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 Sales Tax Proposal Passes During 2010 Session

In the last hours of the 2010 Legislative Session, HB 7157, which contains language to revise the laws relating to direct purchase of construction materials by public entities, is on its way to the Governor for final action.

On Monday, April 22, proponents were successful, with the help of House Finance & Tax Chairman Representative Ellyn Bogdanoff, in getting the new sales tax proposal incorporated into HB 7157 (a tax bill) on the House floor.  It passed the full House on Tuesday and was received in messages by the Senate on Wednesday.  On Thursday, the Senate took up a similar SB 1976 by Senator Altman, amended it to conform to the House Bill, substituted the House Bill for the Senate Bill and rolled the bill to third reading.  Minutes ago, the Senate took up HB 7157 and passed the legislation. The effective date of the new provisions is January 2, 2011.  This gives the Department of Revenue time to promulgate the new rules and a form for a governmental entity to certify their exemption to the vendor and the contractor.

The revised sales tax procedure, which was given a "$0" revenue impact by the Revenue Estimating Conference, creates a system of direct purchase that begins with the governmental entity certifying to the vendor that it is tax exempt and that all purchases they make for the project in question are exempt.  It also requires the governmental entity to confirm that they will follow the rules of the department in making their purchases.  With this certificate in hand, suppliers can sell materials to the governmental entity without tax.  The second part of the new procedure shifts the burden for any taxes that are determined to be due to the governmental entity, making it clear that the vendor and the contractor are not responsible.

We hope this will rectify this difficult issue that has been burdensome to the contractors for over a decade.

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