Contractors Improving Real Property

Sections 63-3609(a), 63-3621, 63-3615(b), 63-3622B, 63-3622D, 63-3622W, 63-3622X, 63-3622NN, 63-3622VV, 63-3622WW, Idaho Code 01. In General. A contractor is any person acting as a general contractor, subcontractor, contractee, subcontractee, or speculative builder who builds, alters, repairs, or improves real property. (7-1-26) a. Contractors are the consumers of all the goods they use. As a result, they pay tax on their purchase or use of building materials, equipment, tools, and supplies, unless an exemption applies. (7-1-26) b. If a contractor doesn’t pay tax on the purchase or use of building materials, equipment, tools, and supplies, they report and pay use tax to the state. See Section 072. (7-1-26) 02. Real Property. See Section 067. (7-1-26) 03. Fuels. A contractor pays sale or use tax on fuel used in off-road equipment unless motor fuels tax was paid. See Section 078. (7-1-26) 04. Custom-Made Goods. Sales tax applies to the entire price charged for custom-made goods sold by the maker. If a contractor purchases fabricated goods from a supplier, the entire price of the fabricated item, including the charge for labor is taxable. If the contractor buys material and fabricates it and installs it into a real property improvement, only the material is taxable. (7-1-26) 05. Value. The contractor owes use tax on the value of the job materials at the time they exercise right or power over them. When a contractor fabricates and installs tangible personal property into Idaho real property, the value is the cost of materials and parts used. This is true even if that contractor hires a subcontractor to install. (7-1-26) IDAHO ADMINISTRATIVE CODE IDAPA 35.01.02 State Tax Commission Idaho Sales & Use Tax Administrative Rules Section 013 Page 6 06. Materials Provided by Project Owner. (3-31-22) a. When a project owner who isn’t exempt from tax buys materials for a job and hires a contractor to install them, sales or use tax is due when the material is purchased. If the owner doesn’t pay tax on the materials, the contractor is liable for the tax. (7-1-26) b. When a project owner who is exempt from sales and use tax buys materials for a job and hires a contractor to install them, the contractor is liable for the tax on the value of the materials. This is true even if the property is owned by an exempt entity such as the federal government or an Idaho governmental agency. (7-1-26) 07. Materials Purchased on Behalf of Project Owner. (7-1-26) a. When a project owner who is exempt from tax allows the contractor to buy building materials in the project owner’s name, the contractor is liable for the tax on the value of the materials. (7-1-26) b. Contractors can’t avoid paying sales or use tax due to a contract that allows purchases to be made in the name of the exempt entity and designates the contractor as an agent of that entity. The contractor is the consumer of the material and owes tax at the time of purchase. (7-1-26) 08. Examples. Available at Sales and Use Tax Examples. (7-1-26)