sales tax; construction
tools exemption
Provides a transaction privilege (sales) and use tax exemption for tools used at a construction jobsite.
The transaction privilege (sales) and use tax is applied to prime contracting activities. The tax base is 65% of the gross proceeds of sales or gross income derived from construction contracts. The tax is not applied to the sales price of land or any furniture, fixtures, appliances, etc. that are not incorporated or attached to the property. In addition, a number of activities may be subtracted from the tax base, including activities regarding hazardous material clean-up, qualified environmental technology projects, military reuse zone projects, etc.
Under current law, contractors are taxed on any tangible personal property that is not incorporated into the project or structure. An example of this includes shovels, gloves, hard hats, etc. This is considered a cost of doing business and therefore taxable. Current law does provide some exemptions from tangible personal property that is sold to a prime contractor. Tangible personal property is not taxable if it is:
Ø incorporated into the structure or project;
Ø used in environmental remediation activities; or
Ø incorporated into any lake facility development in a commercial enhancement reuse district.
A fiscal note has been requested on this bill. However, DOR can not determine the impact since retailers do not report based on who purchased certain items (contractors vs. individuals).