SALT Report 2708 – The New Jersey Division of Taxation issued a technical advisory regarding the application of sales and use tax to the purchase and installation of automated teller machines (ATM) and other equipment by banks.
Purchase of Materials, Supplies, and Equipment
The purchase of tangible personal property, such as materials, supplies, and equipment that will be permanently installed in a bank are subject to tax. Depending on who purchases the materials, the bank or the contractor, will determine who is responsible for paying the tax.
Contractors are considered the retail purchasers of materials and supplies used on the job. Therefore, if the contractor purchases the materials, the contractor will pay the tax at the time of purchase. Alternatively, if the bank purchases the materials for the contractor to install, the bank will pay the tax at the time of purchase.
When an installer purchases tangible personal property that will remain tangible personal property once installed, the installer can issue a resale certificate to the seller and not pay tax on these materials. In this situation, the installer charges tax to the bank on its charges for the tangible personal property.
Installation of Materials, Supplies, and Equipment
A freestanding ATM that is installed is not considered permanently affixed to the real property and the ATM remains tangible personal property. Therefore, charges to install a freestanding ATM are subject to tax.
However, an ATM that is installed in the wall is considered permanently affixed to the real property. Therefore, charges to install a “through-the-wall” ATM are exempt from tax as an exempt capital improvement to real property.
In addition, the State considers the following items permanently affixed to real property and charges to install them are exempt as capital improvements to real property:
- Bank vaults,
- Safety deposit boxes in the wall or a vault,
- Drive-through windows,
- Drive-through teller equipment with a tube system, and
- Night depositories installed in the wall
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