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PUBLICATION 146 | APRIL 2014 - page 21 / 38





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Sales to non-Indian construction contractors

Materials Generally, construction contractors are consumers of materials that are furnished and installed in the performance of a construction contract. As a consumer, tax generally applies to sales of materials to contractors who are not Indi- ans. This is true even when the materials are delivered in Indian country and permanently attached to real estate in Indian country.

Construction contractor as retailer of materials Under certain specific circumstances, a construction contractor performing a construction contract may qualify as a retailer of materials by meeting each of the following requirements (please note that these requirements are distinct from the requirements for exemption discussed below):

  • The construction contractor must be in the business of selling materials or other tangible personal property;

  • The construction contractor must possess a valid seller’s permit;

  • The construction contract must explicitly provide for the transfer of title to the materials prior to the time the materials are installed, and must separately state the sales price of materials, exclusive of the charges for installation (for example, a time-and-materials contract); and

  • The construction contractor must provide a valid and timely resale certificate to its vendor.

A construction contractor that furnishes and installs materials may or may not have a seller’s permit. For example, a construction contractor that only furnishes and installs carpet and tile and makes no over-the-counter sales of materials is generally not required to hold a seller’s permit. If such a construction contractor wishes to enter into a construction contract with an Indian purchaser in Indian country to furnish and install materials and qualify as the retailer of the materials, the construction contractor must obtain a seller’s permit. Any construction contractor that obtains a seller’s permit is deemed to be in the business of selling materials. If the construction contractor does not obtain a seller’s permit, the construction contractor may not act as a retailer of the materials.

Fixtures Sales tax generally does not apply to the sale of fixtures to non-Indian construction contractors when the con- struction contractors furnish and install the fixtures in Indian country. You should obtain a completed and timely California resale certificate from the construction contractor. Please refer to publication 103, Sales for Resale, for additional information.

Sales by construction contractors

Sales to Indians—Construction Contracts for work in Indian country As a construction contractor, when your customer is an Indian, tax generally does not apply to your sales of fixtures furnished and installed as part of a construction contract for work in Indian country. This is because a construction contractor is a retailer of fixtures that are furnished and installed in the performance of a construction contract and the retail sale takes place in Indian country.

However, the same provisions do not necessarily apply to materials since a construction contractor is generally a consumer of materials that are furnished and installed in the performance of a construction contract. Unless you qualify as a retailer of materials, as provided above, you are the consumer of materials and tax is generally due on your purchase of those materials.

Tax-exempt sales of materials under a construction contract When the construction contractor qualifies as a retailer of materials, as described above, the contractor may pur- chase materials from its vendor for resale. In order to resell the materials in a tax-exempt transaction to the Indian customer in performance of a construction contract in Indian country, each of the following requirements must also be met:

APRIL 2014




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