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 190.2490


190.2490 Hawaii Construction Projects. An out-of-state contractor who has a California consumer use tax account specializes in earthquake construction. They design, fabricate, install and test earth retention systems and soil or rock tieback anchors. The company is involved in several Hawaiian construction projects which might result in the imposition of California sales tax under the following circumstances:

(1) The purchase of building materials to be physically incorporated into or consumed on the project from a California vendor for shipment to a temporary storage site in California. These properties would be ultimately shipped to Hawaii for physical incorporation, use, or consumption on the Hawaii jobsite.

Sales tax would apply to the sale of the materials and other supplies because the California tax is imposed upon the vendor and the property is delivered to the purchaser in this state. The exemption provided in section 6386 for out-of-state contractors applies only to sales to persons who hold a valid California seller's permit.

(2) Same factual circumstances as above, except that the property is fabricated to job specifications in California at the temporary storage site.

Again, the vendors' sales of the materials are fully taxable as described above. In addition, tax would also apply to charges made by independent contractors for fabrication work performed in California; however, no tax would apply to the fabrication if the work is performed by the company's own employees.

(3) The lease of construction equipment from California lessors, shipped to temporary storage sites in California, with ultimate shipment to Hawaii for use at the jobsite.

Any lease of equipment to the company, whether tax-paid or ex-tax in the hands of the lessor, would not be subject to California sales or use tax under section 6009.1 "Storage and Use Exclusion." The construction company will be making a functional use of the equipment in Hawaii and is holding the equipment in California only for the purpose of transporting it to Hawaii for use solely outside this state. 8/27/93.