Governor Signs Construction Materials Tax-Exemption Bill

It is a victory 15 years in the making. On Wednesday, Gov. Scott Walker signed Senate Bill 227 (SB 227) into law. This new law will allow contractors to directly purchase construction materials on behalf of their tax-exempt clients without paying the sales tax.

The law’s effective date will be January 1, 2016. ABC of Wisconsin and its members have long argued that the system before SB 227 was unnecessarily burdensome, and it caused supposedly tax exempt entities to indirectly bear additional unnecessary costs.

Previously, sales tax exempt project owners could avoid the tax if they purchased the materials for the builder.

Over the next two weeks, ABC of Wisconsin will be producing a guidance document to help its members take advantage of the change in the law. Until then, here is some high level information.

The tax exempt pass through will apply to any building, shelter, parking lot, parking garage, athletic field, athletic park, storm sewer, water supply system, or sewerage and waste water treatment facility constructed for:

• Any county, city, village, town or school district in this state.
• A sewerage commission, metropolitan sewerage district, or joint local water authority.
•  Any corporation, community chest fund, foundation or association organized and operated exclusively for religious, charitable, scientific or educational purposes, or for the prevention of cruelty to children or animals, except hospital service insurance, no part of the net income of which insures to the benefit of any private stockholder, shareholder, member or corporation.
• A county−city hospital.

Project owners not covered by the new law:

• The State of Wisconsin or any agency thereof, the University of Wisconsin Hospitals and Clinics Authority, the Wisconsin Aerospace Authority, the Wisconsin Economic Development Corporation, and the Fox River Navigational System Authority.
• Any other unit of government in this state or any agency or instrumentality of one or more units of government in this state.
• Any federally recognized American Indian tribe or band in this state.
• A local exposition district. A local cultural arts district. A cemetery company or corporation described under section 501 (c) (13) of the Internal Revenue Code, if the tangible personal property or taxable services are used exclusively by the cemetery company or corporation for the purposes of the company or corporation.

Highways, streets or roads will be exempt from the new law regardless of the project owner.

If you have any questions please call ABC at 608-244-5883 or 800-236-2224.

by John Schulze
Government Affairs Director, ABC of Wisconsin