State Tax Update

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State Tax Update
Contact Info thunt_at_gallina.com mbellows_at_gallina
.com [phone]

• AGC/CFMA Conference October 23 24, 2008
• Presented by Tyler K. Hunt, Partner
• Mark A. Bellows, Senior Tax Manager

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Agenda

• Sales Use Tax Overview
• Credit Overview Research and Development
• Credit Overview Federal and State Hiring Credits

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Sales Use Tax Overview

• Key Considerations
• Taxability of
• Materials
• Fixtures
• Fabrication Processing Labor
• Transactions with Indian Tribes
• U.S. Government Contractors
• Planning

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Key Considerations

• EVERY STATE IS DIFFERENT!!!
• The contract or subcontract is the primary
  document used in determining the application of
  sales/use tax
• Lump sum
• TM
• Cost-plus

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Materials

• General Rule
• Construction contractors are consumers of
  materials which they furnish and install in the
  performance of construction contracts. Either
  sales tax or use tax applies to the sale of
  materials to or for the use of the materials by
  the construction contractor. Cal. Code Regs. 18
  1521(b)(2)(A)(1)
• Exception
• Contractor as retailer

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Fixtures

• General Rule
• Construction contractors are retailers of
  fixtures which they furnish and install in the
  performance of construction contracts and tax
  applies to their sales of the fixtures. Cal.
  Code Regs. 18 1521(b)(2)(B)(1)
• Examples of fixtures
• HVAC units, boilers, furnaces
• Alarm systems
• Prefabricated cabinets
• Lighting and plumbing fixtures
• Solar cells, panels, and systems

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Fabrication Processing Labor

• Self-performed fabrication or assembly
• Subcontracted fabrication or assembly

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Transactions with Indian Tribes

• General rule
• Sales tax applies to sales of materials to
  non-Indian contractors notwithstanding the
  delivery of the materials on the reservation and
  the permanent attachment of the materials to
  realty. Sales tax does not apply to sales of
  fixtures furnished and installed by non-Indian
  contractors on Indian reservations. Cal. Code
  Regs. 18 1521(d)(4)(C)(2).
• Exception CA STCR No. 305.0007
• Barona Band of Mission Indians v. Yee, et al.
  U.S.C.A. (9th Cir.), Dkt. No. 06-55918,
  06/18/2008.

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U.S. Government Contractors

• General Rule
• U.S. construction contractors are consumers of
  materials and fixtures which they furnish and
  install in the performance of contracts with the
  U.S. Government. Cal. Code Regs. 18
  1521(b)(1)(A).
• (Sales) taxshall apply to the gross receipts
  from the sale of any tangible personal property
  to contractors purchasing such property either as
  the agents of the U.S. or for their own account
  and subsequent resale to the U.S. for use in the
  performance of contracts with the U.S. for the
  construction of improvements on real property
  Cal. Rev. Tax Cd. 6384.

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Sales Tax Planning

• Ex-tax purchases vs. tax-paid purchases
• Local and district tax savings
• Compliance issues
• Leasing company (LEASECO) considerations
• Transfer of assets to LEASECO
• Purchase of assets for lease by LEASECO

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Credit Overview Research Development

• Design Build
• Fabrication / manufacturing
• Architectural
• Engineering
• LEED certification

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Credit Overview Federal and State Hiring Credits

• Federal EC/EZ/RC
• Job locations
• Credit amounts
• Credit Process
• California EZ
• New or expanded zones
• Job locations
• Apportionment considerations