Tax on Construction Materials

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Contractors are subject to sales tax for all projects and work within the Town. It's important to note that the Town of Breckenridge does not levy a use tax. Therefore, contractors obtaining building permits are not required to make use tax deposits during the permitting phase.

However, it's crucial to highlight that contractors conducting construction work on real property within the Town are not exempt from 2.50% Town sales tax. Depending on several factors, contractors could either be obligated to obtain licenses and collect Town sales tax, or they may be required to pay Town sales tax to a licensed vendor based on the nature of their activities.

The determination of whether a contractor is deemed a consumer or a retailer plays a significant role in their tax obligations. Under certain circumstances, contractors might need to pay sales tax to sellers on purchases they make. In other scenarios, contractors could be regarded as retailers and therefore must collect sales tax from their customers.

This communication aims to shed light on the following topics:

Qualification criteria for contractors

Tax treatment of purchases and sales made by contractors

Implications of contract terms on taxation

Sales tax licensing prerequisites for contractors

Application of Breckenridge sales tax to contractors

For contractors who secure permits, this means that sales tax should be remitted to vendors for all taxable materials. The tax rate applied to invoices will be contingent upon the delivery location. Materials brought to job sites within the Town of Breckenridge will incur the Town's sales tax of 2.5%, in addition to State, County, and special district taxes, if applicable. Conversely, materials obtained in another municipality would be subject to that municipality's tax rate. Incremental sales tax may be due if less than 2.50% municipal tax was paid in another jurisdiction prior to bringing the materials into the Town.

Contracts, whether involving subcontractors or suppliers for items like windows, concrete, construction materials, appliances, or furniture, are subject to Town taxation. Consequently, possessing a Town of Breckenridge business license is a requirement. As a property developer, it's important to factor in appropriate sales tax estimates in bids and invoices for such materials. These estimates must be remitted by the supplier to the Town of Breckenridge or the relevant municipality, based on the point of delivery.

It's crucial to note that this information extends to subcontractors and their suppliers, and it's the contractor's responsibility to ensure all relevant parties are informed.

Here are some resources in the Town Code to that contractors and subcontractors should be familiar with:

Chapter 1 of Title 3 of the Breckenridge Town Code outlines taxable transactions and provides a comprehensive list of construction materials (though not exhaustive). The Code further clarifies "engaged in business in the Town" to include offering services, selling, leasing, renting, delivering, or installing tangible personal property for use or consumption within the Town.

Chapter 1 of Title 8 of the Breckenridge Town Code, along with the 2006 Editions of the International Building Code and International Residential Code, necessitates the submission of certain information to the Town before issuing Certificates of Occupancy or Compliance. To aid compliance, we've developed the Supplier Verification Form. While it's not mandatory to use the form, you must provide the required information before obtaining your Certificate of Occupancy or Compliance.

The Supplier Verification Form serves to supply the Finance Division with the names, business addresses, and phone numbers of each contractor, subcontractor, and material supplier involved in the property for which the permit was granted. This information ensures adherence to business licensing and sales tax stipulations, maintaining a balanced business environment within the Town of Breckenridge. Failure to accurately provide this information contravenes Town Code and could lead to legal action.

The Tax Compliance Construction Guidance, which defines who is a contractor; tax implications for lump-sum and time and material contracts; tax exempt projects; tax treatments by type; and license requirements.

For any inquiries, you or your subcontractors/vendors can direct them to the Town's Revenue Services Administrator at WebsiteFinance@townofbreckenridge.com or by phone at 970-547-3193.

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