Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 565.0183


565.0183 Supply Contract. A contract with the U.S. Government at a military facility has three basic portions. The first portion includes providing architectural and engineering services. The second portion includes construction work consisting of site excavation, utilities, and foundation work. The third portion involves the leasing of a modular, prefabricated building that comes under the authority of the Department of Housing.

The tax application to the three portions of the contract is as follows:

(1) Neither sales tax nor use tax applies to the architectural and engineering fees.

(2) With respect to site improvements, contractors are the consumers of all fixtures and materials incorporated into site improvements. Thus sales tax or use tax applies to purchases made by the contractor or to subcontractors which are incorporated into site improvements. (Regulation 1521.)

(3) Prefabricated units such as commercial coaches, house trailers, etc., registered with the Department of Motor Vehicles or the Department of House and Community Development, are tangible personal property even though they may be connected to plumbing and utilities. Neither sales tax nor use tax applies to the sale or lease of such property to the federal government. (Regulation 1521(c)(3) and Regulation 1614). Also, the contractor's or subcontractor's charge for performing work on the modular building, such as providing and installing the lights in the building, would not be subject to the tax because the materials become a part of the tangible personal property (building) sold or leased to the federal government. 12/7/90.