Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013

Sales and Use Tax Annotations

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190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521

Annotation 190.2835


190.2835 Determining Criteria for Fixed Price Contract Exemption. In determining whether a construction contract is a "fixed price" contract under section 6376.1, it must satisfy the following criteria:

(1) it must be binding prior to July 15, 1991;

(2) neither party may have an unconditional right to terminate the contract;

(3) the agreement 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 tax.

Criteria number (3) is not met when the contractor reserves the right to increase its charges for labor and materials based on cost increases as measured by the Current Labor Indices and Current Material Indices. In addition, criteria number (4) is not met when the agreement requires the client to be responsible for any and all taxes enacted subsequent to the date that the bid was received. 1/31/92.

(Note: Fixed price contract includes a contract which is for a fixed amount and contains no provisions at all regarding California sales and use taxes. See Annotation 800.0009.) (Am. 2000–1).