(a)
Construction activities. Imposition of tax on construction
activities shall conform with the following:
(1) A contractor shall pay tax upon the
purchase price, as defined by the TRC, of all property, including materials,
equipment, components and supplies, which he furnishes and installs in the
performance of his construction activities.
Example 1: As part of a contract for
the construction of a house "X" Contractor has agreed to install a built-in
dishwasher for his customer. "X" Contractor pays his supplier $150 for the
purchase of the dishwasher. "X" Contractor pays $9 sales tax to his supplier
and subsequently installs the dishwasher in the kitchen of the house he is
building. The dishwasher becomes a part of the realty and is included in the
overall price of the house to the customer. "X" Contractor does not charge
sales tax on this transaction to his customer. The contractor may include the
tax he must pay in his bid proposal but not as a separately stated item.
(2) A contractor whose activities
are confined to construction activities is required to pay tax directly to his
supplier at the time he purchases the materials, equipment, components or
supplies which he furnishes and installs. A use tax license number shall be
available to a construction contractor from the Department to permit him to
remit tax directly to the Department upon the purchases from vendors who are
not required or are not licensed with the Department for the collection and
remission of tax.
Example 1: "X" Contractor purchases
lumber in Baltimore, Maryland, which is delivered in Pennsylvania. The lumber
supplier is not registered with this Commonwealth to collect sales tax of this
Commonwealth. "X" Contractor shall be required to remit use tax on his
"purchase price" (including shipping charges) of the lumber directly to the
Department under his use tax number. See §
33.2 (relating to purchase
price).
Example 2: "X" Contractor purchases
and takes possession of lumber in Baltimore, Maryland. At the time of purchase
the Maryland rate of tax is 4%. "X" Contractor pays to his supplier 4% tax.
Maryland and the Commonwealth have enacted reciprocal tax statutes. Because of
this reciprocity, "X" Contractor may take a 4% tax credit against the use tax
of the Commonwealth which he owes. "X" Contractor shall be required to remit 2%
use tax on his "purchase price" of the lumber directly to the Department under
his use tax number.
(3) A
construction contractor shall pay tax upon all tools and equipment, such as
backhoes, cranes, saws, drills, motor vehicles, and the like, which are used
but not transferred in conjunction with his construction activities. Effective
March 4, 1971, a construction contractor performing contracts for public
utilities may no longer claim the exemption of the utility upon the purchase or
rental of such items.
(4) A
contractor who performs both construction activities and sales activities shall
be required to be licensed with the Department for the collection and remission
of sales tax and shall be issued a sales tax license number. As to property
which he knows he will resell, he may use a resale exemption certificate upon
his purchase from his supplier. He shall collect and remit tax upon the sales.
As to all other purchases which he may make, he shall pay tax to his supplier
at the time of purchase.
(b)
Sales activities.
Imposition of tax on sales activities shall conform with the following:
(1) A contractor who, in addition to
performing construction activities, makes sales at retail, as defined by the
TRC, of tangible personal property is deemed to be a vendor and is required to
register with the Department for the collection and remission of tax upon the
sales which he makes.
(2) A
contractor who performs taxable services in repairing and altering tangible
property or applying or installing tangible personal property as a repair or
replacement part of other personal property is also deemed to be a vendor and
is required to collect and remit tax. See §
31.5 (relating to persons
rendering taxable service).
(3)
Effective March 4, 1971, charges for labor or transportation in conjunction
with the sale at retail and installation of tangible personal property are
subject to tax even though the labor or delivery charges are separately stated
on the billing.
Example 1: "X" Contractor, who has
been issued a sales tax number, purchases a portable dishwasher which is
delivered to the house "X" Contractor is building for "Y" Customer. "X"
Contractor purchases the dishwasher for $150 from his supplier and gives him a
resale exemption certificate. "X" Contractor then charges "Y" Customer $200 for
the dishwasher, including delivery, unpacking and installation charges. "X"
Contractor shall collect $12 sales tax from "Y" Customer based upon the total
sales price of $200.
(c)
Contractors producing the
property they consume, as part of the same business operation.
Contractors who, as part of the same business operation, produce the property
they consume shall conform with the following:
(1) A contractor, in addition to performing
construction activities, may also manufacture, mine, process or grow the
materials, supplies or equipment which he consumes in the performance of his
construction activities. With respect to his manufacturing, mining, processing,
and the like, operations, the contractor is entitled to the exemption provided
by the law for the operations.
(2)
With respect to construction activities, the contractor's use tax base is the
acquisition cost of the raw material purchased to produce the property which he
consumes.
Example: A contractor purchases
seedlings for $2 which he grows and later transfers to his customer in
conjunction with his construction activities. At the time of transfer, the
seedlings have a market value of $50. The contractor, however, is required to
pay tax upon the $2 cost of the seedlings which he paid at the time of their
acquisition.
