Sales tax exemption on city construction projects
For those who havent encountered this hidden issue here is a summary:
Materials used in city public construction projects are exempt from sales tax. The competitive bidding act allows a city to appoint a purchasing agent to purchase materials for a public project. The gliche comes in where the project is being let in the name of a public trust since the tax commission takes the position that a public trust cannot appoint a purchasing agent and all materials must be invoiced to and paid for by public trust. The easy solution seems to be to avoid issuing public construction projects in the name of the City instead of the trust. Here is the OTC rule that causes this problem:
A tax commission audit could cause an assessment to the trust or the contractor if the rule is not followed.
710:65-13-550. Trust authority transactions
(a) Trust authorities organized pursuant to 60 O.S. § 176 et seq. may purchase material exempt from sales tax, but may not appoint an agent to do so. In order for the transaction to be exempt from sales tax, the purchase must be invoiced to and paid for by the authority, using authority funds or revenue received from bonds let by the authority.
(b) Purchases made with flow-thru funds are taxable. Flow-thru funds are defined as monies deposited in a trust authority account, by private industry, with the authority to dispense the funds under the trust's own name. [See: 68 O.S. § 1356]
(c) The amount of proceeds received from the sale of admission tickets which is separately- stated on the ticket of admission, for the repayment of money borrowed by any public trust of which a county in this state is the beneficiary, for purposes set out in 68 O.S. § 1356(8), is not taxable.
(d) The amount of any surcharge, separately stated on an admission ticket, which is imposed, collected, and used for the sole purpose of constructing, remodeling, or enlarging facilities of a public trust having a municipality or county as its sole beneficiary is exempt from sales tax.
(e) Application for exemption is made by submitting to the Taxpayer Assistance Division, Oklahoma Tax Commission, 2501 Lincoln Blvd., Oklahoma City, OK 73194, a completed Form 13-16-A, contained in Packet E available telephonically at (405) 521-3160 or online at www.tax.ok.gov along with the enabling document for the Trust or Authority showing organization under 60 O.S. § 176 et.seq.
CONFIDENTIALITY NOTE: This transmission is protected by the Electronic Communications Privacy Act, 18 U.S.C. Sections 2510-2521 and intended to be delivered only to the named addressee(s) This e-mail message is intended only for the personal use of the recipient(s) named above. This message is or may be an attorney-client communication and as such privileged and confidential. If you are not an intended recipient, you may not review, copy or distribute this message. If you have received this communication in error, please notify us immediately by e-mail and delete the original message.
s/ David A. Davis
LAW OFFICE OF DAVID A. DAVIS
4312 N. Classen Blvd.
OKLAHOMA CITY, OK 73118
405 840-6353
405 557-0777 (FAX)
ddavislaw@live.commailto:ddavislaw@live.com
correction the earlier email should have said avoid issuing contracts in name of trust and issue in name of city.
CONFIDENTIALITY NOTE: This transmission is protected by the Electronic Communications Privacy Act, 18 U.S.C. Sections 2510-2521 and intended to be delivered only to the named addressee(s) This e-mail message is intended only for the personal use of the recipient(s) named above. This message is or may be an attorney-client communication and as such privileged and confidential. If you are not an intended recipient, you may not review, copy or distribute this message. If you have received this communication in error, please notify us immediately by e-mail and delete the original message.
s/ David A. Davis
LAW OFFICE OF DAVID A. DAVIS
4312 N. Classen Blvd.
OKLAHOMA CITY, OK 73118
405 840-6353
405 557-0777 (FAX)
ddavislaw@live.commailto:ddavislaw@live.com
From: Oama oama-bounces@lists.imla.org on behalf of david davis ddavislaw@live.com
Sent: Thursday, January 30, 2020 1:16 PM
To: oama@lists.imla.org oama@lists.imla.org
Subject: [Oama] Sales tax exemption on city construction projects
For those who havent encountered this hidden issue here is a summary:
Materials used in city public construction projects are exempt from sales tax. The competitive bidding act allows a city to appoint a purchasing agent to purchase materials for a public project. The gliche comes in where the project is being let in the name of a public trust since the tax commission takes the position that a public trust cannot appoint a purchasing agent and all materials must be invoiced to and paid for by public trust. The easy solution seems to be to avoid issuing public construction projects in the name of the City instead of the trust. Here is the OTC rule that causes this problem:
A tax commission audit could cause an assessment to the trust or the contractor if the rule is not followed.
710:65-13-550. Trust authority transactions
(a) Trust authorities organized pursuant to 60 O.S. § 176 et seq. may purchase material exempt from sales tax, but may not appoint an agent to do so. In order for the transaction to be exempt from sales tax, the purchase must be invoiced to and paid for by the authority, using authority funds or revenue received from bonds let by the authority.
(b) Purchases made with flow-thru funds are taxable. Flow-thru funds are defined as monies deposited in a trust authority account, by private industry, with the authority to dispense the funds under the trust's own name. [See: 68 O.S. § 1356]
(c) The amount of proceeds received from the sale of admission tickets which is separately- stated on the ticket of admission, for the repayment of money borrowed by any public trust of which a county in this state is the beneficiary, for purposes set out in 68 O.S. § 1356(8), is not taxable.
(d) The amount of any surcharge, separately stated on an admission ticket, which is imposed, collected, and used for the sole purpose of constructing, remodeling, or enlarging facilities of a public trust having a municipality or county as its sole beneficiary is exempt from sales tax.
(e) Application for exemption is made by submitting to the Taxpayer Assistance Division, Oklahoma Tax Commission, 2501 Lincoln Blvd., Oklahoma City, OK 73194, a completed Form 13-16-A, contained in Packet E available telephonically at (405) 521-3160 or online at www.tax.ok.gov along with the enabling document for the Trust or Authority showing organization under 60 O.S. § 176 et.seq.
CONFIDENTIALITY NOTE: This transmission is protected by the Electronic Communications Privacy Act, 18 U.S.C. Sections 2510-2521 and intended to be delivered only to the named addressee(s) This e-mail message is intended only for the personal use of the recipient(s) named above. This message is or may be an attorney-client communication and as such privileged and confidential. If you are not an intended recipient, you may not review, copy or distribute this message. If you have received this communication in error, please notify us immediately by e-mail and delete the original message.
s/ David A. Davis
LAW OFFICE OF DAVID A. DAVIS
4312 N. Classen Blvd.
OKLAHOMA CITY, OK 73118
405 840-6353
405 557-0777 (FAX)
ddavislaw@live.commailto:ddavislaw@live.com