Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013

Sales and Use Tax Annotations

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305.0000 INDIANS

Annotation 305.0028.025

305.0028.025 Non-Indian Construction Contractor May Qualify as Retailer of Materials to Indians. When a construction contractor contracts to sell and to install materials, the construction contractor may resell the materials as a retail sale prior to making any use of them (e.g., installing them) only by complying with the provisions of Regulation 1521(b)(2)(A)2.; that is, only if (1) its construction contract separately states the price of materials, exclusive of the charge for installation (e.g., a time and materials contract as described in Regulation 1521(a)(7)); (2) the contract explicitly provides for the transfer of title to the materials prior to the time the materials are installed, and (3) in fact, the contractual provisions are carried out.

Where a non-Indian construction contractor resells materials to an Indian, for construction on a reservation, under a construction contract that complies with Regulation 1521(b)(2)(A)2., the construction contractor must also (1) comply with the requirements of Regulation 1616(d)(4)(A), which include delivery made to an Indian on the reservation, and in fact passing title to the materials to the Indian on the reservation, and (2) must do so prior to the use of the materials in order for the retail sale of the materials to be exempt from tax. In order to fulfill the requirements that title and possession of the materials actually pass to the Indian purchaser on the reservation, the contract, invoices, and bills of lading must stipulate that the materials are to be shipped F.O.B. the reservation (unless the materials are delivered by the contractor/retailer's own facilities). Without this clause on all documents, title would actually pass to the Indian purchaser upon delivery of the materials to the carrier for shipment despite the contract providing that title passes on the reservation, and the contractor's sale of materials to the Indian would be subject to tax.

In addition to meeting the requirements described above, the contractor selling materials to an Indian should obtain from the Indian an exemption certificate as described in Regulation 1667 to substantiate that the contractor's sale was exempt from sales and use tax. The contractor must also make available a copy of this exemption certificate to any vendor that is also a subcontractor, when that subcontractor vendor accepts a resale certificate from the contractor.

While a construction contractor generally cannot avoid liability for tax on its use of materials furnished and installed by him or her by taking a resale certificate from the prime contractor, a subcontractor who sells materials to the prime contractor pursuant to Regulation 1521(b)(2)(A)2. may accept a resale certificate only if (1) the prime contractor will, in turn, sell the materials in compliance with Regulation 1521(b)(2)(A)2.; and (2) the prime contractor's sale of materials is an exempt sale to an Indian fulfilling the requirements of Regulation 1616(d)(4)(A), which include delivery made to the Indian purchaser on the reservation and title (ownership) transferring to the Indian purchaser on the reservation. 06/12/02. (2003–2).