Building for Uncle Sam

How Sales & Use Tax Applies to Construction Contracts with the United States Government

Generally speaking, the United States Government is immune from state taxation under the Supremacy Clause of the United States Constitution.  Courts have ruled that states are precluded from taxing activities where the incidence of tax falls directly upon the federal government, its agencies, and instrumentalities.  But what about construction contracts with the federal government where the contractor is the party that is providing and installing items on behalf of the federal government? 

This article uses California as an example to briefly explain how tax […]

Tricks of the Trade

Understanding How Sales and Use Tax Applies to Cabinet Contractors in California Can Save You a Bundle of Tax

Sales and use tax rules for the construction industry are complex.  Generally speaking, California construction contractors are considered consumers of materials and retailers of fixtures.  Consumers must pay sales or use tax on the costs of the items they “use,” and retailers owe tax on the sale price of the items they sell.  Like many areas of taxation, however, the devil is in details.  The application of tax may vary depending on the item being installed, the form […]

The Complexities of California Law for Construction Contractors

By Lucian Khan, Of Counsel to McClellan Davis

This article discusses some of the complexities of the California sales and use tax law, as it applies to construction contractors. Pursuant to California Code of Regulations, title 18, section 1521, Construction Contractors, a construction contract is a contract to erect, construct, alter or repair any building or structure, project, development, or other improvement to realty. However, the tax consequences can vary depending on the type of property installed, how the property is installed, the type of contract you have, how the contract is billed, whether the contractor does any further processing before […]

Construction Contractors as Consumers When Installing Property of Others – at SalesTaxSupport.com


This month, Jesse W. McClellan, Esq, co-founder of McClellan Davis and featured contributor at Sales Tax Support writes about sales tax and construction contractors. Sales Tax Support publishes articles written by experts and thought leaders in the specialized field of sales and use tax with small and medium sized business owners in mind.

Visit our blog to read Jesse’s informative article “Construction Contractors as Consumers When Installing Property of Others?”

Construction Contractors as Consumers When Installing Property of Others

In previous posts, my partner, Dan Davis, CPA, addressed how states tax installation charges and how states tax contracts with exempt entities. This article includes a related question: how states tax property that is being installed when title to that property is not held by the installing contractor and tax was not previously paid. For example, California generally considers a contractor to be the consumer of equipment and machinery which is furnished and installed under a contract with the U.S. Government, but the contractor will not generally be considered the consumer of such property if title is […]