Procedure when a tax is not paid on construction material when purchased by contractor

Sec. 22. (a) A contractor may purchase construction material exempt from the state gross retail tax only if he issues either an exemption

certificate or a direct pay certificate to the seller at the time of purchase.

(b) A contractor, who purchases construction material exempt from the state gross retail tax or otherwise acquires construction material

"tax-free", is accountable to the Department of Revenue for the state gross retail tax when he disposes of such property unless the ultimate recipient

could have purchased it exempt (see 6-2.5-5 [45 IAC 2.2-5]).

(c) A contractor has the burden of proof to establish exempt sale or use when construction material, which was acquired "tax-free", is not

subject to either the state gross retail tax or use tax upon disposition.

(d) Disposition subject to the state gross retail tax. A contractor-retail merchant has the responsibility to collect the state gross retail tax

and to remit such tax to the Department of Revenue whenever he disposes of any construction material in the following manner:

(1) Time and material contract. He converts the construction material into realty on land he does not own and states separately the

cost for the construction materials and the cost for the labor and other charges (only the gross proceeds from the sale of the construction material

are subject to tax); or

(2) Construction material sold over-the-counter. Over the counter sales of construction materials will be treated as exempt from the

state gross retail tax only if the contractor receives a valid exemption certificate issued by the person for whom the construction is being performed

or by the customer who purchases over-the-counter, or a direct pay permit issued by the customer who purchases over-the-

counter.

(e) Disposition subject to the use tax. With respect to construction material a contractor acquired tax-free, the contractor is liable for the

use tax and must remit such tax (measured on the purchase price) to the Department of Revenue when he disposes of such property in the following

manner:

(1) He converts the construction material into realty on land he owns and then sells the improved real estate;

(2) He utilizes the construction material for his own benefit; or

(3) Lump sum contract. He converts the construction material into realty on land he does not own pursuant to a contract that includes

all elements of cost in the total contract price.

A disposition under C. [subsection (e)(3) of this section] will be exempt from the use tax if the contractor received a valid exemption

certificate from the ultimate purchases (purchaser) or recipient of the construction material (as converted), provided such person could have initially

purchased such property exempt from the state gross retail tax.