Sales Tax Exemption & Public Works Projects
ABC of Alabama has been extremely involved in the sales tax exemption process for public works projects. Last week you received a memo from the Alabama Department of Revenue from ABC reiterating the guidelines and standards for sales tax exemption projects. That memo generated a lot of questions from across the state. Here are a few highlighted questions we thought were relevant enough to share with the entire industry, as well as responses from the Department of Revenue.
Please continue to submit your questions to ABC of Alabama and we will periodically update the membership on the Department of Revenue's responses.
Q: Have you heard if this will effect city and county reporting or only state reporting?
A: The contractor must report all unreported past purchases used on an exempt governmental job.
Q: Will the contractor be required to file back returns or will this just apply to current and future reporting?
A: The contractor should file back returns for the state only.
Q: Do you know, in general, if a job with the VA would be sales tax exempt. The contract was signed in 2013.
A: The VA jobs are not exempt. The federal government was specifically excluded in the Act.
Q: What is required when I file monthly consumers use tax return for a customer that is tax exempt, however, they are purchasing everything for the job, we are only billing them for labor, equipment, overhead and profit? Would we be responsible for entering their exemption #, project # and purchase amount even though we would have nothing to file from our billing to them?
A: If you have been issued an exemption certificate for a tax exempt governmental job, you must report the purchases--even if the total purchased is $0.00. If not, no future exemption certificates for any job will be issued until you are full in compliance. Revocation of a certificate could result in the contractor being barred from the issuance of any certificate for a period up to two years. However, if the governmental entity is purchasing all the materials, there is no need to be issued an exemption certificate
Q: If the contractor had an exempt certificate prior to the act going into effect, the sales tax would be due anyway since it was still in progress after the act was passed on the exclusion of federal government jobs?
A: That is correct -- unless the contractor had entered a purchasing agency agreement. The contractor should not have had an exemption certificate for that job even before the Act was passed. Before the Act was passed, a purchasing agency agreement was required for all jobs involving any governmental entity.