Does a seller have to charge sales tax on playground equipment sold to a city, county, or school district if the seller also assembles and installs it?
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This page answers the general question as of 2005. Ezel answers yours, under current Utah tax law, with citations.
Plain-English summary
A company sells playground equipment, mostly to cities, counties, and schools ("political subdivisions"), which generally get a sales tax exemption under Utah Code Ann. § 59-12-104(2). But that exemption has an exception: it doesn't cover "construction materials" that get installed or converted into real property by someone other than the political subdivision's own employees — like a private contractor. In about 15-20% of its political-subdivision sales, the company itself assembles and installs the equipment (separately billed), and it asked whether that installation service would flip the equipment into taxable "construction material" and strip away the buyer's exemption.
The Commission said no. Under Utah Code Ann. § 59-12-102(19) and Utah Admin. Rule R865-19S-58, "construction material" is tangible personal property (like lumber, bricks, or cement) that gets converted into real property and typically loses its separate identity once incorporated. But the rule specifically carves out moveable items that are attached to real property "merely for stability" — those keep their personal property status. The playground equipment fit that carve-out: it's set on supporting posts sunk into postholes with cement for stability, but it can be unbolted, dug out, and moved to a new location (something the company is actually asked to do two or three times a year), leaving nothing behind but a hole in the ground.
The Commission applied the classic three-factor test from Nickerson Pump and Machinery Co. v. State Tax Commission, 361 P.2d 520 (Utah 1961): (1) can the item be removed without harming the real property? (2) can it be reused elsewhere? and (3) was the sale of the item, rather than a construction project, the real point of the transaction? All three favored personal property here — political subdivisions mostly install the equipment themselves, showing installation is just a convenience the seller sometimes provides, not the reason for the purchase. The Commission also drew a cross-reference to the property tax rule (Utah Admin. Rule R884-24P-33), which classifies similarly stability-anchored items — amusement rides, billboards, sign towers, radio towers, ski lift and tram towers — as personal property, noting that Utah courts (per Crossroads Plaza v. Salt Lake County, 912 P.2d 961 (Utah 1996)) apply the same personal-property-vs-realty criteria for both sales tax and property tax purposes.
Because the playground equipment never converts into "construction material," the exception to the political-subdivision exemption never triggers — so the sale, including the assembly/installation service, stays fully tax-exempt when sold to a political subdivision. The Commission also flagged an unrelated terminology slip in the request: for its taxable sales to private buyers, the company should describe the tax base as the "sales price" (per Rule R865-19S-51), not the "purchase price" — a wording clarification, not a substantive change.
What this means for you
Sellers of equipment to government/school customers
Installing or assembling what you sell for a political-subdivision customer doesn't automatically convert your product into taxable "construction material." The key question is whether the item is genuinely built into the structure and loses its separate identity, or whether it's just anchored "for stability" and can be removed and reused — the latter keeps its personal-property status and the buyer's exemption intact.
Manufacturers and dealers of heavy, ground-anchored equipment (playground sets, amusement equipment, signage, towers)
The "attached merely for stability" carve-out is broader than it might seem — the Commission looked to how the same type of equipment is classified under the property tax rules (which list amusement rides, billboards, and towers as personal property) as persuasive evidence for the sales tax question, since Utah courts use the same test for both.
Accountants advising equipment sellers on exempt-buyer transactions
Watch the three-factor Nickerson Pump test whenever a sale to an exempt entity also includes installation: removability without damage, reusability elsewhere, and whether the sale (not the installation) was the primary point of the deal. If your invoice separately states installation and the equipment can be unbolted and relocated, that supports personal-property treatment.
Common questions
Q: Does separately stating the installation charge matter to this outcome?
A: It's part of the factual picture (showing the sale itself is the primary transaction), but the core legal question is whether the equipment itself becomes "construction material" — if it doesn't, the whole sale (equipment plus install) stays within the political-subdivision exemption regardless of how the invoice is itemized.
Q: Would the answer differ if the equipment were permanently poured into a concrete foundation and couldn't be removed without demolishing it?
A: Likely yes — that would tend to show the item is genuinely converted into real property (an "integral part of the real property improvement") rather than merely attached for stability, which is the losing side of the Nickerson Pump test.
