Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521
(e) FIXED-PRICE CONTRACTS
190.2843 Fixed Price Contracts. For a contract to qualify for exemption from the sales and use tax increase of July 15, 1991, as a "fixed price" construction contract, it must meet the following criteria: (1) it must be binding prior to July 15, 1991, (2) neither party has a right to terminate the contract conditioned solely upon notice; (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 rate of tax and does not provide for an increase in tax.
A contract entered into on May 28, 1991 which was for a fixed price, which allowed for termination at the convenience of the customer upon payment for work done prior to termination, and which specified that all taxes were included succeeds in meeting the criteria and is exempt from the tax increase.
Change orders executed after July 15, 1991, are considered new contracts and do not invalidate the "fixed price" nature of the original contract. Such change orders are subject to the new tax rates. 9/16/92.