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S.F. No. 901 - Exemption for construction materials purchased by contractors
Author: Senator Ann H. Rest
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Date: February 19, 2019


Under current law, construction materials purchased directly by certain local government organizations, nonprofits, and medical provider entities are generally exempt from sales tax if the materials are purchased separately from the costs of construction. The exemption does not apply when those materials are purchased under a lump-sum contract (i.e., where materials and labor are included in one “lump sum” bid).

Section 1 provides an exemption for construction materials purchased by a contractor, subcontractor, or builder that are used or consumed in or incorporated into buildings or facilities used principally by eligible local government, nonprofit and medical provider entities. Also provides an exemption for school districts and local governments for materials, supplies and equipment used in construction, repair, or maintenance of public infrastructure. Sales tax would be paid upfront and then refunded. Effective for sales and purchases made after June 30, 2019.

Sections 2 to 4 incorporate the exemption authorized in section 1 in the statutory refund provisions. Effective for sales and purchases made after June 30, 2019.

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