Q: Does this exemption apply the same way to private (non-government) buyers?
A: No. This exemption is specific to sales to the state, its institutions, and its political subdivisions under § 59-12-104(2). Sales to private entities remain taxable regardless of installation, as the ruling's closing clarification about "sales price" for those transactions confirms.
Citations and references
Statutes and rules:
- Utah Code Ann. § 59-12-104(2), (2)(a) (political subdivision exemption and construction-materials exception)
- Utah Code Ann. § 59-12-102(19) (statutory definition of "construction material")
- Utah Admin. Rule R865-19S-58.A.1, .D (construction material definition; stability-only attachment carve-out)
- Utah Admin. Rule R884-24P-33 (property tax classification of stability-anchored items as personal property)
- Utah Admin. Rule R865-19S-51 (sales tax collected on "sales price")
Cases:
- Nickerson Pump and Machinery Co. v. State Tax Commission, 361 P.2d 520 (Utah 1961) (three-factor personal-property-vs-realty test)
- Crossroads Plaza v. Salt Lake County, 912 P.2d 961 (Utah 1996) (same test applies for sales tax and property tax purposes)
Prior Commission rulings cited:
- Utah PLR 97-035; Utah PLR 95-051
Source
- Landing page: https://tax.utah.gov/commission/rulings/
- Original PDF: https://files.tax.utah.gov/tax/commission/ruling/05-003.pdf
Original ruling text
05-003
NAME
ADDRESS
PHONE
Dear Commissioner Johnson,
Our firm represents a client who would like to request a Private Letter Ruling on a sales
tax matter. Our client sells playground equipment that is typically used in public and
private parks, in tot lots in subdivision developments, and etc. Approximately 20% of the
playgrounds that are sold are to private entities. Sales tax is collected on the purchase
price of the playground equipment when sold to these private entities. Approximately
80% of the playground sales are to cities, counties, schools, etc. (“political
subdivisions”). Typically, when the client sells the playground equipment to political
subdivisions, it does not collect any sales tax due to the exemption for political
subdivisions found in Utah Code Ann. §59-12-104(2). Our client does not typically
assemble or install the playground equipment. However, if a customer wants our client to
install the playground equipment, it will do so. If a customer requests assemble and
installation, the charge for installation is separately stated and charged to the customer.
Sometimes the installation is billed on a completely separate invoice from the playground
equipment and sometimes it is listed as a separate charge on the same invoice as the
playground equipment. Approximately 15% to 20% of the political subdivision
customers ask our client to assemble and install the playground equipment.
The question that now arises is whether or not our client is required to collect sales tax
from the sale of playground equipment to political subdivision customers when such
entities request that the playground equipment be assembled and installed by our client.
As the Commission is aware the exemption for political subdivisions has an exception for
“construction materials” that are not installed by the employees of the political
subdivision. The purpose of this letter is to request clarification as to whether or not the
sale of the playground equipment to political subdivisions that is assembled and installed
by our client is subject to sales tax as being viewed as some type of “construction
material.”
We do not believe that the playground equipment should be treated as a construction
material and do not believe that sales tax should be triggered should a political
subdivision customer request that the client assemble and install the playground
equipment. Our conclusions are based on the following:
Construction materials are typically defined as “tangible personal property such as
lumber, bricks, nails, and cement that are used to construct buildings, structures, or
improvements on the land and typically lose their separate identity as personal property
once incorporated into the real property.” Utah Admin. Rule R865-19S-58.A.1.
Page 2
The statutory definition of construction materials is a little more broad than the
administrative rule and defines construction materials as “any tangible personal property
that will be converted into real property”. Utah Code Ann. §59-12-102.
In prior Private Letter Rulings, this Commission has applied the statutory and
administrative rule definitions to state that “As a general rule, anything that is affixed real
property that becomes an integral part of the real property improvement upon installation
is treated like construction materials.” Private Letter Ruling 97-035. “However,
attachment alone is not determinative.” Private Letter Ruling 95-051. “Personal property
which is merely affixed to real property” is distinguishable from “personal property
which has been converted into real property.” Id. And see Private Letter Ruling 97-035.
Personal property that is “attached to real property merely for stability” retains its
personal property characteristics and is not deemed to be construction material. Utah
Admin. Rule R865-19S-58.D.1.
