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Materialmen who make qualified sales to contractors may be able to postpone payment of the sales tax until they receive payment from the contractor. This bulletin explains:
A materialman is any person or business that sells any of the following to a property owner, contractor, subcontractor, or repairman to be used for the improvement of real property:
Common examples of materialmen include hardware stores, building supply companies, and home improvement stores.
To qualify for the pay-when-paid option, a seller must:
In addition, to qualify for the pay-when-paid option, a sale must be made on credit granted by the seller. Payments made with cash or sales financed by a third-party, where credit is not extended by the seller to the purchaser (e.g., purchases made using a private label credit card), do not qualify for the pay-when-paid option. Sales tax must be collected on those types of sales at the time of the sale and remitted with the sales and use tax return filed for that reporting period.
Qualifying sellers must submit Form ST-112, Annual Application for a Materialman to Remit Sales Tax Under the Pay-When-Paid Option, by June 1 of each year.
Under the pay-when-paid option, a materialman must report qualifying sales as gross sales (not taxable sales) on the tax return covering the period in which the sale is made. The sales are then reported as taxable sales for the period when the materialman receives payment. In all cases, the tax must be remitted within one year of the date of sale, whether or not payment is received from the purchaser.
When the return is filed and the tax due is remitted, tax is computed at the rate in effect at the time the sale was made. If the sales tax rate changes in the applicable locality after the sale, the materialman must file a paper sales tax return for the current quarter and will have to manually enter the:
For additional information, see TSB-M-99(2)S, Materialmen - Pay When Paid.
Example: In August, a supplier sells building materials for $30,000 to a contractor in Albany County. The supplier bills the contractor $32,400 ($30,000 for materials, plus $2,400 for the 8% sales tax). The contractor agrees to pay the supplier when the house is sold. The house is sold in November of the same year, and the contractor pays the supplier the amount owed of $32,400.
The supplier reports the $30,000 sale as a gross sale on the quarterly sales and use tax return filed for the period ending August 31, and not as a taxable sale. The supplier reports the payment as a taxable sale on the quarterly return for the period ending November 30.
Example: In March, a supplier sells building materials for $20,000 to a contractor in Albany County. The supplier bills the contractor $21,600 ($20,000 for materials, plus $1,600 for the 8% sales tax). The contractor agrees to make payments each month of $5,400, during April, May, June, and July.
The supplier reports the $20,000 sale as a gross sale on the quarterly sales and use tax return filed for the period ending May 31. The supplier reports $10,000 as a taxable sale on the return for the period ending May 31. The supplier reports the total for June and July ($10,000) as a taxable sale on the quarterly return ending August 31.
If the supplier files monthly returns, $5,000 in taxable sales would be reported on each monthly return filed for the months of April, May, June, and July.
If a receivable from a qualifying sale is determined to be uncollectible for federal income tax purposes, the materialman may apply for a refund or credit of the tax paid on the uncollectible amount (e.g., if an account becomes uncollectible after one year from the date of the sale and the materialman has paid the tax due as required). The materialman must apply for the refund or credit within three years from the date the tax was payable to the Tax Department, or two years from the date the tax was paid, by filing Form AU-11, Application for Credit or Refund of Sales or Use Tax. For additional information, see Tax Bulletin How to Apply for a Refund of Sales and Use Tax (TB-ST-350).
In addition to the recordkeeping requirements for all sales tax vendors, materialmen using the pay-when-paid option must keep the following records for each sale of building materials or services to a contractor:
For additional information, see Tax Bulletin Recordkeeping Requirements for Sales Tax Vendors (TB-ST-770).
Tax Law: Sections 1132(a)(2); 1135(f)
Publication 20, New York State Tax Guide for New Businesses
Publication 750, A Guide to Sales Tax in New York State
Publication 900, Important Information for Business Owners
TSB-M-99(2)S, Materialmen - Pay When Paid
How to Apply for a Refund of Sales and Use Tax (TB-ST-350)
Recordkeeping Requirements for Sales Tax Vendors (TB-ST-770)