Interior Protection Services Subject to Tax in New Jersey

Jul 11th, 2012

The New Jersey Division of Taxation recently issued a letter ruling discussing the taxability of interior protection services. N.J. Ltr. Rul. LR: 2012-1-SUT (Div. of Taxn. Jun. 22, 2012). The taxpayer that requested the ruling is a subcontractor who provides services for general contractors on construction projects. These services include providing plastic dust and debris covers for the purpose of protecting interior surfaces during a construction project. The taxpayer needed to know whether providing and installing these plastic dust and debris covers were subject to sales tax in New Jersey.

New Jersey imposes sales tax on the services of installing, maintaining, servicing, and repairing tangible personal property. N.J. Stat. Ann. sec. 54:32B-3(b)(2). Additionally, charges for maintaining, servicing, and repairing real property are subject to tax. N.J. Stat. Ann. sec. 54:32B-3(b)(4). The only time installation services are exempt from tax is when the work is considered a "capital improvement" to real property or if the work is performed as part of a job for a federal or New Jersey governmental authority, a qualified Urban Enterprise Zone, or an exempt organization that has been issued an Exempt Organization Certificate.

Based on the facts presented by the taxpayer, the Division determined that the taxpayer's interior protection services do not constitute exempt capital improvements to real property. Instead, the Division ruled that the taxpayer's the installation of plastic dust and debris interior protection wrap is subject to tax as a form of installing, maintaining, servicing, and repairing tangible personal property. Accordingly, the Division stated that the taxpayer is "required to charge and collect New Jersey sales tax on charges for providing plastic dust and debris interior protection services for a general contractor."