Discussion:Corporeal personal property cost segregation vs income and sales tax
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Corporeal personal property cost segregation vs income and sales tax
Discussion Forum Index --> Tax Questions --> Corporeal personal property cost segregation vs income and sales tax
| 17 March 2008 | |
| One of our clients are having a bit of a problem with the local sales taxing authorities. The local sales tax authorities are trying to define building construction materials as tangible personal property and wish to claim that structural components are retail sales in construction projects. The local tax code defines tangible personal property as corporeal personal property. Does anyone have an accepted definition of corporeal personal property and what it entails? Structural components for cost segregation purposes are definitely NOT tangible personal property but I'm not sure what "corporeal personal property" is actually defined as in the majority of tax regimes. | |
Proptaxguy (talk|edits) said: | 17 March 2008 |
| According to BusinessDictionary.com the definition is
corporeal property Definition Real estate or personal property having a tangible form and structure, such as a building, equipment, vehicle, as opposed to intellectual property such as copyrighted works of authorship. What state are you located in? | |
| 17 March 2008 | |
| It depends on the jurisdiction and its particular rules for construction materials. Building construction necessarily involves the conversion of tangible personal property (lumber, drywall, concrete, rebar, nails, screws, etc.) into real property. Sales of TPP are generally subject to sales/use tax; sales of real property generally are not.
Usually, construction contractors or builders are considered the consumers of tangible personal property that is used in constructing real property. Thus sales or use tax is paid on the contractor's or builder's purchase of the lumber, nails, drywall, etc., and no sales or use tax is imposed on the contractor's sale of the finished real property to the purchaser. There are exceptions, however, particularly in Washington State, where the contractor or builder purchases the materials ex-tax and the sale to the purchaser of a newly constructed building is subject to sales tax. Are you in Colorado, by any chance? CO uses the term "corporeal" as part of the definition of property subject to sales/use tax, and also has local taxing jurisdictions. Louisiana is another example. The District of Columbia, NY, PA, and MD also use the term "corporeal" in defining TPP, but I don't believe any of them has local tax departments that do their own audits, as CO and LA do. Both CO and LA impose sales/use tax on purchases of materials and supplies to be used in the construction of real property -- IOW, the contractor or builder pays sales or use tax on the purchase of materials. In either of those states (and in most other states as well), if your client is a construction contractor or acted as his own contractor in building a structure for his own use, sales or use tax is due on his purchases of materials. | |
| 17 March 2008 | |
| P.S. Black's Law Dictionary defines "corporeal" as "having a physical material body; tangible." | |
