Sales Tax Exemption for Church Construction Projects: Understanding Contractor and Supplier Responsibilities

Understanding sales tax exemptions in church construction projects is crucial for contractors and suppliers. This guide outlines key responsibilities and precautions to ensure compliance with state regulations.

Last Reviewed: January 8, 2025

In many states, sales of construction materials to contractors are exempt from sales tax if the materials are used in church construction projects. To qualify, contractors typically must obtain an exemption certificate or number from the church and present it to the supplier.

Case Study: Hess, Inc. v. Department of Revenue

In Hess, Inc. v. Department of Revenue, 663 N.E.2d 123 (Ill. App. 1996), a contractor purchased materials for a church construction project and presented the church’s exemption certificate to the supplier, who then did not charge sales tax. Upon audit, the state revenue department claimed the supplier owed sales tax, arguing that suppliers cannot solely rely on exemption certificates and must verify the actual use of materials. The Illinois Appellate Court rejected this claim, ruling that suppliers are entitled to rely on valid exemption certificates without further verification.

Source: Leagle

Implications for Church Treasurers

To ensure compliance with sales tax exemptions in church construction projects:

  1. Maintain Current Exemptions: Ensure your church’s sales tax exemption is active and renewed as required by state law to avoid unexpected liabilities.
  2. Clarify Contractual Obligations: When entering contracts for goods or services, explicitly state the church’s tax-exempt status and outline responsibilities for any potential sales tax assessments due to non-compliance.

Conclusion

Understanding and properly managing sales tax exemptions in church construction projects is essential for compliance and financial stewardship. By maintaining current exemption certificates and clearly defining tax responsibilities in contracts, churches, contractors, and suppliers can navigate these exemptions effectively.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
ChatGP4o, Team Gloo Workspace

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

ajax-loader-largecaret-downcloseHamburger Menuicon_amazonApple PodcastsBio Iconicon_cards_grid_caretChild Abuse Reporting Laws by State IconChurchSalary Iconicon_facebookGoogle Podcastsicon_instagramLegal Library IconLegal Library Iconicon_linkedinLock IconMegaphone IconOnline Learning IconPodcast IconRecent Legal Developments IconRecommended Reading IconRSS IconSubmiticon_select-arrowSpotify IconAlaska State MapAlabama State MapArkansas State MapArizona State MapCalifornia State MapColorado State MapConnecticut State MapWashington DC State MapDelaware State MapFederal MapFlorida State MapGeorgia State MapHawaii State MapIowa State MapIdaho State MapIllinois State MapIndiana State MapKansas State MapKentucky State MapLouisiana State MapMassachusetts State MapMaryland State MapMaine State MapMichigan State MapMinnesota State MapMissouri State MapMississippi State MapMontana State MapMulti State MapNorth Carolina State MapNorth Dakota State MapNebraska State MapNew Hampshire State MapNew Jersey State MapNew Mexico IconNevada State MapNew York State MapOhio State MapOklahoma State MapOregon State MapPennsylvania State MapRhode Island State MapSouth Carolina State MapSouth Dakota State MapTennessee State MapTexas State MapUtah State MapVirginia State MapVermont State MapWashington State MapWisconsin State MapWest Virginia State MapWyoming State IconShopping Cart IconTax Calendar Iconicon_twitteryoutubepauseplay
caret-downclosefacebook-squarehamburgerinstagram-squarelinkedin-squarepauseplaytwitter-square