Sales and Use Tax - Construction Contractors

Page | 1 Sales and Use Tax Treatment of Construction Contractors Throughout the States by Dan Davis, MBA (Tax), CPA, CFE Construction : General Rule Although the wording may differ from state to state, a Construction contractor is generally one who converts tangible personal property into real property (land, buildings, or other affixed structures). The contractor does this by substantially attaching the personal property to, or otherwise incorporating the personal property into, the real estate. In most states, the contractor who performs the final act of incorporating tangible personal property into realty is legally regarded as the consumer, or end user, of the installed property. In those states, the tax generally is due on Sales by the supplier to the contractor. In such cases, a contractor who buys tangible personal property with the intention of incorporating it into realty may not issue a resale certificate to the supplier, because the property will not be resold, at least in the form of tangible personal property.

Rhode Island: Contractors who sell standard units of equipment at retail and sometimes install such units are treated as retailers of both the installed and uninstalled equipment. South Carolina: Contractors who manufacture fixtures that they also incorporate into realty must pay tax on the fair market value of any such units they install.

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