HB340 Alabama 2021 Session

Summary

Primary Sponsor

David FaulknerRepresentative

Republican

Session

Regular Session 2021

Title

Sales and use tax, construction contracts for highways, roads, and bridges, Revenue Dept., issuance of exemption certificates if gov't entity contracting is tax exempt, Sec. 40-9-14.1 am'd.

Summary

HB340 expands sales tax exemption certificates for government construction projects to include highway, road, and bridge contracts entered into after January 1, 2022.

What This Bill Does

The bill requires the Department of Revenue to issue exemption certificates to governmental entities for tax-exempt projects and to contractors/subcontractors for purchases of construction materials that become part of the project, now including highway-related contracts started after 2022. Contractors must maintain cost records for exempt purchases and file required reports as a condition of renewing exemptions. It creates penalties for misuse or improper reporting, allows the department to adopt implementing rules, and aims to reduce administrative costs on public works projects; it also clarifies the timing and applicability for different contract types.

Who It Affects

• Governmental entities (state, counties, municipalities, authorities, and educational institutions) that undertake construction projects and will obtain exemption certificates for materials used in those projects (including highways after 2022).
• Contractors and subcontractors (licensed general contractors and their subs) who purchase building and construction materials to be used in government projects and must use and report exemptions properly.

Key Provisions

• Expands the exemption to include contracts for the construction of highways, roads, or bridges entered into after January 1, 2022.
• The Department of Revenue must issue exemption certificates to governmental entities for tax-exempt projects and grant exemption certificates to contractors/subcontractors for eligible purchases that become part of the project.
• Exemption applies to tangible personal property that becomes part of the structure; contractors must maintain accurate cost accounting for exempt purchases.
• Contractors must file reports of exempt purchases as a prerequisite to renewing their exemption certificates.
• Misuse or improper accounting may trigger state/local tax assessments and civil penalties (at least $2,000 or twice the tax due) and potentially bar exemption use for up to two years.
• The department may adopt rules to implement the section; bid forms must include accounting for tax savings.
• The act becomes effective October 1, 2021; it applies to contracts entered into after January 1, 2022 for highways/roads/bridges and has specific dates regarding prior contracts and applicability.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Sales and Use Tax