ALABAMA DEPARTMENT OF REVENUE - SALES AND USE TAX RULES
Code of Alabama 1975, Sections 40-23-31 and 40-23-83
810-6-3-.69.02. (Continued)
will use in the performance of a contract with the United States Government, the State of
Alabama, county or incorporated municipality of the state, or an entity with a specific
exemption, for making additions, alterations, or improvements to realty belonging to the
government, state, county, municipality, or entity are not purchases by the government,
state, county, municipality, or entity and do not qualify for the sales and use tax exemptions
in Sections 40-23-4(a)(11) and 40-23-62(13). (Sections 40-23-1(a)(10) and 40-23-60(5))
(a) A contractor that sells building materials to a tax exempt entity under one
contract and affixes the materials to realty under a second contract with the tax exempt
entity is liable for sales or use tax; the fact that the materials are sold and installed under
separate contracts does not qualify the contractor's purchase of the materials for the sales
or use tax exemptions in Sections 40-23-4(a)(11) and 40-23-62(13). A contractor may not
purchase materials tax exempt for resale to the tax exempt entity and then affix the same
materials to realty for the tax exempt entity. (State v. Algernon Blair Industrial Contractors,
Inc., 362 So.2d 248 (Ala.Civ.App. 1978), cert. denied 362 So.2d 253)
(b) A contractor may purchase items of tangible personal property tax free when
the items are purchased for resale to a tax exempt governmental entity in the form of
tangible personal property and are not affixed to realty by the contractor pursuant to a
contract with the tax exempt entity.
(3) On and after October 1, 2000, the sale to, or the storage, use, or consumption
by, any contractor or subcontractor of any tangible personal property to be incorporated
into realty pursuant to a contract with the State of Alabama or a county or incorporated
municipality of the State of Alabama awarded prior to July 1, 2004, is exempt from state,
county, and municipal sales and use taxes provided the contractor or subcontractor has
complied with Rule 810-6-3-.77, entitled Exemption for Certain Purchases by Contractors
and Subcontractors in conjunction with Construction Contracts with Certain Governmental
Entities, Public Corporations, and Educational Institutions. (Section 40-9-33)
(4) On and after July 1, 2004, the sale to, or the storage, use, or consumption by,
any contractor or subcontractor of any tangible personal property to be incorporated into
realty pursuant to a contract with the United States government, the State of Alabama or a
county or incorporated municipality of the State of Alabama is subject to all state, county,
and municipal sales and use taxes for any contract awarded, or any portion of a contract
which is revised, renegotiated, or otherwise altered on and after July 1, 2004, to the extent
that such revision, renegotiation, or alteration requires the purchase of additional tangible
personal property. If the “change order” or other revision does not require the purchase of
additional tangible personal property, however, the change will not cause the contract to
lose its exempt status. Items purchased after June 30, 2004, pursuant to a contract
awarded prior to July 1, 2004, will continue to be exempt for the remainder of the contract.
(Sections 40-2A-7(a)(5), 40-23-31, 40-23-83, 40-23-4(a)(10), 40-23-4(a)(11), 40-23-62(13),
40-23-1(a)(10), 40-23-60(5), and 40-9-33, Code of Alabama 1975) (Readopted through
APA effective October 1, 1982, amended November 12, 1997, amended March 27, 2001,
amended June 10, 2005, amended January 5, 2010)