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sales tax puts you between rock and hard place June 26, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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sales tax puts you between rock and hard place
June 26, 2018
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sales tax puts you between rock and hard place 
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Ken
    While I have been a security installer and business owner for over 30 years (licensed and an ESA member) I have always charged NYS sales tax for installations of alarm and video camera systems.  I occasionally receive arguments from customers claiming they are capital improvement sales  and sale tax exempt. 
    My understanding is that the wire may not be taxed but the equipment is taxed. 
     Can you please provide NYS documentation that can clarify this for me?
Thank you.  
MP
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Response
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    So my opinion won't be enough; you want documentation.  
    First, I want to caution everyone that not every jurisdiction charges sales tax the same, so you should check with your accountant before charging sales tax, or failing to charge and collect it.  Also, I want to repeat a rumor I heard - so it's unverified.  If you fail to collection sales tax you can be responsible to the taxing authority for that tax.  This is not the surprising part.  If you are not required to collect sales tax, but you do anyway, you may be required to return the sales tax to your customers even though the taxing authority won't return the money to you.  How's that?
    You need to know what your obligation is for collecting and remitting sales tax.  
    The 
Standard Form Agreements provide that all equipment provided by the alarm company is considered personalty; in other words, it is not a fixture that becomes part of the real property.  That includes the wiring, and it includes all fire and security equipment.  The tax laws may pay deference to the contract, but is not bound by it.  So if the tax law considers it personalty or real property, taxed or tax exempt, you should follow the tax law, at least for collecting sale tax purposes.
    I asked a CPA who has experience with alarm companies in NY [fire and security systems].  If you're in NY and you need an accountant, here's a great one.  Unlike me, however, he doesn't work for free, so don't call him unless it's to engage his services.  I highly recommend him.
    If you're out of NY, anywhere else as a matter of fact, contact Mitch Reitman, truly an alarm - security-fire tax expert.  I think sometimes he works for free .......  but don't tell him I sent you [unless you're paying him]
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Ken,
    Sales Tax Publication 862 (4/01) page 13
    In-wall installations of electrical wiring and communications cables in connection with the installation of burglar alarms or security systems are considered capital improvements.
The equipment in tangible personal property as is taxable.
    Hope this helps.
Joseph P. Merritt, CPA
Sklar, Heyman, Hirshfield & Kantor LLP
Bellmore, NY 11710

www.sklarheyman.com
(516) 826-4300 ex 120
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com