Idaho Admin. Code r. 35.01.02.015

Current through August 31, 2023

Section 35.01.02.015 - WELL DRILLERS/PUMP INSTALLERS

Sections 63-2410, 63-2423, 63-3609(a), 63-3621, 63-3615(b), 63-3622B, 63-3622D, 63-3622R, 63-3622W, Idaho Code

01.In General. This rule is meant to explain how Idaho sales and use tax applies to contractors who drill wells and install pumps. The general principles in Rule 012 and 014 of these rules apply to well drillers and pump installers and should be reviewed along with this rule. (3-31-22)

02.Types. The types of wells covered by this rule include, but are not limited to: (3-31-22)

a. Water wells, including those for municipal, domestic, commercial, and industrial purposes, and wells used for agricultural irrigation. (3-31-22)

b. Monitor wells used to check for contamination or to find the water table. (3-31-22)

c. Anode wells used to ground power or gas lines. (3-31-22)

d. Construction wells used for pilings, shoring, and elevator hoists. (3-31-22)

03.Contractor Improving Real Property. A well driller is a contractor improving real property. In general, the contractor pays sales or use tax on materials and equipment they own and use or over which they exercise right or power while performing a contract. The contractor should not charge sales tax on materials, such as casing, pumps, screens, piping, etc., used to complete a well. Section 63-3609(a), Idaho Code, states that these materials are consumed by the well driller. The contractor pays tax even if the owner of the material is exempt from the tax, such as a government agency. Well drillers may be responsible for use tax on owner-supplied materials. See Rule 012 of this rule. Exemptions are discussed in Subsection 015.05 of this rule. Pumps that are installed with a well, such as a pump that supplies water to land or a building, are presumed to be real property improvements. Pumps that do not supply water to land or buildings and are used in commercial or industrial applications will generally be considered personal property unless they have been so integrated into the real estate that they would be considered a permanent fixture. (3-31-22)

a. Example: A well driller contracts to drill a water well and install a pump for a homeowner. The contractor bills the homeowner separately for materials and labor as well as the drill bits used. The contractor should pay sales or use tax on his purchase of the materials and drill bits. The contractor should not charge sales tax to the customer since this is a contract to improve real property. (3-31-22)

b. Example: A well driller contracts to drill a well for an Idaho city. The contractor pays sales or use tax on the materials and pumps used to complete the well, even though the eventual owner of these items is a governmental entity. See Rule 094 of these rules. (3-31-22)

04.Exemptions. In some cases, exemptions may apply to materials installed by well drillers and pump installers. Note: These exemptions apply only to project materials and not to construction equipment and supplies, such as drilling rigs and drill bits. If a well driller or pump installer makes exempt purchases, he must complete an exemption certificate for the vendor's records. (3-31-22)

a. Materials installed in a well which will be used primarily for agricultural irrigation are exempt under Section 63-3622W, Idaho Code. The exemption applies even if the materials become part of the real property. Agricultural irrigation includes supplying water to crops, livestock, and fish which are produced for resale. (3-31-22)

b. Pumps and other equipment used directly in manufacturing or processing are exempt under Section 63-3622D, Idaho Code. Generally, such pumps retain the characteristics of personal property. This exemption applies only to tangible personal property. It does not apply to materials which will become part of real property. Examples include: pumps used directly in food processing; booster pumps and chlorine pumps used directly in manufacturing; and dairy waste pumps. (3-31-22)

05.Motor Vehicles. In general, drilling rigs and licensed motor vehicles are taxable when purchased by a well driller or pump installer. However, if a vehicle weighs more than twenty-six thousand (26,000) pounds, is used more than ten percent (10%) of the time outside of Idaho, and is registered under the International Registration Plan or similar pro rata plan, its purchase is exempt. See Rule 101 of these rules. This exemption does not apply to repair parts for motor vehicles, or to drilling rigs purchased separately from a motor vehicle. (3-31-22)

06.Fuel. Motor fuel taxes do not apply, or a refund may be obtained, if the fuel is used to run drilling rigs or other off-road equipment. Fuel purchased for such off-highway use is taxable. See Sections 63-2410 and 632423, Idaho Code, and related IDAPA 35.01.05, "Idaho Motor Fuels Tax Rules." (3-31-22)

Idaho Admin. Code r. 35.01.02.015