The construction contract must separately state the price of materials, exclusive of the charge for installation (for example, a time-and-materials contract);
The contract must specifically provide that ownership of the materials (title) will transfer to the Indian customer in Indian country prior to use or installation of the materials;
The materials must in fact be delivered to the Indian customer in Indian country; and
The construction contractor must obtain an exemption certificate from its Indian customer.
Be sure to document the circumstances of any sale you claim as exempt (see Documenting Exempt Transactions).
It is important to note that in a situation where a subcontractor is acting as a retailer of materials that are furnished and installed, or in a situation where a subcontractor is furnishing and installing fixtures, the subcontractor gen- erally may not accept a resale certificate from a prime contractor. The subcontractor must sell the materials or fixtures at retail directly to the Indian purchaser in Indian country for the transaction to qualify as exempt from tax. However, if the subcontractor is making a retail sale of materials or fixtures to a prime contractor, and the materials or fixtures are resold by the prime contractor to the Indian purchaser prior to installation (see Two Agreements in Example 2 below), the subcontractor may accept a resale certificate from the prime contractor in this situation.
For a contractor to be a retailer of materials, the contractor must separately state the selling price of the materials and the contract must pass title of the materials to the Indian customer prior to installation. A time-and-material contract is one type of contract that provides for a separate statement of the selling price of materials. However, a time-and-material contract is not required. Any other type of contract may be used provided the contract contains a separately stated selling price of the materials. For example, a guaranteed maximum price contract may qualify provided the selling price of the materials is separately stated. In addition to the separately stated selling price of the materials, the contract must contain sufficient language transferring title of the materials to the Indian cus- tomer purchaser in Indian country on the reservation prior to installation by the selling contractor.
Following are two nonexhaustive examples of language that may be included in a guaranteed maximum price construction contract for the purpose of providing a separately stated selling price of materials. In addition to either of the following examples, the contract must contain a title clause providing for the transfer of title to the materials from the contractor to the Indian purchaser prior to installation.
Section x. Contract Price. Subject to the terms and conditions hereof, as payment for contractor’s performance of the Services under this Agreement, Tribe shall pay a guaranteed maximum cost of $ (“Contract Price”). The portion of the Contract Price which is the guaranteed maximum cost of materials only is
$ Example 2. Contract Sum
, which amount is exclusive of any charge for installation and performance of labor services.
The sum of the cost of the work and the contractor’s fee is guaranteed by the contractor not to exceed an
aggregate amount, hereinafter the “guaranteed maximum price,” equal to $
. The cost of the
work shall include materials that are exempt from tax under 18 CCR 1616(d)(4)(C), which materials contractor shall, pursuant to this agreement, sell or cause to be sold to owner. The final cost of such materials is estimated
to be $
. Changes to the cost of materials exempt from sales tax under 18 CCR 1616(4)(4)(C),
stated above, shall be effected through change orders, which shall in all cases separately state the cost of such materials.
SALES TO AMERICAN INDIANS AND SALES IN INDIAN COUNTRY