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SC Construction Contractors & Federal Gov’t Work

Posted by salestax on July 14, 2009

This may take some planning and careful construction of contracts, but when 6-7% of sales taxes can be saved on a Federal contract, it can be the difference between getting a bid or losing one. Not to mention, how it could increase the profit on a job if sales taxes aren’t due on 90% of the costs incurred.

See the attached:  pages 3-6 of the SC information letter #09-11.

IL09-11.pdf

While it’s a long-standing interpretation of the SC construction Sales/Use tax statutes that construction contractors are exempt from sales/use taxes on the items purchased that will be transferred to Federal Government projects, it was ambiguous what information was needed to be granted such an exemption and how 2nd and 3rd subcontractors were to be taxed on the purchases (if at all) for the same job.

This letter describes that the initial contractor (GC) must have an agreement with the Federal Gov’t that states that the property purchased will be transferred to and become the property of the Federal Government in order to be granted an exempt contractor’s certificate. However, if a subcontractor is involved and the GC and Subcontractor’s agreement lists the Sub as an agency, and the GC accepts responsibility for the Sub’s purchases (if defaulted) for the contract in question, the subcontractor can also be exempt from its purchases used and transferred to the Fed. Gov’t on the project. Further, the Subcontractor can hire 3rd subcontractor and agree to them that they are a sub-agent of the GC – the GC must also accept responsibility if the 3rd subcontractor defaults on payments related to the job. All agency relationships must be in writing.

To get the exemption, Subcontractors with Agent/Subagent relationships to the GC can state on their PO’s that they are agents of the GC and use the Federal contractor’s exemption certificate issued by the SC department of revenue to the GC. The GC must issue a copy of the certificate listing the Subcontractor’(s) name in Section C as agents eligible to take the exemption.

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One Response to “SC Construction Contractors & Federal Gov’t Work”

  1. I was wondering if you ever considered changing the page layout of your blog?
    Its very well written; I love what youve got to say.

    But maybe you could a little more in the way of content so people could connect with it better.
    Youve got an awful lot of text for only having one or two pictures.
    Maybe you could space it out better?

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