§ 31.13. Claims for exemptions.
(a) With the exception of the limited exemption set forth under subsections (h)—(k), a contractor may not claim an exemption upon his purchase of materials, supplies, equipment or parts which he installs so as to become a part of the real estate in conjunction with his construction activities. Thus, a contractor erecting a building, repairing a roof, replacing a door for a governmental agency, manufacturer, processor, public utility, school district, charitable or religious organization, and the like, shall pay tax upon the property which he consumes and is not entitled to use the exemption of the ultimate customer for whom he is performing the contract.
(b) Effective March 4, 1971, the exemption which a contractor has with respect to contracts with public utilities, manufacturers, and the like, has been limited. The exemption is limited to the purchase of property constituting equipment, machinery and parts thereof which the contractor, in conjunction with his contract, transfers to and is subsequently used directly by the public utility, manufacturer, processor, and the like. To qualify for exemption the equipment, machinery or parts thereof shall be used directly in the rendition of a public utility service, manufacturing operation, and the like, upon installation. The exemption applies whether or not the equipment, machinery or part thereof is affixed to the real estate. The following are examples of equipment to which the limited exemption applies:
(1) Coal conveyor systems, pulverizers, boilers, cooling towers, electrostatic precipitators, utility poles, transmission wire, transmission wire poles, transmission and substation equipment installed for public utilities or electric cooperatives.
(2) Sanitary sewer, not storm sewers, or water mains, manholes and covers, sewage treatment equipment, pumping equipment installed for public utilities, municipalities or municipal authorities.
(3) Machinery and equipment which act upon or convey the manufactured or processed product between the first and last production operation installed for manufacturers or processors. Machinery and equipment which act upon or convey dairy products between the point where raw milk enters the clarifier to the point the dairy product is bottled or capped, installed for a dairy.
(4) Silos which produce ensilage, hay and grain conveyor systems, irrigation pumps, pipe and fittings, water pumps and piping used to convey water to farm animals installed for a farmer.
(c) Notwithstanding any other procedure established by this section, a contractor, whether or not licensed with the Department for the collection and remission of sales tax, shall obtain a ‘‘Certification’’ from the exempt public utility, manufacturer or similar customer certifying that:
(1) The property will be resold or transferred to the exempt public utility, manufacturer, or the like.
(2) It constitutes machinery, equipment or parts thereof.
(3) Upon installation it will be directly used by the exempt customer in its public utility facilities, manufacturing operations, or the like. Attached to the ‘‘Certification’’ shall be a listing of the specific items of equipment, machinery or parts upon which the exempt customer claims an exemption.
(4) A sample copy of the required form for this ‘‘Certification’’ is as follows:
CERTIFICATION
(d) At the time the contractor makes purchase of the items for resale, he is required to tender a copy of the ‘‘Certification’’ to the supplier, upon which the supplier will mark the date filed, which the supplier will retain, together with a copy of the Department’s ‘‘Blanket Exemption Certificate’’ (Form REV-345), completed by the contractor setting forth on the face thereof the following language: ‘‘Property and/or services will be resold to (Name of Exempt Customer) pursuant to the Certificate executed by them and filed with you on (Date of Filing)’’.
(1) A sample copy of the required format is as follows:
BLANKET EXEMPTION CERTIFICATE
(2) The supplier shall retain the Blanket Exemption Certificate together with the ‘‘Certification’’ in his exemption certificate file to justify the tax free sale of the list of items filed with the certification. Contractors failing to follow this procedure may not make tax free purchases and are liable for tax upon the materials used in conjunction with their contracts.
(e) A contractor may make tax free purchases of property which he resells to exempt entities in conjunction with his construction activities. This exemption applies only to property furnished by the contractor which, upon installation, does not become a permanent part of the real estate. Examples of property which, upon installation, do not become part of the real estate are set forth in the definition of ‘‘sales activities’’ in § 31.11 (relating to definitions).
(f) A contractor who is licensed with the Department to collect and remit sales tax; that is, holds a sales tax license, may make tax free purchases of property which he will sell by tendering to his supplier a completed copy of a Blanket Exemption Certificate (Form REV-345). To qualify as a valid exemption certificate, the face side of the certificate must reflect the following language: ‘‘Property and/or services will be resold in the ordinary course of the purchaser’s business conducted under Pennsylvania Sales Tax License Number (Insert Number).’’
