HB440 Alabama 2023 Session

Summary

Primary Sponsor

Joe LovvornRepresentative

Republican

Session

Regular Session 2023

Title

Relating to taxation and revenue; to provide for the 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 a building or other project for an entity statutorily exempt from paying sales and use taxes; and to provide for accounting for purchases and enforcement for violations.

Summary

HB440 would let the Department of Revenue issue sales tax exemption certificates to licensed contractors for building material purchases on projects for statutorily exempt entities, with required accounting, reporting, and penalties for misuse.

What This Bill Does

The Department of Revenue would issue exemption certificates to contractors and subcontractors working on projects for statutorily exempt entities. It defines what counts as a statutorily exempt entity and excludes governmental entities. Contractors must maintain cost accounting and file exemption purchase reports to renew certificates, and the department may assess taxes or penalties if exemptions aren’t properly documented, including civil penalties for intentional misuse and possible removal of exemption rights. Bids must show the tax savings, and the measure aims to lower administrative costs without changing how professional services are valued; the rules apply to contracts entered on or after January 1, 2024, not retroactively.

Who It Affects

• Contractors and subcontractors licensed by the State Licensing Board for General Contractors who work on projects for statutorily exempt entities; they would receive exemption certificates, must maintain cost accounting, and could face taxes or penalties if not properly reported.
• Statutorily exempt entities and the projects they fund or oversee; they would benefit from tax-exempt purchases of building materials, subject to the contractor’s compliance with reporting and accounting requirements.

Key Provisions

• Defines 'statutorily exempt entity' and excludes governmental entities from this exemption framework.
• The Department of Revenue shall issue an exemption certificate for each tax-exempt project and may grant certificates to licensed contractors or subcontractors for eligible purchases of building materials and supplies that become part of the exempt project.
• Use of the exemption certificate is limited to tangible personal property that becomes part of the structure; contractors must maintain accurate cost accounting of purchases and use.
• Contractors must file reports of all exempt purchases as a prerequisite to renewing the exemption certificate.
• The department may assess state/local sales or use taxes on items not properly accounted for, and civil penalties for intentional misuse (at least twice the tax due and not less than $2,000; possible removal of exemption for up to two years).
• The department may adopt rules to implement these provisions and ensure proper accounting and enforcement.
• Bid documents for tax-exempt projects must include accounting for the tax savings.
• The act aims to lower administrative costs without changing how professional services are valued, and it is not retroactive to contracts before January 1, 2024.
• The provisions become effective for contracts entered on or after January 1, 2024, with immediate effect upon passage and approval.

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