Improvements Made to Reseller Permit

AGC successfully lobbied for improvements to the reseller permit laws making them more practical for contractors.

One of the changes allows the Department of Revenue to issue permits for a two-year period to contractors rather than the current requirement for one-year permits. While that’s a positive step it is not scheduled to take effect until July 1 2013. The legislation allows the Department of Revenue to implement the change earlier and AGC is working with DOR to move this date up.

Another important change allows contractors to use a two-year (rather than one-year) “look back” in determining whether their market mix of construction activities meets the 25 percent threshold to qualify for the permit.

This is important because if a contractor’s total dollar amount of business activity drops below 25 percent of taxable construction issuance of a seller’s permit is jeopardized. Use of a 12 month “look back” in calculating market-sector activity in determining the 25 percent taxable activity threshold could be problematic for contractors and the Department when economic conditions cause many contractors to perform a greater proportion of their business as projects for government agencies which aren’t subject to sales tax. This makes achieving the 25 percent threshold more difficult than normal. As the economy improves these contractors’ mix of business will fluctuate gravitating more to a normal mix of private sector and government projects. Calculating future permit eligibility based on 12 months of non-qualifying construction activity will make achieving the 25 percent threshold more difficult resulting in more requests for special permit handling and appeals of permit denials or requiring contractors to pay sales tax “up front” and then try to get a refund from the state.

The legislation also eases the renewal process allowing for automatic renewal if there are no problems in the previous period. Plus the definition of “contractor” is more uniformly tied to the definitions found in the familiar Contractor Registration laws.

These new provisions (except for the two-year permit) take effect July 1 2010. The Department must adopt new rules to implement them and it indicates that rulemaking will begin in June. AGC will be at the table and participating including making a push for an earlier start date for the two-year permits.

In addition DOR has created a new tool for verifying customers’ reseller permit information. The new Reseller Permit Verification Service allows checks to see if customers’ hold valid reseller permits. It also makes it easier to update records. After a compatible file is submitted the Department will return current information about all customers’ reseller permits. As of June 10 2010 you may store files returned from our Reseller Permit Verification Service in lieu of paper or electronic permit copies.

How it works: Create and submit a compatible electronic file with your customers’ reseller permit information. DOR sends you an email with a link to your files – a results file and an error file – within two business days. With the returned file you may correct data-entry errors and contact customers if they are required to provide you with updated permit information.

For audit purposes keep permits resale certificates and returned verification files in your records for five years after the date of last use.

For more information on the reseller permit click this page on the DOR website.