On Tuesday, April 9, the House passed a bill sponsored by Representative Paul DeMarco (among others) and championed by the Associated Builders & Contractors. The proposed legislation covers construction projects involving governmental entities exempt from sales/use taxes. The bill would change existing law, which is itself the result of the 2004 repeal of the so-called Government Contractor Exemption Act, Ala. Code § 40-9-33. Current law requires that (1) the prime contractor and subcontractors be appointed in writing as the purchasing agents of the government entity and (2) only the government owner’s funds be used to purchase the construction materials subject to the exemption. Suffice to say, administrative nightmares and cash flow problems abound with the current process. So do financially devastating traps for the unwary contractor or subcontractor.

The bill would essentially be a return to the pre-2004 conditions, allowing the Alabama Department of Revenue to grant certificates of exemption from sales and use taxes to contractors and subcontractors licensed by the State Licensing Board for General Contractors for the purchase of building materials and construction materials to be used in the construction of most government projects (not including a highway, road, or bridge project). The bill would provide for the accounting for purchases and for strict enforcement of violations. We commend Commissioner of Revenue Julie Magee and her staff for working with the contractor community on this long-awaited legislation.