SALT Report 1879 – The New Jersey Division of Taxation issued a tax bulletin regarding the sales and use tax exemption available to contractors. The purpose of the bulletin is to identify the materials, supplies and services that qualify for the exemption and to address other taxable purchases, rentals, leases and uses by contractors.
When a contractor makes purchases to improve, alter or repair the property of an exempt organization or other qualifying business, the contractor may qualify for a sales and use tax exemption. The exemption applies to purchase of materials, supplies and services, which will be used exclusively to fulfill a contract with an exempt organization or qualifying business.
The exemption applies to repairs of real property owned by the following:
- Exempt organizations,
- Urban Enterprise Zone business that have UZ-4 and UZ-5 exemption certificates, or
- Qualified housing sponsors
If the owner of the real property is an exempt organization or a qualified housing sponsor, the contractor must provide sellers with the Contractor’s Exempt Purchase Certificate Form ST-13. If the real property owner is a UEZ qualified business, the contractor must obtain the Contractor’s Exempt Purchase Certificate Form UZ-4 from the UEZ qualified business and provide it to sellers.
The contractor must also retain in its records, as proof, a copy of the contract with a New Jersey or federal government entity, a copy of the Exempt Organization Certificate Form ST-5, or a copy of the Exempt Purchase Certificate Form UZ-5.
The bulletin provides a list of the materials, supplies, and services that qualify for the exemption. However, the exemption does not apply to leases, rentals, purchases or uses of construction equipment. Construction equipment includes grading, lifting and excavating vehicles, compressors, scaffolds, forms, hand tools, and ladders. As well as, chains, cutters, extension cords, gas cans, generators, guide wires, hand trucks, hoses, industrial vacuum cleaners, measuring devices, metal buckets, metal trowels, padlocks, road skids and wheelbarrows.
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