Interim guidance statement regarding concrete pumping service providers

August 30, 2019

Purpose

The Department of Revenue (“Department”) is issuing this interim guidance statement to clarify the tax treatment of concrete pumping services.

Background

WAC 458-20-211 (Rule 211) provides that concrete pumpers providing a concrete pump and operator to pump concrete are subject to the retailing B&O and retail sales tax. However, the Department’s industry guide also indicates that concrete pumping services are considered construction services. This interim guidance statement is intended to clarify the tax treatment of certain concrete pumping services.

Frequently, concrete pumping services are sold as a separate service and do not include the provision of materials (concrete). Customers, such as construction contractors, will purchase concrete from another vendor who delivers the material to a job site in a ready-mix concrete truck (cement mixer).

The mixer discharges the ready mixed concrete into the bay of the concrete pumping truck, and the concrete pumping service provider provides the use of the concrete pumping equipment with an operator. The equipment is used to distribute and place concrete to customer specification. Generally, concrete pumping trucks include a powerful pump attached to the truck, with an extendable, sectioned hose, or cylinder, and cylinder frame. The concrete pumping truck requires a trained and knowledgeable operator to ensure the equipment functions properly.

Scope of guidance

This interim guidance statement addresses a number of topics in separate sections as follows:

• Section 1 – Tax treatment of sales transactions of stand-alone concrete pumping services that include the rental of concrete pumping equipment (specialized trucks, hoses, and other related equipment) with an operator.

• Section 2 – Tax treatment of sales transactions that include both: 1) the rental of concrete pumping equipment with an operator and 2) the sale of concrete materials.

• Section 3 – Tax treatment of sales transactions that include both: 1) the rental of concrete pumping equipment with an operator and 2) the sale of other construction related services.

• Section 4 – Application of this interim guidance statement.

Section 1: Tax treatment of concrete pumping equipment rentals with an operator

This section applies to taxpayers who provide stand-alone concrete pumping services. For taxpayers who provide a combination of concrete pumping services and concrete materials or construction services, refer to section 2 or 3 of this interim guidance statement.

A “retail sale” includes the charges made for providing tangible personal property along with an operator for a fixed or indeterminate period of time. RCW 82.04.050(9). Accordingly, consistent with the example in Rule 211(8)(c), the rental of concrete pumping equipment with an operator (i.e. the concrete pumping service) is subject to retailing B&O and retail sales tax.

Customers, including construction contractors or subcontractors, who rent concrete pumping equipment with an operator are considered consumers of such retail sales and cannot use a reseller permit.

Section 2: Sales that include a rental of concrete pumping equipment with an operator and concrete materials

A concrete pumping service provider may sell concrete in addition to concrete pumping services. In cases where a transaction includes 1) the provision of concrete pumping services and 2) the sale of concrete materials, the total charge is subject to tax based on the primary purpose of the transaction. The primary purpose of the sale may be the provision of concrete materials or the rental of equipment with operator depending on the specific facts.

• When the primary purpose of the sale is furnishing concrete materials, the sale would be treated as the sale of concrete materials. Accordingly, the sale would be subject to retailing B&O and retail sales tax unless it qualifies as a purchase for resale. Refer to WAC 458-20-170(4)(c) for information regarding the sale of concrete materials to contractors and subcontractors for resale.

• When the primary purpose of the sale is the provision of concrete pumping services, the sale would be treated as the rental of equipment with operator as explained in Section 1 of this statement. Accordingly, the sale would be subject to retailing B&O and retail sales tax and could not be purchased for resale.

Section 3: Rental of concrete pumping truck with an operator, plus the provision of other construction services

A concrete pumping contractor may offer concrete finishing and other related concrete or construction services in addition to the provision of concrete pumping services. When a transaction includes 1) the provision of a concrete pumping service¹ and 2) the provision of other related construction services for one non-itemized price, the total charge is subject to tax based on the primary purpose of the transaction. The primary purpose of the sale may be the provision of concrete materials or the rental of equipment with operator depending on the specific facts.

• When the primary purpose of the sale is the provision of concrete pumping services, the sale would be treated as a rental of equipment with operator as explained in Section 1 of this statement. Accordingly, the sale would be subject to retailing B&O and retail sales tax and could not be purchased for resale.

• When the primary purpose of the sale is the provision of construction services, the sale would be treated as the sale of construction services. The sale may qualify as a purchase for resale under certain circumstances. Refer to WAC 458-20-170(3)(a) regarding the sale of construction services to contractors and subcontractors for resale.

Section 4: Application

This interim guidance statement is effective April 1, 2020. The Department will accept the prior reporting of a taxpayer if the taxpayer made a good faith effort to comply with its reporting requirements. The Department will not issue refunds for taxes validly paid.

In circumstances where an existing contract was in place prior to the effective date of this interim guidance statement, the Department may allow taxpayers to continue to report in accordance with the published guidance in effect at that time as discussed below.

New contracts:

New contracts entered into (signed) on or after the effective date of this interim guidance statement must follow the guidance in this interim statement.

Existing contracts (unaltered contract terms):

Existing contracts entered into (signed) before the effective date of this interim guidance statement that remain unaltered after the effective date are not subject to the guidance in this interim statement. Taxpayers may continue to follow the Department’s published guidance in effect at the time the existing contract was entered into if they properly relied on the guidance in good faith.

Existing contracts (altered contract terms):

Contracts entered into before the effective date of this interim guidance statement, where the contract’s terms are changed (amended, or otherwise altered), on or after the effective date of this interim guidance statement are required to follow the guidance in this interim guidance statement in cases where the changes are substantive. Substantive changes include but are not limited to:

• The provision of additional concrete pumping services (e.g., an original contract included pumping services for ten apartment building foundations, and under the same contract concrete pumping services are subsequently added for sidewalks and several concrete patios),

  • Note: The mere extension of time to complete pre-existing contract terms would not be considered a substantive change (e.g. original contract included concrete pumping services for ten apartment building foundations to be completed by December 31, 2019, and under the same contract the completion date is subsequently extended to March 31, 2020).

• A change in the contractor performing contracted services, or

• A change in the scope of the services provided by the contractor.

   

Taxpayers are encouraged to submit a request for a binding letter ruling to the Department in cases where it is unclear whether the changes to an existing contract are substantive.

Existing request for proposal (RFP):

A request for proposal (RFP) is a project funding announcement posted by a business or organization for which taxpayers can place bids to complete the project. Contractor bids that relate to existing RFPs announced before the effective date of this interim guidance statement, are subject to the provisions above for Existing Contracts (Unaltered Contract Terms), including bids submitted after the effective date of this interim guidance statement. Taxpayers may follow the Department’s published guidance that the RFP relied on at the time of its issuance.

Example: The City of Lacey issues an RFP for a sidewalk project on September 3, 2019. Contractor bids must be submitted by December 31, 2019. The terms of the RFP are unchanged through December 31, 2019. On September 16, 2019, Contractor A submits a bid. On November 1, 2019 Contractor B submits a bid. The City of Lacey and both contractors may follow the Department’s published guidance that the RFP relied on at the time of its issuance, so long as the terms of the RFP are unaltered.

Taxpayer instructions

The Department plans to engage in the rulemaking process to finalize this issue in Rule 211. Rule 211 changes will incorporate the guidance in this interim statement and include further clarifications, as needed.

If you are interested in participating in the rulemaking process, you may sign up for DOR Excise Tax Rule Actions notifications here. The Department will send a notification announcing a meeting date, time, and location.

If you have questions about this guidance, please contact the Department at 360-705-6705.