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Must construction contractors collect sales tax?
- What types of sales are exempt from tax?
- What is the relationship between retailers’ occupation and use tax in Illinois?
- Is labor taxable?
- Why are taxes frequently collected at fairs, festivals, flea markets, or craft shows? What are the responsibilities of retailers at these events? How should these retailers file Form ST-1 for the tax period during which such event took place?
A construction contractor does not need to collect sales tax when incorporating tangible personal property into real estate under a construction contract. In this scenario, Illinois law considers the construction contractor the end user of the items permanently incorporated into real estate. The construction contractor incurs use tax on the cost price of these items and must either pay the tax to its supplier or remit the tax directly to the Illinois Department of Revenue (IDOR), if the supplier is not registered with IDOR.
Construction contractors will incur retailers’ occupation tax liability when they sell tangible personal property to purchasers for use without installation. See 86 Ill. Adm. Code Sections 130.1940 and 130.2075.
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