Chamber-Backed Bill to Protect Contractors from Unfair Tax Assessments Passes Senate

April 23, 2018

Good news! Chamber-backed legislation to prevent Treasury from assessing contractors use tax on items provided to them by their customer for installation services only was unanimously approved by the State Senate last week. 

Over the last year, we have seen Treasury issue Use Tax Assessments under audit on what is commonly referred to as “owner supplied material." Even though the contractor’s customer paid sales tax on the items they provided to their contractor, Treasury argued that use tax must be assessed. Unless the contractor can prove their customer paid sales tax on that material, Treasury will require use tax be paid, which can be difficult. Often times, proof of sales tax being paid does not exist. Other times, a contractor’s customer refuses to turn over adequate documentation. In any scenario, making a contractor audit their customer is inappropriate and fosters an environment ripe for double taxation.

Senate Bill 887 takes the contractor out of the picture for scenarios that involve owner-supplied material.

For more information on this tax issue, contact Dan Papineau at dpapineau@michamber.com.