The questions then becomes whether or not the playground equipment is affixed to real
property in such a manner that it loses its personal property characteristics and becomes
an integral portion of the real property improvement.
In Nickerson Pump and Machinery Co. v. State Tax Commission, 361 P.2d 520 (Utah
1961), the Utah Supreme Court listed several factors that should be reviewed in
determining whether or not an item of personal property retains its personal property
status or becomes converted into the real property. In Nickerson Pump, the Court
concluded that the pumps were not permanently affixed to the land and remained
personal property. In particular, the Court reached these conclusions because:
(1) The pumps were “readily removable without harm to the structures in
which they were placed.
(2) The pumps could have been used in other locations, if the owner desired to move
them.
(3) The primary purpose of the transaction was the sale of the pumps. The placement
of the pumps “was a mere convenience for the purchaser because of the great
weight of the pumps which required special equipment to move them.”
We believe that when these tests are applied to the playground equipment in this matter,
the same result is achieved in that the playground equipment is not permanently attached
to real property or converted into real property.
(1) The playground equipment is “readily removable without harm to structures in
which they were placed.” In this matter, the playground equipment can be
easily removed and transported to another location without any harm at all to
the real property or any building.
(2) The playground equipment can be used in other locations, if the owner desires
to move it. The playground equipment is assembled on location and is easily
attached to supporting posts. In order to stabilize the playground equipment,
post holes are dug into the ground and the poles holding the playground
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equipment are placed into the post holes. Cement is then poured into the post
holes to add stability. The playground equipment is attached to the ground
“merely for stability” and does not lose its personal property characteristics. If
the owner desires to remove the playground equipment, the owner merely
needs to unbolt the playground equipment from the supporting poles and then
dig the posts out of the ground. The cement is broken off of the posts and the
entire assembly can be moved to a different location. Approximately 2 or 3
times each year, our client is asked to come and move playground equipment
to another location.
(3) The primary purpose of the transaction in this matter is the sale of the
playground equipment. The placement and/or assembly of the playground
equipment “is a mere convenience to the purchaser.” As stated above, the
overwhelming majority of customers of the client assemble and install their
own playground equipment. Nevertheless, as a mere convenience to the
purchaser, the client will assemble and stabilize the playground equipment.
This occurs in approximately 15% to 20% of its transactions with political
subdivisions.
Based on the foregoing, we do not believe that the playground equipment is a
construction material. Rather, it is a separate and distinct piece of equipment that can be
easily removed from one location to another and retains its personal property
characteristics. Consequently, we request that the Commission issue a letter ruling that in
the above situations, no sales tax is owed should a political subdivision customer request
our client to assemble and stabilize the playground equipment because the playground
equipment retains its personal property characteristics and is not a construction material.
If you have any questions or require a clarification on any of the items contained in this
letter, please call me.
Sincerely,
NAME
Page 4
RESPONSE LETTER
September 27, 2005
NAME
ADDRESS
PHONE
Re: Private Letter Ruling Request 05-003-Playground Equipment
Dear NAME:
We have received your request for a private letter ruling concerning tax liability
associated with the sale and installation of playground equipment to cities, counties,
schools, ect. (“political subdivisions”). Specifically you have asked whether or not your
client is required to collect sales tax from the sale of playground equipment to political
subdivision customers when such entities request that the playground equipment be
assembled and installed by your client.
From your letter we understand that your client sells playground equipment and about
80% of your client’s sales are made to political subdivisions. Approximately 15% to 20%
of the political subdivision customers ask your client to assemble and install the
playground equipment. If the customer requests installation, the charge for installation is
separately stated and charged to the customer by your client.
As you have noted in your request, Utah Code Sec. 59-12-104(2) provides a sales tax
exemption for sales to political subdivisions. However, there is a statutory exception to
the exemption at Utah Code Sec. 59-12-104(2)(a) for “construction materials” that are
not installed or converted to real property by employees of the state, its institutions or its
political subdivisions. The specific question then becomes whether the playground
equipment would be considered “construction material” for purposes of the exception to
the exemption.
