drexmet

My non-DoD research led me to this, When Are Construction Materials Subject to Sales Tax? In most states, construction contractors must pay sales tax when they purchase materials used in construction. This means that any materials and supplies you purchase are taxable at the time of purchase. However, you won't have to pay sales or use tax upon the sale of the finished construction. In some cases, this can be an advantage because any markup you charge to your customer on the materials, supplies and labor, won't be subject to sales tax. Again, I am not a construction contractor, but rather mostly a supply contractor, so this is all foreign to me. Does the above paragraph apply to federal construction contracts? (assuming the contract is in one of the "most states?"

We, as a re-seller, are essentially always tax-exempt with our suppliers. Our customer, (as he is being told by the KO), is not tax-exempt by virtue of the fact that this is a construction contract, according to the KO.

I called into the KO's office to talk with them about this and their statement to me was, "this is construction and construction is not tax-exempt," meaning that the contractor would not be able to claim a tax exemption from anything that the KO would give them. They seemed to fully expect the contractor to pay sales taxes to his suppliers, and not pass the sales tax on to the KO, at least not as a separate line item on an invoice.

I am a newbie so I will apologize up front for not knowing how to start a new discussion, although my question is very similar to the question posed here. My 14 years of direct contracting experience is all in 'supply' and now one of my customers is asking me about a construction MATOC that they have. My customer is a small business, matoc idiq contractor to the PA ANG. His contract is Time and Material. His KO says ANG does not pay taxes, but construction is not tax exempt so my customer must pay sales tax on his materials (my goods). When he submits his invoices for re-imbursement, the KO disallows the tax line. Is he expected to therefore "eat" the sales tax, or should he have included a certain percentage for taxes in the re-imbursement percentage that he bid? I found FAR 29.303 but that clause appears to only establish that each situation will be handled according to its own specifics.