The West Virginia State Tax Department recently revised Publication TSD-310, The Capital Improvement Rule: Sales and Use Tax and the Construction Trades. The update reflects the Department’s guidance on special rules for contractors performing construction contracts with entities in industries where an exemption is allowed. The Department also gives direction on the taxability of services performed by construction managers on projects in West Virgina.
Construction contractors may utilize an exemption on certain purchases when performing construction services contracts for certain businesses or organizations. Contracts with entities in the following industries may be eligible for the exemption: manufacturers, transportation companies, utilities, public utilities, producers of natural resources and nonprofit youth organizations chartered by Congress and having an established area of at least 6,000 acres in West Virginia. The exemption is limited to tangible personal property that remains at the site after construction has been completed.
West Virginia defines a construction manager as, “a person who enters into an agreement on a fee basis to act between the owner of the project and the various contractors who are hired and paid directly by the owner. As to such project, a construction manager is neither a prime contractor, a general contractor, a specialty contractor, a subcontractor nor any other kind of contractor.” Reg. Sec. 110-15-107.3.8. When a project results in a capital improvement, most services provided by construction managers are not subject to tax. Services not considered contracting and therefore taxable include: acquiring land or real property, acquiring equipment that does not become part of a capital improvement, services related to financing, bonds and insurance.
See Publication TSD-310 for full details and West Virginia’s sales tax treatment of construction contractors.
If you have any questions regarding this article please feel free to contact your Schneider Downs state and local tax practitioner.
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