Legislative Research Commission PDF Version
103 KAR 26:070. Construction contractors.
RELATES TO: KRS 139.210, 139.240, 139.260, 139.270, 139.310, 139.340, 139.710, 139.730
STATUTORY AUTHORITY: KRS 131.130
NECESSITY, FUNCTION, AND CONFORMITY: To interpret the sales and use tax law as it ap-
plies to transactions involving contractors making improvements to real property.
Section 1. All sales to contractors, subcontractors, builders or owners of building materials, fix-
tures and supplies which are to be incorporated or fabricated into any structure or improvement to
real estate by the process of erecting, remodeling, or repairing such structure or improvement are
subject to the sales or use tax at the time of sale to the contractor, subcontractor, builder or own-
er. This applies irrespective of the type of contract (lump sum and materials, cost plus fixed fee, or
other) for which the purchase is made. A person, firm, association, partnership or corporation en-
gaged exclusively in construction work as a contractor or subcontractor is not required to hold a
retail sales tax permit and such a permit will not be issued to these persons.
Section 2. Definitions. (1) The terms "contractor" and "subcontractor" are used herein in the
common and ordinary acceptance of the terms and include both general contractors and subcon-
tractors engaged in such building trades as carpentry, bricklaying, wall to wall carpeting, cement
work, steel work, plastering, sheet metal work (including aluminum siding), roofing, tile and terraz-
zo work, cabinet work, electrical work, plumbing, central heating and air conditioning, painting,
interior decorating, and storm window and permanent awning work. The terms "contractor" and
"subcontractor" as used herein do not include any person who repairs tangible personal property.
(2) The term "construction contract" as used herein means a contract for erecting, remodeling,
or repairing a building or other structure on land and includes lump sum, cost plus, and time-and-
materials contracts, but does not include a contract for the sale and installation of machinery, ap-
pliances or equipment which the contractor has sold but which do not become part of the real
property. (In this latter case, the contractor must apply for a retail sales and use tax permit and
remit tax on his sales price of the machinery, appliances or equipment.) Examples of taxable
sales include refrigerators, oven-ranges and dishwashers which are not built-in, laundry applianc-
es, window unit air conditioners and space heaters.
(3) The term "materials" means all of the tangible personal property, other than fixtures, which
enters into and becomes a permanent part of a structure. Examples of materials are: bricks,
builders hardware, cement, gravel, sand, macadam, asphalt, lumber, electrical wiring, wall board
and coping, roofing, guttering, aluminum siding, storm doors and windows, and cabinets.
(4) The term "fixtures" means things which are accessory to a building and do not lose their
identity as accessories but which do become a permanent part of the realty. Examples of fixtures
are: lighting fixtures, plumbing fixtures, hot water heaters, furnaces, boilers, central heating units,
elevators, hoists, burglar and fire alarm fixtures, central air conditioning and built-in refrigeration
units, built-in oven-ranges and dishwashers, and cabinets.
(5) The term "improvements to real estate" as used in this administrative regulation includes,
but is not limited to, buildings, roads, sewers, dams, railroads, and fences.
Section 3. A contractor may not claim that the purchase of materials or fixtures is not subject to
the tax because the property is to be used in fulfilling a contract with the federal government,
state government or political subdivision thereof, or any department, agency, or instrumentality of
the federal government, state government or political subdivision thereof, or with a religious, edu-
cational, or charitable institution.