Idaho Admin. Code r. 35.01.02.013 - ROAD AND PAVING CONTRACTORS
Sections 63-3609, 63-3615, Idaho Code
01.
In General. This rule
illustrates the application of Idaho sales and use tax to specific activities
of road and paving contractors. The general principles stated in Rule
012 of these rules apply equally to
road and paving contractors. (3-31-22)
02.
Road or Paving Contractor. A
road or paving contractor is a contractor improving real property. The use of
materials over which he exercises right or power in the course of performing
the 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. (3-31-22)
03.
Examples. Here are some
examples of taxable materials contractors use in paving and road contracts:
(3-31-22)
a. Example 1: A contractor is hired
to pave a road for a city. The materials the contractor will use are taxable,
regardless of ownership, and include rock, sand, asphalt oil, chemicals,
bonding agents, or any other like materials which become the aggregate
pavement. (3-31-22)
b. Example 2: A
contractor is hired to chip seal a local road. The chip seal includes a layer
of liquid asphalt or similar material applied to the road with an immediate
layer of rock chips applied on top of the wet asphalt. A roller sets the rock
chips in place. Once this dries, the surface is cleaned and another oil seal or
like product is applied. These three items and any other materials used to form
the aggregate chip seal are taxable. (3-31-22)
c. Example 3: A contractor is hired to
perform landscaping for the barrow pits and shoulders of a new highway. The
highway district provides the grass seed and some bushes for the project. The
contractor provides labor to sow the seed, plant the bushes, and labor and
materials to provide erosion control, land leveling, contouring, etc. The
contractor owes sales or use tax on all materials consumed, including those
provided by the highway district. (3-31-22)
d. Example 4: A contractor is hired to
install a new bridge and provide drainage for a new freeway interchange. The
highway district provides the bridge components and culverts needed for the
project, and the contractor provided all of the remaining materials and the
labor for the project. The contractor will owe sales or use tax on all
materials he consumes including the bridge components and culverts provided by
the highway district, as well as on the materials the contractor purchased for
use on the project. (3-31-22)
e.
Example 5: A contractor is hired to install traffic control lights, signage,
and roadway illumination for a rebuilt section of roadway. The highway district
provides the traffic control signals and the permanent signage for the highway
so that all signage will be consistent throughout the highway district. The
contractor owes use tax on the value of the traffic signals and signage
provided by the highway district as well as on the cost of electrical wiring,
signal wiring, and the lights and light poles, etc., purchased and consumed by
the contractor. (3-31-22)
04.
Materials. The sale or use
of materials which are extracted and crushed is taxable. Use tax does not apply
to the use of natural materials that are secured on site and used without
significant change. (3-31-22)
05.
Rock Crushing. The application of the sales or use tax to rock
crushing operations depends upon the circumstances of the case. (3-31-22)
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 tax on all such sales. (3-31-22)
b. A contractor who applies crushed rock to
the highway pursuant to a contract is a person engaged in improving real
property. 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 rock. If a recent retail
acquisition of the crushed rock exists, the retail price is to be presumed to
be the value of the material. If a recent retail sales price does not exist,
then value is to be determined by the current acquisition cost of like material
from the same or a similar source. For purposes of this section, a retail
acquisition within one (1) year of the time of the performance of the contract
is to be presumed to be a recent sales price. (3-31-22)
c. A contractor whose contract calls for him
to both crush and apply rock to a road is also subject to sales or use tax on
the value of the rock whether the contract is performed for a governmental or
private contractee. The value is to be determined by the royalty or similar
charge for raw materials. If a royalty or similar charge does not 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.
(3-31-22)
d. A sale of rock
crushing services to a retailer who will sell the rock is an exempt sale. The
sale of crushed rock to a consumer is a taxable sale unless an exemption
applies. (3-31-22)
06.
Production Exemption. (3-31-22)
a. Since a contractor improving real property
is defined as the consumer of materials incorporated into realty, he is not
producing an article for resale. Therefore, the production exemption does not
apply to the use of equipment used by contractors to produce asphalt or
concrete which are used to complete paving contracts. (3-31-22)
Notes
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