Section 35.01.02.014 - CONTRACTORS/RETAILERSSections 63-3609(a), 63-3610, 63-3620, 63-3621, Idaho Code
01.In General. This rule shows how Idaho sales and use tax applies to contractors who are also retailers. The general principles in Rule 012 of these rules also apply to contractor/retailers and should be reviewed along with this rule. (3-31-22)02.Contractor/Retailer. Many contractors are also retailers. For example, plumbers, electricians, carpet layers, cabinet builders, and mechanical contractors can be both contractors and retailers. They are contractors when they install materials in the course of a residential or commercial service call or contract; but when they sell items or materials they don't install; they are retailers and need to collect sales tax from their customers. (3-31-22)03.Record Keeping Procedure. A contractor/retailer can follow any consistent procedure to account for inventory and job purchases. (3-31-22) a. Example: If the majority of a contractor/retailer's business is performing contracts to improve real property, The contractor/retailer can pay Idaho tax on all purchases and if an item is sold at retail, remit Idaho sales tax collected and request a refund for the tax paid. See Rule 117 of these rules for refund instructions. (3-31-22)b. Example: If the majority of the contractor/retailer's business is making retail sales, the contractor/ retailer can purchase all inventory without paying tax by giving suppliers a properly completed resale certificate. The contractor/retailer would remit sales tax collected on Idaho retail sales and pay an Idaho use tax on the value of items taken from inventory and used to improve real property. (3-31-22)c. Example: A contractor/retailer can opt to use separate accounting procedures for the purchase of resale inventory and job materials. Resale inventory purchases can be made without paying tax by giving suppliers a properly completed resale certificate and pay tax on the purchase of job materials. See Rule 128 of these rules. (3-31-22)04.Inventory Withdrawals. When any withdrawal is made from nontaxed inventory, the use tax is due to the state when the material is delivered to the job site, regardless of when it is used in performing a contract. (3-31-22)05.Tangible Personal Property vs. Improvements to Real Property. Built-in appliances and related items become fixtures to realty when installed in residential buildings. Such built-in appliances include dishwashers, microwave ovens, stove tops, refrigerators, stove hoods, central vacuum systems, waste disposal units, trash compactors, water softeners, water purification systems, and garage door openers. Some appliances retain the character of personal property such as microwave ovens that are not built-in, freestanding stoves, refrigerators, washers, and dryers. Other rules may apply to commercial, industrial, and other non-residential buildings. See Rule 067 of these rules. (3-31-22)06.Sales with Agreement to Install. A regular over-the-counter sale of a complete unit with an agreement to install it is not a contract to improve real property if the item does not become affixed to realty. This applies to sales of stoves, refrigerators, washing machines, dryers, and other electrical appliances. In this case, sales tax is collected from the buyer by the seller on the retail sales price of the item. If the installation charges are properly separated, sales tax is due only on the cost of the unit. (3-31-22)07.Sales of Both Tangible Personal Property and Improvements to Real Property. If a contract includes both retail sales of personal property and improvements to real property, the contractor/retailer collects sales tax on the retail portion of the contract. Also, the contractor/retailer does not pay sales tax to their vendor, they pay use tax on the materials used to perform the real property portion of the contract. (3-31-22)a. Example: A cabinet builder contracts to build and install kitchen cabinets and build a portable, freestanding china hutch. In the case of the cabinets, the cabinet builder is a contractor improving real property and pays tax on the material costs. In the case of the china hutch, the cabinet builder is a retailer and charges his customer sales tax on the sales price of the hutch, including labor. (3-31-22)b. Example: A cabinet builder is hired by Contractor X to fabricate and deliver cabinets to the job site. Contractor X will do the installation. In this case, the cabinet builder is a retailer and charges sales tax to Contractor X on the full sales price, including labor. (3-31-22)Idaho Admin. Code r. 35.01.02.014