Iowa Supreme Court Determines Taxable Carpentry Services Are Limited to Repairs

Wednesday, January 9th, 2019

A carpenter cuts wood on a table saw.

The Iowa Supreme Court has recently addressed the taxability of various installation services. The taxpayer was a home improvement retailer that entered into contracts for the sale and installation of various fixtures (e.g., custom storm windows and doors, faucets, toilets, built-in dishwashers, celling fans, patio doors, interior and exterior doors, sinks, vanities, and garbage disposals). The taxpayer argued its contracts were for exempt capital improvements.

Iowa taxes (1) carpentry, (2) electrical and electronic repair and installation, and (3) pipe fitting and plumbing services. The court was asked to determine whether installation labor for the various fixtures was taxable. The court determined that electrical and plumbing services were defined to include installation, but carpentry services were defined to include only repair. As a result, the court found that tax did not apply to the installation of vanity tops, windows, storm doors, patio doors, and interior and exterior doors.

In contrast, the court found that electrical and plumbing installation was taxable. The court also determined that the taxpayer's sale and installation contracts were not capital improvements. The court reasoned that small-scale installation without structural changes to a customer's home, such as replacing a dishwasher, is taxable as installation labor, and not exempt as a capital improvement.

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