Road, Paving, And Earthwork Contractors

Sections 63-3609, 63-3615, 63-3619 (f), 63-3622D, Idaho Code 01. In General. This rule illustrates the application of Idaho sales and use tax to specific activities of road, paving, and earthwork contractors. The general principles stated in Section 012 apply to these contractors. (7-1-26) 02. Road or Paving Contractor. A road or paving contractor is a contractor improving real property. The use of materials over which the contractor exercises right or power while performing a contract is taxable. This is true even if an exempt entity, such as a government agency, owns the material. It is also true if the contractor does the work under the full or partial supervision of the person for whom the contractor is performing the contract. (7-1-26) 03. Materials. Use tax doesn’t apply to the use of natural materials such as rock, backfill, or other related materials that are secured on site and used without significant change. (7-1-26) a. The sale or use of natural materials or rock removed from a construction site and used elsewhere is taxable. (7-1-26) b. The sale or use of crushed rock that is removed from a construction site and used elsewhere is taxable. (7-1-26) 04. Rock Crushing. The application of sales or use tax to rock crushing operations depends upon the circumstances of the case. (7-1-26) a. A sale of crushing only is a sale of a taxable processing service. In this circumstance the crusher obtains raw material owned by another, crushes the rock, and stockpiles it for subsequent use either by the owner or a third party. Unless an exemption applies, the crusher charges sales tax. (7-1-26) b. A contractor who crushes rock obtained on a construction site and uses that rock on the same site is performing a nontaxable service. The processing of such rock, backfill, or other related materials isn’t taxable. (7-1-26) c. If the contractor applying the crushed rock purchases the rock, the purchase price will be taxable. If the contractor applies rock owned by another party, the contractor will be responsible for a use tax on the value of the rock, unless the other party paid a sales tax upon its acquisition. This is true even if a government agency supplied the IDAHO ADMINISTRATIVE CODE IDAPA 35.01.02 State Tax Commission Idaho Sales & Use Tax Administrative Rules Section 014 Page 7 rock. When a recent purchase of the crushed rock exists, that purchase price is presumed to be the value of the material. When there isn’t a recent purchase, then the value is determined by the current purchase price of like material from the same or a similar source. For the purposes of this section, a purchase made within one (1) year of the performance of the contract is presumed to be a recent purchase price. (7-1-26) d. A contractor who crushes and applies rock to a road owes tax on the value of the rock whether the contract is performed for a governmental or private entity. The value is to be determined by the royalty or similar charge for raw materials. If a royalty or similar charge doesn’t exist, then the value will be determined as the royalty fee or value of like material from a similar source. If the contractor chooses to have the rock crushed by a subcontractor, the measure of the use tax is on the crushed value. (7-1-26) e. A sale of rock crushing services to a retailer who will then resell the rock is an exempt sale. The sale of crushed rock to a consumer is a taxable sale unless an exemption applies. (7-1-26) 05. Production Exemption. (3-31-22) a. A contractor improving real property is the consumer of the materials incorporated into realty and isn’t producing an article for resale. The production exemption doesn’t apply to the equipment and supplies used by a contractor to produce crushed rock, asphalt, or concrete used by the contractor to complete real property improvements. (7-1-26) b. A business primarily devoted to producing crushed rock, asphalt, or concrete ultimately sold at retail may qualify for the production exemption. See Sections 079 and 082. (7-1-26)