(1) A sample copy of the required format is as follows:
BLANKET EXEMPTION CERTIFICATE
(2) If the exempt customer to whom the property will be transferred holds a valid exemption; that is, a governmental agency, school district, and the like, applying to the property being transferred, the contractor shall obtain a completed copy of a Blanket Exemption Certificate (Form REV-345) from the exempt entity in lieu of the collection of tax. If the ultimate consumer does not hold an exemption, the contractor shall collect and remit the tax upon the contract price of the item or items including charges for delivering or installing the item under the contract.
(g) A contractor who is not licensed with the Department to collect and remit sales tax is not authorized to follow the normal procedure outlined in subsection (f) in making tax free purchases of property he will resell in conjunction with his construction activities. A contractor may not use a Use Tax License Number in making tax free purchases for resale. A Use Tax License Number is that number issued by the Department prefixed with the digits ‘‘89.’’
(h) When the ultimate customer is a governmental agency, school district, religious organization, or the like, the contractor not holding a sales tax license shall obtain a ‘‘Certification’’ from the exempt customer certifying the following:
(1) The property will be resold to the exempt customer.
(2) The basis for the exemptions.
(3) The property, upon installation, will not constitute an improvement to real estate but remain tangible personal property.
(i) Attached to the ‘‘Certification’’ shall be a listing of the specific items upon which the exempt customer claims an exemption.
(1) A sample copy of the required format for this ‘‘Certification’’ is as follows:
CERTIFICATION
(2) At the time the contractor purchases the items for resale, he shall tender a copy of the ‘‘Certification’’ to the supplier, upon which the supplier shall mark the date filed, which the supplier shall retain together with a copy of the Department’s ‘‘Blanket Exemption Certificate’’ (Form REV-345), completed by the contractor, setting forth on the face thereof the following language: ‘‘Property and/or services will be resold to (Name of Exempt Customer) pursuant to the Certification executed by them and filed with you on (Date of Filing).’’ A sample copy of the required format is as follows:
BLANKET EXEMPTION CERTIFICATE
(3) The supplier shall retain the Blanket Exemption Certificate together with the ‘‘Certification’’ in his exemption certificate file to justify the tax free sale of the list of items filed with the ‘‘Certificate.’’ Contractors failing to follow this procedure may not make tax free purchases. If the contractor fails to obtain a ‘‘Certification’’ and does not pay tax at the time of purchase, he shall be deemed to be the ultimate consumer of the property which he transfers and shall pay the applicable tax. A contractor’s failure to register shall make him liable for tax upon the installed value, including delivery, labor and installation costs, of the property not incorporated as part of the real estate.
(j) When the ultimate customer is not entitled to an exemption, the contractor shall be licensed with the Department either temporarily or permanently for the collection and remission of tax. Upon receipt of a temporary or permanent sales tax license number, he may purchase property for resale utilizing the procedure outlined in subsection (f). A temporary sales tax license number may be used for 90 days after issue by the Department and may be obtained from a District Sales Tax Office.
(k) A contractor may not use a use tax license number in making exempt purchases for resale. A contractor may not collect sales tax from his customer unless he has been issued a sales tax license number by the Department. A contractor making taxable sales of property not incorporated as part of the real estate shall be liable for the collection of tax upon the installed value including delivery, labor and installation costs of the property not incorporated as part of the real estate.
Source The provisions of this § 31.13 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.
Notes of Decisions This section recognizes sanitary sewer systems and water systems as public utility facilities for purposes of the statutory exemption for use sales tax purposes. Ernest Renda Contracting Co., Inc. v. Commonwealth, 532 A.2d 416, 419 (Pa. 1987).
For an exemption certificate to be valid on its face there must be ‘‘a listing of the specific items of equipment, machinery or parts upon which the exempt customer claims an exemption’’ attached to the certification. Ernest Renda Contracting Co., Inc. v. Commonwealth, 532 A.2d 416, 423 (Pa. 1987).
Cross References This section cited in 61 Pa. Code § 31.11 (relating to definitions); 61 Pa. Code § 46.3 (relating to construction contractor installing stained glass windows); 61 Pa. Code § 46.7 (relating to nonresident contractors); and 61 Pa. Code § 46.8 (relating to industrialized housing).
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