Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521
(a) IN GENERAL—ACTIVITIES CONSTITUTING CONTRACTING OR MAKING OF IMPROVEMENTS
190.0828 Sales of Decorative Rocks. A company in the decorative rock sales and design business purchases rock from quarries and rock supply dealers. The rock is stored in a holding yard. Rock is sold to customers with tax charged on this amount. Equipment such as a crane truck, forklift, and flatbed trucks are rented. This charge is segregated on the invoice. A separate charge for a delivery fee is made. A charge is also made for consultation in the design process, planning of design, and a visual scene from a drafting method for the rock placement. Tax is not charged on the charge for equipment rental, delivery, or consultation.
Assuming that the company places the rocks and spreads the rocks used as ground cover on the customer's property at the locations specified in the landscape plans, the contract the company has with the customer is a construction contract. A construction contractor who provides materials (decorative rock) is the consumer of the materials furnished and installed in the performance of a construction contract. An exception to this rule is when materials are furnished pursuant to certain "time and material contracts" where a charge for the materials and a separate charge for installation of those materials are set forth. If title to the materials explicitly passes to the customer under a time and material contract prior to installation, the contractor is the retailer of the materials. If the contractor bills the customer for "sales tax" on the charge for the materials (which must at least equal the contractor's cost of the materials) under a time and material contract, the contractor is the retailer of the materials. Assuming the charges for the rocks and the charges for "sales tax" are stated separately to the customer, the company is the retailer of the rocks, and the "gross receipts" from the sales of the rocks are subject to sales tax.
If the sale of rocks is taxable under the time and material contract exception, the taxable gross receipts from the sales of rocks include the charges for transportation unless the requirements of Regulation 1628 are met. The company does not meet the requirement unless there is an explicit agreement in writing with each customer that title to the rocks will pass prior to delivery. Therefore, the transportation charges, including rental charges for equipment, are subject to tax. 2/26/92.