Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521

Annotation 190.2487


190.2487 Fungible Goods—Steel Fabricator. A steel fabricator subcontracts with steel manufacturers to fabricate and install reinforcing bars furnished by the steel manufacturers. The fabrication consists of shearing the steel to the required length and bending it to shape.

The contracts specify that reinforcing bars are to be furnished by the steel manufacturers. However, because of inventory considerations, the steel fabricator sometimes uses its own reinforcing bars or another steel manufacturer's job inventory. Eventually, however, the steel fabricator obtains from the various steel manufacturers a sufficient quantity of bars to satisfy the requirements of various steel companies it has contracts with.

In situations of this type, the proper solution is to follow the thinking used in the fungible goods section of the law. Thus, as long as the steel fabricator has enough on hand obtained from the particular steel manufacturer to satisfy that steel manufacturer's requirements, the fact that this steel is commingled with steel obtained from the other companies will not result in tax liability on the theory that the steel fabricator purchased steel from the other companies. On the other hand, if, in order to fulfill an order, the steel fabricator must use steel in excess of that which it has on hand which originally came from the contractor giving the order, the steel fabricator will be considered as having purchased such excess steel and the tax would apply to its cost price. 7/24/64.