I run a small cell phone repair store and we fix many phones. Many times it's bricked phones or cracked screens. But what I want to know, do we have to charge sales tax on repair services such as these? Technically we are not selling thing anything tangible.
According to the New York State Department of Taxation and Finance, your service is not exempt from taxes. Service and repair of tangible personal property are specifically itemized on this page as taxable services.
Sales of tangible personal property are subject to New York sales tax unless they are specifically exempt.
The term tangible personal property means any kind of physical personal property that has a material existence and is perceptible to the human senses (in other words, something you can see and touch).
Examples of taxable tangible personal property, services, and transactions that are subject to sales tax are:
- tangible personal property:
- furniture, appliances, and light fixtures;
- certain clothing and footwear;
- machinery and equipment, parts, tools, and supplies;
- maintaining, installing, servicing, and repairing of tangible personal property;
According to the NYC Department of Finance, the total Sales and Use tax on most tangible personal property and their associated services in New York City appears to be 8.875% in 2018:
The State and City charge sales tax on many services and on retail sales for most goods.
The total sales and use tax rate in New York City is 8.875%.
- New York City local sales and use tax rate of 4.5%
- New York State sales and use tax rate of 4%
- Metropolitan Commuter Transportation District surcharge of 0.375%
The NYC page also lists some exempt goods and services, but mobile phone repair is not in the list of exempt services.
According to the New York State Department of Taxation and Finance, your service would appear to be exempt from taxes. However, if you are charging for tangible items, those would incur a sales tax.
The following link says servicing of any tangible property is not tax exempt:
But, if the device you are "troubleshooting" or "servicing" is a software issue, it is exempt, see: https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/computer_software.htm
As we can see it is a contradiction in how to charge for a "software" only repair. If a customer calls you and you "troubleshoot" the software issue remotely, it is technically tax exempt according the "computer software" tax code. The question differs when the customer brings that software issue to you in person in a physical device.