Rules & Regulations of the State of Tennessee
Title 1320 - Revenue
Subtitle 1320-04 - Miscellaneous Tax Division
Chapter 1320-04-05 - Business Tax Rules and Regulations
Section 1320-04-05-.09 - CONSTRUCTION CONTRACTORS AND EXTERMINATORS

(1) Contractors, as defined at T.C.A. § 67-4-708, Classification 4, shall be liable for business tax regardless of whether the contract is on a lump sum or cost-plus basis.

(2) A contractor shall pay tax under Classification 4 of the Business Tax Act upon all receipts without any deductions except as specifically provided. Tax is due upon all progress payment charges billed pursuant to the contract and received by the contractor and any charges for renting or leasing equipment to others for use in constructing, or making improvements or additions, or repairing buildings or other structures on real property when the equipment is operated by the lessor. Additionally, tax is due at the end of the contract period on the difference between the progress payment charges as billed and the payments received by the contractor. Amounts actually paid during the business tax period to subcontractors or other persons for the services enumerated in T.C.A. § 67-4-711(a)(5) may be deducted provided the contractor adequately identifies such persons by supplying the names and addresses of the subcontractors or other persons and the amounts subcontracted. For contracts issued on or after October 1, 2009, the contractor may deduct only amounts paid to a subcontractor holding a business license or who is licensed by the state board for licensing contractors for work described in T.C.A. § 67-4-708(4)(A) and must also supply the subcontractor's business license or license number issued by the board for licensing contractors. The contractor must maintain in its books and records a copy of the subcontractor's business license or contractor's license.

(3) A contractor shall obtain a license from the appropriate local officer and shall be liable for the initial business license fee in each county and/or municipality in which he receives more than $50,000 from contracts during any taxable period. The contractor must also file a business tax return and pay the business tax on such receipts for each such location. A contractor shall also obtain a license and shall be liable for the initial business license fee in the county and/or municipality in which his business is located and will pay business tax on his gross receipts derived in the state, less any amounts reported for counties and/or municipalities in which his contracts exceed $50,000, during any taxable period. If a contractor does not have a domicile or place of business in the state, he will not owe the tax imposed by T.C.A. § 67-4-705 in a particular jurisdiction if his total receipts from contracts performed in that jurisdiction are less than $50,000 during any taxable period. "Receipts" used herein mean taxable receipts.

(4) Sales of tangible personal property and services to a contractor who in the course of performing his contract installs the property as a component part of an addition or improvement to or repair of real property are sales to a user and a consumer, and such sales are considered retail sales unless the sales are exempt by specific provisions of the Business Tax Act and rules and regulations construing the Act.

(5) If a contract is performed within the jurisdiction of more than one (1) governmental entity, any business tax on receipts due shall be attributed to each such governmental entity proportionately based upon the amount of work actually performed within each governmental entity.