A New Jersey Tax Court has agreed with the Division of Taxation’s position that a company who performed maintenance and repair work on commercial heating and cooling systems acted as a contractor performing services on real property, and is therefore required to pay sales or use tax on the purchases of parts used in performing the service contracts. Although New Jersey considers parts and materials used to perform services on tangible personal property sales for resale where tax is collected by the owner of the tangible personal property, parts and material purchased to perform services on real property qualify as sales to a contractor as the end user. Since the heating and cooling systems were undisputedly real property, the company should have paid sales or use tax at the time it purchased the parts and materials. Additionally, since the company charges a lump sum for the maintenance contracts, which includes labor and parts, the entire price of the contract is taxable. Further, the Tax Court upheld the Divison’s denial of penalty and interest abatement. (Touzour Energy Systems, Inc. v. Division of Taxation, New Jersey Tax Court, No. 007698-2004, April 3, 2007)