When Should You Charge Sales Tax?

According to legal expert Ken Kirschenbaum Esq. of Kirschenbaum & Kirschenbaum, electronic systems installations such as home theater and alarm systems are considered personal property or capital improvements and, therefore, not subject to sales tax.

He specifically refers to language that should be in your contract with the homeowner that provides the installed equipment remain personal property, meaning the equipment would not be a capital improvement.

“For tax purposes, the tax department is going to make its own determination whether the installation is a capital improvement, in which event it would not get taxed,” he says, advising integrators to get capital improvement certificates from the homeowners and not charge the tax.

Sales tax does, however, apply for recurring revenue from security monitoring and service contracts, according to Kirschenbaum.