Chim Chim Cheroo! DFA Interprets "Cleaning Service" Narrowly

Burt from Mary Poppins would leap with joy: The Department of Finance and Administration, in Opinion No. 20160105, has advised that chimney cleaning services are not taxable.  The ruling is a reminder that while the state does tax "cleaning services," not every cleaning service is taxable.

The taxpayer who requested the ruling provides chimney cleaning and repair services.  Most jobs are labor-only; a few also involve installation.  The taxability of chimney cleaning services required harmonization of two conflicting statutes.  On the one hand, Arkansas taxes the service of "[p]roviding cleaning or janitorial work."  Ark. Code Ann. § 26-52-301(3)(D)(i)(b).  On the other hand, the gross receipts tax "shall not apply to the initial installation, alteration, addition, cleaning, refinishing, replacement, or repair of nonmechanical, passive, or manually operated components of buildings or other improvements to real estate."  Ark. Code Ann. § 26-52-301(3)(B)(viii)(a).  That statute then goes on to list a number of components of buildings comprising most nonmechanical parts except flooring.  While chimneys are not specifically listed, fireplaces are listed.  Ark. Code Ann. § 26-52-301(3)(B)(viii)(a)(22).  The exclusionary language of section 26-52-301(3)(B)(viii) contrasts with the taxability of those services (installation, cleaning, repair, alteration, etc.) with respect to machinery and other items under section 26-52-301(3)(B)(i).

Harmonizing subparagraphs (3)(B) and (3)(D) of section 26-52-301, the Department concluded that "chimney cleaning falls outside the scope of cleaning services that the General Assembly intended to tax."  No further analysis was provided, but perhaps the Department was bearing in mind the General Assembly's admonition that a statute imposing a tax "shall be strictly construed in limitation of the imposition of tax."  Ark. Code Ann. § 26-18-313(a).  The opinion letter cited rule GR-21(C)(1) but did not quote its language that "The cleaning of the interior or exterior of any building or structure, including vents, ducts, windows, walls, ceilings, or floors, is a taxable service."  Additionally, the provisions of rule GR-9.4(D) dealing with the taxability exception for cleaning nonmechanical, passive, or manually operated components of buildings or other improvements to realty was not addressed.

The reasoning applicable to chimney cleaning in this opinion could apply to other aspects of cleaning nonmechanical real property except flooring.  Taxpayers should not assume that all cleaning services are taxable and may wish to consider getting their own rulings on the question with repect to their specific facts.

The remainder of the ruling addressed chimney repair services and the installation of property.  Repair services were nontaxable under section 26-52-301(3)(B)(viii).  When equipment was sold and installed as part of a repair, the taxpayer was considered to be acting as a construction contractor and taxed as the end-user.  Any sales of equipment without services, however, would be acting as a retailer and subject to sales tax.

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