You have considered the applicable statute and law in this matter in reaching your
conclusion that these sales would not be subject to sales tax. The statutory definition at
Utah Code Sec. 59-12-102(19) provides that “construction material” is any tangible
personal property that will be converted to real property. Utah Admin. Rule R865-19S-
58.A.1 defines “construction material” as “tangible personal property such as lumber,
bricks, nails, and cement that are used to construct buildings, structures or improvements
on the land and typically lose their separate identity as personal property once
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incorporated in the real property.” The rule goes on to state that it “does not apply to
contracts where the retailer sells and installs personal property that does not become part
of the real property. Examples of items that remain tangible personal property even when
attached to real property are: 1. moveable items that are attached to real property merely
for stability or for an obvious temporary purposes . . .:” Utah Admin. Rule R865-19S-
58.D.
In your letter you have outlined the nature of the equipment and the installation. You
indicate that the equipment is assembled on location and is easily attached to supporting
posts. In order to stabilize the playground equipment, postholes are dug into the ground
and the poles holding the playground equipment are placed into the postholes. Cement is
then poured into the postholes to add stability. To move the equipment, it merely needs to
be unbolted from the supporting poles. The poles then would be dug out of the ground,
the cement broken off the posts and the entire assembly moved to a different location.
You indicate that your client is asked two or three times per year to move playground
equipment from one location to another. You also indicate that the political subdivision
customers who purchase the playground equipment usually assemble and stabilize or
install the equipment themselves, with you client performing this service in only 15% to
20% of the transactions with political subdivisions.
In answering your question the Commission notes that the applicable rule specifically
indicates that moveable items attached to real property merely for stability are not
construction materials. Utah Admin. Rule R865-19S-58.D. The Commission notes that
there are numerous items that are attached to the ground for stability and listed in the Tax
Commission Administrative Rules as personal property for property taxation purposes.
Utah Admin. Rule R884-24P-33 lists specific classes of items taxed as personal property,
like amusement rides that must be affixed to in some manner to real property for stability.
Utah Admin. Rule R884-24P-33.E.7. Additionally items like billboards, sign towers,
radio towers and ski lift and tram towers all must be attached to the ground for stability,
yet they are specifically listed as personal property at Utah Admin. Rule R884-24P-
33.E.15. Although this rule was promulgated in the property tax content, it appears that
when the courts have considered the issue of when personal property becomes converted
to real property they have looked at the same criteria for both sales tax and property tax
purposes. Crossroads Plaza v. Salt Lake County, 912 P.2d 961 (Utah 1996).
In Nickerson Pump and Machinery Co. v. State Tax Commission, 361 P.2d 520 (1961),
the Utah Supreme Court considered whether pumps that were sold and then placed into
real property remained personal property for sales tax purposes. In finding that the pumps
remained personal property the Court noted that they could be removed without harm to
the real property, they could be moved and used in other locations, and the primary
purpose of the transition was the sale of the pump, the placement “was a mere
convenience for the purchaser because of the great weight of the pumps which required
special equipment to move them.”
Based on your representations we find that:
Page 6
1) after the installation the playground equipment can be, and is occasionally
moved and used at other locations;
2) political subdivisions can and generally do assemble and install the equipment
making this service appear to be a mere convenience for the purchaser;
3) when removed the equipment leaves only a hole in the ground that could easily
be filled; and
4) there is no substantial difference from the way the playground equipment is
attached to the ground for stability as items classified in the rule as personal
property, like billboards and amusement rides.
Therefore we conclude that the playground equipment remains personal property and is
not construction material within the meaning of the exception to the exemption at Utah
Code Sec. 59-12-104(2)(a). For that reason the Commission agrees that no sales tax is
owed on the sales from your client to its political subdivision customers, where the
political subdivision customers have your client assemble and install the equipment. The
playground equipment retains its personal property characteristics and is not
“construction material.”
One item of concern in your request letter, however, is on line 4 where you state that tax
is collected on the “purchase price” of the playground equipment when sold to private
entities. Just to clarify, since the playground equipment remains tangible personal
property, your client should be collecting sales tax on its sales price of the equipment.
See Utah Admin. Rule R865-19S-51.
Our conclusions are based on the facts as you represented. Should the actual situation
differ from your statements, our decision may be subject to reconsideration. Should you
have additional questions please do not hesitate to contact us.
For the Commission,
Marc B. Johnson
Commissioner
JK/MJB/05-003.doc
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