Current through Register Vol. 42, No. 11, August 30, 2024
(1) The
Alabama Supreme Court has interpreted the language relative to modular
buildings in Sections
40-23-1(a)(10) and
40-23-60(5),
Code of Ala. 1975, as "designed to make the sale of
materials going into the construction of such buildings subject to the tax and
to exempt the sale of the building itself" from sales or use tax. This
interpretation places "modular building components on a par with conventional
building materials" and makes "the sale of all building materials, modular or
otherwise, sales at retail." The attachment of the building components or units
to realty and the subsequent sale of the components or units as a completed
building is not treated as a taxable transaction. In making this
interpretation, the Supreme Court ruled that use tax is due on modular building
units manufactured by an out-of-state manufacturer and sold by the manufacturer
to a contractor who attached the units to realty in Alabama. The measure of the
use tax is the manufacturer's selling price of the modular units. (Boswell v.
Alcoa Construction Systems, Inc., 368 So. 2d 18 (S. Ct.1979)).
(2) Sales tax is due on modular building
components or units manufactured in Alabama as follows:
(a) An instate builder or manufacturer of
modular building components or units who builds or manufactures the components
or units for resale in the form of tangible personal property to persons who
affix them to realty, shall obtain a sales tax license and purchase all
building materials, fixtures and other equipment becoming part of the modular
building components or units without payment of sales or use tax to the
suppliers. The builder or manufacturer of the modular building components or
units shall (i) collect sales tax on any retail sales of the components or
units sold in Alabama measured by the selling price of the components or units
and (ii) report and pay the sales tax to the Department of Revenue on those
retail sales.
(b) In the event an
instate builder or manufacturer of modular building components or units, who
has obtained a sales tax license pursuant to paragraph (2)(a), also contracts
to affix modular building components or units to realty either inside or
outside Alabama, the builder or manufacturer shall be liable for sales tax
computed on the cost price of the materials withdrawn from inventory and used
to build or manufacture the components or units which the builder or
manufacturer affixes to realty pursuant to the contract.
(3) Use tax is due on modular building
components or units as follows:
(a)
Out-of-state builders or manufacturers of modular building components or units,
who do not have a place of business in Alabama but for whose business
sufficient nexus exists, shall (i) register to collect sellers use tax on their
Alabama sales of modular building components or units which are sold in the
form of tangible personal property to persons who affix them to realty and (ii)
report and pay the tax to the Department of Revenue on their Alabama sales. The
measure of the sellers use tax is the selling price of the components or units.
Purchases of modular building components or units from
out-of-state builders or manufacturers who are not registered to collect
sellers use tax are subject to consumers use tax.
Consumers use tax should be computed and paid by the purchaser
measured by the purchase price of the components or units. (Section
40-23-60(5)).
(b) An out-of-state
builder or manufacturer of modular building components or units, who contracts
to affix modular building components or units to realty inside Alabama, is
liable for consumers use tax computed on the cost price of the materials
incorporated into the components or units which the builder or manufacturer
affixes to realty in Alabama pursuant to the contract. Credit for legally
imposed sales and use taxes paid to any other state or its subdivisions will be
allowed against the Alabama use tax due as outlined in Rule
810-6-5-.04.
(Sections
40-23-60(5) and
40-27-1,
Article V.1,
Code of Ala. 1975).
Author: Patricia Estes and Dan
DeVaughn
Statutory Authority:
Code of Ala.
1975, §§
40-2A-7(a)(5),
40-23-1(a)(10),
40-23-31,
40-23-60(5),
40-23-83,
and
40-27-1.
