.3.a. The maintenance, service, or repair results in a substantial increase in the capital value of the building or other structure or of the real property to or in which the tangible personal property is affixed or incorporated;

115.1.1.3.b. The maintenance, service or repair results in a appreciable increase in the original useful life of the building or other structure or of the real property to or in which the tangible personal property is affixed or incorporated.

115.1.2. New Construction, Reconstruction, Alteration, Expansion or Remodeling. - The maintenance, service, or repair of tangible personal property is contracting when it is performed "on or connected with" new construction, reconstruction, alteration, expansion or remodeling of real property, buildings or structures which itself results in a capital improvement thereto.

115.1.2.1. The term "on or connected with" as used in Section 115.1.2 is broad and conveys its generally accepted meaning. Therefore, in a specific situation, the facts relating thereto are controlling in determining whether the service is contracting or is a taxable service. "On or connected with" does not connote that things connected have to be primary or subsidiary to the construction, reconstruction, alteration, expansion or remodeling of the building or other structure or real property, which results in a capital improvement thereto.

115.1.2.1.a. An incidental relationship can qualify the activity as contracting if the relationship forms an immediate connection with the construction activity.

115.1.2.1.b. The presence of a time relationship can also be a factor in determining the applicability of the contracting exemption.

115.1.2.1.c. The motive behind the activity and the course of events that could reasonably be expected to occur would be further consideration in determining if an exempt contracting service is involved.

115.1.2.1.d. A physical relationship is also a factor that should be evaluated. If a building is constructed to house machinery, any enumerated services relating to the installation of that machinery would be an exempt contracting service. For example, piping joining two pieces of equipment housed in separate buildings would be treated as tax exempt contracting if the equipment in either building was installed while such new construction, reconstruction, alteration, expansion or remodeling of the structure was also taking place to house the equipment.

115.2. Examples of Maintenance, Service or Repair of Tangible Personal Property Constituting a Taxable Service.

Example 1. The repair or tuning of a piano is a taxable service.

Example 2. The service of lubricating a motor vehicle is a taxable service.

Example 3. Washing an automobile is a taxable service, whether the washing is performed manually or by a money machine.

Example 4. A company operates a diagnostic service in which it tests an appliance for a set fee. The diagnostic service is a taxable service.

Example 5. A company-operated central station burglar alarm system charges its customers a fee for repairs to the system necessitated by damage beyond the control of the company. The repair of the system is a taxable service.
Example 6. The replacing of a thermocouple on a furnace is a taxable service. The repair is not contracting because it does not constitute a capital improvement to a building, structure or real property. It does not constitute a capital improvement, because it does not increase the capital value of the furnace, nor extend the original useful life of the furnace.

Example 7. The repair of a hole in the lining of a boiler is a taxable service. The repair is not contracting because it does not constitute a capital improvement to a building, structure, or real property. It does not constitute a capital improvement because it does not increase the capital value of the boiler or extend the original useful life of the furnace.

115.3. Examples of Maintenance, Service or Repair of Tangible Personal Property Constituting Contracting.

Example 1. The replacement of the lining of a boiler is contracting because it constitutes a capital improvement to a building, structure or real property. It constitutes a capital improvement because the original useful life of the boiler has been extended.

Example 2. The repair of a faucet is normally considered to be a taxable service. However, if the repair of the faucet is performed with or connected to the remodeling of a kitchen, it will be contracting, because the overall activity involves a capital improvement to a building, structure or real property.

115.4. Taxability of Sales. - To determine whether consumers sales and service tax should be collected from the customer and remitted, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in Section 115 of these regulations.

115.4.1. Sales of Contracting. - A person who engages in contracting does not charge consumers sales and service tax to the customer. The sale of contracting is exempt from sales and use tax as set forth in Section 9.2.17 of these regulations.

115.4.2. Sales of Service. - A person who engages in providing of taxable service must collect and remit consumers sales and service tax from the customer or obtain an exemption certificate or direct pay permit.

115.5. Taxability of Purchases. - In order to determine whether consumers sales and use tax should be paid on purchases for use in these types of activities, it is necessary to first determine whether the type of activity involved is contracting or a taxable service by examining the criteria set forth in the previous Section 115 of these regulations.

115.5.1. Taxability of Purchases for Use in Contracting Activity. - Beginning March 1, 1989, except as outlined in Section 108 of these regulations relating to transition rules and Section 109 of these regulations relating to the exemption for material used in government contracts, a person who engages in contracting must pay consumers sales or use tax on his purchases for use in the contracting activity. This includes machinery, equipment, materials, and services used in the contracting activity. It does not include labor provided by employees of the contractor. Transition rules are provided in Section 108 of these regulations. Special rules are provided in Section 109 of these regulations for contracts with the United States, the State of West Virginia, its political subdivision, or corporate entities created by the West Virginia Legislature.

115.5.2. Taxability of Purchases for use in Service Activity. - On or after July 1, 1989, a person who engages in the providing of a service is taxable on purchases for use in his taxable service activity, except for purchases for resale.