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 190.2825


190.2825 Definition of Fixed Price Contract. To qualify as a fixed price contract under section 6376.2 for purposes of avoiding increases in the tax rate, a contract must meet four criteria: (1) it must be binding prior to the effective date of the contract; (2) neither party has an unconditional right to terminate that contract; (3) the contract must fix the amount of all costs at the outset; and (4) the agreement must include a provision which fixes the tax obligation on a tax-included basis or sets forth either the amount or the rate of tax and does not provide for an increase in the amount of the tax.

A purchase order by itself is not a contract, but if it is accepted by the date of the tax increase becomes a contract. Shipment is a reasonable mode of acceptance of the purchase order. 12/6/93. (Am. 2000–1).