Tax Applies to Installation of Modular Cleanrooms in Rhode Island

Feb 5th, 2020

The Rhode Island Division of Taxation recently found that the installation of modular clean rooms was subject to sales and use tax. The taxpayer was a business that designed, manufactured, and installed modular cleanrooms. The cleanrooms were removeable self-contained spaces. The taxpayer fabricated component parts like walls and ceilings off-site before delivering and installing them to a customer's facility.

Rhode Island taxes sales of tangible personal property, but requires contractors to pay tax on items that become real property upon installation. The ruling found that the cleanrooms were tangible personal property because they were not permanently affixed to real property. Instead, they could be moved and reinstalled without causing any significant damage. As a result, the ruling determined that the cleanrooms remained tangible personal property upon installation, and were therefore taxable to the purchaser.

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