Iowa Department of Revenue explains how construction contracts, contractor classifications and materials are taxed

The Iowa Department of Revenue presenters at an Iowa SourceLink webinar laid out how construction contracts, contractor classifications, and building materials are treated for Iowa sales and use tax purposes, with examples for electrical work, carpeting, manufacturers, and grain bins.

"Construction contract is an agreement between a contractor and a supplier, wherein the contractor agrees to provide labor, materials, and supplies, and equipment to build a structure for the sponsor," Matt said, defining the term the department uses to identify exempt construction services. He and other presenters explained that services and labor connected with new construction, reconstruction, alteration or remodeling are generally not subject to sales tax when performed as part of a construction contract; instead, the contractor is treated as the consumer of materials and pays sales or use tax when purchasing those materials.

Why this matters: whether work is characterized as "new…