Steve
–
I
gave the Memorandum a good read.
The
statutory reference is unchanged and the determinations of taxability are
correct for the most part.
The
bowling center can buy the balls and shoes tax free as well as well as any
score sheets or pencils. The bowling center must pay tax on pins, lanes,
pinsetters, lane oil, other furniture and fixtures and remodeling labor.
(the last two were not mentioned in either category in
the memo)
The
locker information on page one appears incorrect. When the lockers are
installed, they normally become real property. The rental of the locker
to the bowler is a rental of real property and is not subject to tax.
This is also true when you rent a locker at an amusement park, gym or other
amusement service provider with the exception of a country club.
Since you are performing a nontaxable service in renting the locker,
there is no purchase for resale available. The 151.302 provision referred
to a provider of a taxable service.
I
noticed that on page three that the writer of the document thought that the
lockers were taxable but had changed them in pen to nontaxable. This
indicates that the original writer of the document thought locker rental was a
taxable service. They corrected the sales side later and did not change
the purchase side of the equation. The last paragraph under taxable items
also incorrectly states that the locker lock can be purchased tax free.
Once again, there is a difference between a private club and a bowling center
that may have tripped up the writer.
The section entitled “Sales Tax Exemptions” states that food, candy, toys and gum sold in the 25 cent vending machines is exempt. This changed to 50 cents in 1999 but only applies to bulk sales. These are defined as “contains unsorted items and that dispenses at random an item or approximately equal quantities of items to the customer without selection of a particular item or type of item by the customer.” I think you’ve probably seen the machines they are talking about. Other than that, this section is correct as is the “Taxable Purchases” section. These sections of course do not list all of the taxable or exempt items and are not an all inclusive list or they would have had to include the entire tax code.
Under
“Improvements top Realty,” the information is certainly correct from a
purchaser’s viewpoint. Actually, in new construction, the materials are
taxable in both a lump-sum or separated contract. But under a lump sum,
the contractor paid it to his vendors and probably used that fact in computing
his lump sum price. Under a separated contract, the contractor pays no
tax to his supplier, but breaks out the materials and tax to the customer. The
key to whether you are remodeling or performing new construction is whether you
are adding new usable square footage to the structure. You can have mixed
contracts where square footage is added but you also have some taxable
remodeling.
I
can see that maintenance can become a big issue with a bowling center. It
is true that cleaning is taxable janitorial whether it is performed on a
scheduled and periodic basis or not. There is no exemption when work is
just done on an “as needed” basis. However, a bowling center that had its
lanes resurfaced on a scheduled and periodic basis could claim the exemption.
If
you have additional questions, do not hesitate to contact me. You
mentioned that some of the association’s members are under audit. Let me
know where we are seeing problems.
Assistant
Director of Tax Administration
512
475 0613