Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

A    B    C    D    E    F    G    H    I    J    L    M    N    O    P    R    S    T    U    V    W    X   


190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521

Annotation 190.2721


190.2721 Resale Certificates. A California construction contractor keeps its materials inventory on an ex-tax basis by:

(1) providing resale certificates to California vendors;

(2) not paying use tax on out-of-state purchases; and

(3) taking a tax paid purchase credit upon return of materials from California jobs to inventory where the tax had been previously paid.

The only proper reasons for holding ex-tax inventory of materials by a construction contractor are:

(1) to hold for resale in the regular course of business, and

(2) to hold for subsequent use solely outside the state property purchased under an exemption certificate as provided in section 6386.

The Board has held that if a purchaser is a retailer as well as a construction contractor, a resale certificate may be accepted, provided the purchaser is "unable to tell at the time of the purchase whether the property will be consumed or resold."

Since the contractor does not buy the property for resale, it can not issue resale certificates. If it has not already paid tax on the use of property, it must do so no later than the property's removal from inventory for a California job. There is no tax credit available if property is placed into inventory after having been purchased tax-paid for a specific job. The only deduction available under these circumstances would be a tax-paid resold deduction as explained in Regulation 1701, for property that the construction contractor later resold in California. 7/22/93.