IDAPA 35.01.02.015 — WELL DRILLERS/PUMP INSTALLERS (RULE 015)

Sections 63-2410, 63-2423, 63-3609(a), 63-3621, 63-3615(b), 63-3622B, 63-3622D, 63-3622R, 63-3622W, Idaho
Code
01.
In General. This rule is meant to explain how Idaho sales and use tax applies to contractors who
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IDAPA 35.01.02
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Idaho Sales & Use Tax Administrative Rules
Section 015
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drill wells and install pumps. The general principles in Rule 012 and 014 of these rules apply to well drillers and
pump installers and should be reviewed along with this rule.
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02.
Types. The types of wells covered by this rule include, but are not limited to:
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a.
Water wells, including those for municipal, domestic, commercial, and industrial purposes, and
wells used for agricultural irrigation.
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b.
Monitor wells used to check for contamination or to find the water table.
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c.
Anode wells used to ground power or gas lines.
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d.
Construction wells used for pilings, shoring, and elevator hoists.
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03.
Contractor Improving Real Property. A well driller is a contractor improving real property. In
general, the contractor pays sales or use tax on materials and equipment they own and use or over which they exercise
right or power while performing a contract. The contractor should not charge sales tax on materials, such as casing,
pumps, screens, piping, etc., used to complete a well. Section 63-3609(a), Idaho Code, states that these materials are
consumed by the well driller. The contractor pays tax even if the owner of the material is exempt from the tax, such as
a government agency. Well drillers may be responsible for use tax on owner-supplied materials. See Rule 012 of this
rule. Exemptions are discussed in Subsection 015.05 of this rule. Pumps that are installed with a well, such as a pump
that supplies water to land or a building, are presumed to be real property improvements. Pumps that do not supply
water to land or buildings and are used in commercial or industrial applications will generally be considered personal
property unless they have been so integrated into the real estate that they would be considered a permanent fixture.
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a.
Example: A well driller contracts to drill a water well and install a pump for a homeowner. The
contractor bills the homeowner separately for materials and labor as well as the drill bits used. The contractor should
pay sales or use tax on his purchase of the materials and drill bits. The contractor should not charge sales tax to the
customer since this is a contract to improve real property.
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b.
Example: A well driller contracts to drill a well for an Idaho city. The contractor pays sales or use
tax on the materials and pumps used to complete the well, even though the eventual owner of these items is a
governmental entity. See Rule 094 of these rules.
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04.
Exemptions. In some cases, exemptions may apply to materials installed by well drillers and pump
installers. Note: These exemptions apply only to project materials and not to construction equipment and supplies,
such as drilling rigs and drill bits. If a well driller or pump installer makes exempt purchases, he must complete an
exemption certificate for the vendor's records.
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a.
Materials installed in a well which will be used primarily for agricultural irrigation are exempt
under Section 63-3622W, Idaho Code. The exemption applies even if the materials become part of the real property.
Agricultural irrigation includes supplying water to crops, livestock, and fish which are produced for resale. (3-31-22)
b.
Pumps and other equipment used directly in manufacturing or processing are exempt under Section
63-3622D, Idaho Code. Generally, such pumps retain the characteristics of personal property. This exemption applies
only to tangible personal property. It does not apply to materials which will become part of real property. Examples
include: pumps used directly in food processing; booster pumps and chlorine pumps used directly in manufacturing;
and dairy waste pumps.
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05.
Motor Vehicles. In general, drilling rigs and licensed motor vehicles are taxable when purchased
by a well driller or pump installer. However, if a vehicle weighs more than twenty-six thousand (26,000) pounds, is
used more than ten percent (10%) of the time outside of Idaho, and is registered under the International Registration
Plan or similar pro rata plan, its purchase is exempt. See Rule 101 of these rules. This exemption does not apply to
repair parts for motor vehicles, or to drilling rigs purchased separately from a motor vehicle.
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06.
Fuel. Motor fuel taxes do not apply, or a refund may be obtained, if the fuel is used to run drilling
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IDAPA 35.01.02
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Section 016
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rigs or other off-road equipment. Fuel purchased for such off-highway use is taxable. See Sections 63-2410 and 63-
2423, Idaho Code, and related IDAPA 35.01.05, "Idaho Motor Fuels Tax Rules."
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