This is how the repair & maintenance service excise tax is specifically structured, but all of the new service excise taxes are similar in how they are imposed:
Beginning January 1, 2018, a tax is imposed upon the purchase, for use and not for resale, of the repair, servicing, alteration, fitting, cleaning, painting, coating, towing, inspection, or maintenance of tangible personal property or tangible personal property that has been affixed to real estate at the rate of 5% of the purchase price.
If tangible personal property (goods) is transferred incident to a purchase of service, and if the provider separately states on the invoice the cost price of the goods transferred, including any applicable sales or use tax paid on those goods, this excise tax is imposed on the difference between the total purchase price and the provider’s cost price of the goods transferred.
If goods are transferred incident to a purchase of service, and if the provider does not separately state on the invoice the cost price of the goods transferred, the new excise tax is imposed on 80% of the purchase price.
A provider that transfers goods incident to sales of service is required to make an annual election prior to December 31 of each year to pay the tax imposed by this Act under either scenario for the entirety of the following calendar year. A provider may not make an election regarding the method of calculating tax on a transaction-by-transaction basis. For any provider failing to make an election, the tax is imposed on 80% of the total purchase price.
There is a third method of reporting, collecting and paying these new excise taxes on services for providers making sales of services in which their aggregate annual cost price of goods transferred incident to all sales of services is less than 3% of the aggregate annual total purchase prices from all sales of services subject to the tax.
These service providers may annually elect to calculate tax on 100% of the total purchase price for each purchase of service.
Providers may provide resale certificates under the Retailers’ Occupation Tax Act to their suppliers of the goods to be transferred incident to sales of services only if the provider sells the goods at retail. A provider that provides resale certificates to his or her supplier must pay collect and remit Retailers’ Occupation Tax on the portion of the goods sold at retail. Any provider that does not elect to calculate tax this way must separately state on the invoice the cost price of the goods they transfer incident to a purchase of service and calculate the applicable tax accordingly.
Providers who do not also make sales of goods at retail may not provide suppliers with certificates of resale, and their purchases of tangible personal property are subject to tax under the Use Tax Act, but are excluded from taxation under the excise tax on service.