There is a Pennsylvania law that considers installed home-improvement purchases non-taxable construction contracts.
That means you, the consumer, are not responsible for paying sales tax on the sale and installation of a built-in dishwasher, furnace or water heater, for example, because these items, once installed, are part of the real estate. You would, however, pay sales tax on the purchase of a portable dishwasher, which is not installed as a permanent fixture in the home and does not become part of the real estate.
Last week I received an email from Bill Ross of Mountain Top requesting clarification of this law. On March 24, Ross purchased five kitchen appliances from Voitek TV in Exeter – an over-the-range microwave, double oven, cook top, built-in dishwasher and a refrigerator. Despite the fact that Voitek TV will permanently install all but the refrigerator, Ross was charged 6 percent sales tax — $526 — on the entire $8,769 purchase price.
“I feel I should not be charged Pennsylvania sales tax on appliances installed in my house,” Ross wrote. “Please explain.”
So I called Voitek TV in Exeter and reached Store Manager Dave Voitek, a very personable guy who offered a candid explanation for seemingly ignoring the law.
“It’s not that we’re taking advantage,” he said. “The law states the 6 percent sales tax has to be paid on all the items. Let’s face it — no matter what, the tax get passed on to the consumer. We don’t raise the price 6 percent and pay the tax ourselves; we charge the sales tax outright to the customer. The tax has to be paid, so why hide it? The customer is paying whether you do it our way or absorb it into the price.”
Voitek does have a point, but still, the law is the law. So who will be held responsible for the sales tax when the appliances are delivered and installed in Ross’s home?
“Purchase and installation of a built-in dishwasher, cook top, double oven and over-range microwave would be considered construction contracts, and therefore the sales tax obligation is the retailer’s, rather than the consumer’s,” said Elizabeth Brassell of the Pennsylvania Dept. of Revenue.
She acknowledged, however, that the law can be confusing because “it is not always easy to determine construction contracts versus sales at retail.”
For example, installation of gas appliances, such as gas space heaters and gas log inserts, are generally considered non-taxable construction contracts, but installation of free-standing gas cooking ranges and gas clothes dryers are not. On the taxable items, Brassell said, sales tax can be charged separately on sales at retail. On non-taxable items, she said retailers may build sales tax into the cost of construction contracts, but they are not allowed to itemize sales tax separately on the invoice.
Confused? No worries. The revenue department “allows some flexibility,” said Brassell, just so long as somebody pays the tax and the commonwealth gets its money. Finally, she said that anyone who believes he or she overpaid Pennsylvania tax should file a petition for a refund with the department’s Board of Appeals.
Christine Young is the Times Leader’s Consumer Watchdog. She can be reached at ConsumerWatchdog@timesleader.com. Her column appears weekly.