Must construction contractors collect sales tax?

Sales tax is not collected from a customer when a construction contractor incorporates taxable items into real estate under a construction contract. In this case, the construction contractor is considered the end user of the items permanently incorporated into real estate and must either pay tax on the cost price of these items directly to the supplier or remit the tax directly to the department.

Sales tax is collected from a customer when a construction contractor sells taxable items over the counter because these are retail sales. See Illinois Administrative Code, Title 86, Sections 130.1940 and 130.2075.

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