(a) For the purposes of this section, the term governmental entity means the State of Alabama and its political subdivisions, including a county, a municipality, an industrial or economic development board or authority, airport authority, and any public water or sewer authority, district, system, or board that otherwise is sales and use tax exempt. A governmental entity shall also include an educational institution of any of the foregoing Alabama political subdivisions including a public college or university, a county or city board of education, and the State Board of Education.
(b)(1) The Department of Revenue shall issue a certificate of exemption to the governmental entity for each tax exempt project.
(2) The Department of Revenue shall grant a certificate of exemption from state and local sales and use taxes to any contractor licensed by the State Licensing Board for General Contractors, or any subcontractor working under the same contract, for the purchase of building materials, construction materials and supplies, and other tangible personal property that becomes part of the structure that is the subject of a written contract for the construction of a building or other project for and on behalf of a governmental entity which is exempt from the payment of sales and use taxes.
(c) The use of a certificate of exemption for the purchase of tangible personal property pursuant to this section shall include only tangible personal property that becomes part of the structure that is the subject of the construction contract. Any contractor or subcontractor purchasing any tangible personal property pursuant to a certificate of exemption shall maintain an accurate cost accounting of the purchase and use of the property in the construction of the project.
(d) A contractor who has an exemption from sales and use tax for the purchase of materials to use on a government project shall file, in a manner as prescribed by the department, reports of all exempt purchases. The reports shall be filed as a prerequisite to renewal of a certificate of exemption.
(e)(1) The department may assess any contractor or subcontractor with state and local sales or use taxes on any item purchased with a certificate of exemption not properly accounted for and reported as required.
(2) Any contractor or subcontractor who intentionally uses a certificate of exemption in violation of this section, in addition to the actual sales or use tax liability due, shall be subject to a civil penalty levied by the department in the amount of not less than two thousand dollars ($2,000) or two times any state and local sales or use tax due for the property and, based on the contractor's or subcontractor's willful misuse of the certificate of exemption, may be barred from the use of any certificate of exemption on any project for up to two years.
(f) The department may adopt rules to implement this section in order to effectuate the purposes of this section and to provide for accurate accounting and enforcement of this section.
(g) In bidding the work on a tax exempt project, the bid form shall provide for an accounting for the tax savings.
(h) The intent of this section is to lower the administrative cost for the governmental entity, contractor, and subcontractor for public works projects. It is not the intent of this section to change the basis for determining professional services from fair market value, which may include sales and use taxes.
(i)(1) Except as provided for a contract for the construction of a highway, road, or bridge as provided in subdivision (2), this section shall be operative for contracts entered into with governmental entities as defined in subsection (a), not including public water or sewer authorities, districts, systems, or boards that otherwise are sales and use tax exempt, on January 1, 2014, or thereafter, and shall not apply to any contract entered into prior to January 1, 2014. This section shall be operative for contracts entered into with public water or sewer authorities, districts, systems, or boards that otherwise are sales and use tax exempt on January 1, 2019, and thereafter, and shall not apply to any contract entered into with such entities prior to January 1, 2019. In addition, this section shall not apply to any contract change orders or contract extensions, including revised, renegotiated, or altered contracts, when the original contract was entered into prior to January 1, 2014, with a governmental entity. Nor shall this section apply to any contract change orders or contract extensions, including revised, renegotiated, or altered contracts with any public water or sewer authority, district, system, or board that otherwise is sales and use tax exempt, when the original contract was entered into prior to January 1, 2019.
(2) This section shall be operative for any contracts with a governmental entity defined in subsection (a) for the construction of a highway, road, or bridge entered into on or after January 1, 2022, and shall not apply to any contracts for the construction of a highway, road, or bridge entered into prior to January 1, 2022, nor shall this section apply to any contract change order or contract extensions, including revised, renegotiated, or altered contracts, when the original contract was entered into prior to January 1, 2022.
(j) The Department of Revenue may adopt rules to implement this section.
Structure Code of Alabama
Title 40 - Revenue and Taxation.
Chapter 9 - Exemptions From Taxation and Licenses.
Article 1 - General Provisions.
Section 40-9-1 - Persons and Property Generally.
Section 40-9-1.1 - Stringfellow Memorial Hospital.
Section 40-9-1.2 - Alabama Eye Bank.
Section 40-9-3 - Peanuts and Pecans Stored in Licensed Warehouses.
Section 40-9-4 - Products or Materials Used in Textile Manufacture.
Section 40-9-5 - Manufacturers of Calcium Cyanamide, Aluminum or Aluminum Products.
Section 40-9-6 - Personal Property Stored for Shipment Outside of State.
Section 40-9-7 - Personal Property Held by Warehouseman for Distribution.
Section 40-9-8 - Artesian Wells Leased to Municipalities.
Section 40-9-12.1 - United Appeal Fund Organizations and Supported Charities.
Section 40-9-14 - Property Used for Public Purposes.
Section 40-9-14.2 - Airport Authorities.
Section 40-9-15 - Alabama State Fair and Exhibit Association.
Section 40-9-17 - Property Owned and Used or Held by Colleges for Certain Purposes.
Section 40-9-18 - Property of Corporation Organized for Purpose of Aiding Retired Teachers, Etc.
Section 40-9-20 - Certain Homes Owned by Veterans or Their Widows.
Section 40-9-21.1 - Verification of Eligibility by Mail for Certain Persons.
Section 40-9-21.2 - Falsely Claiming Homestead Exemption.
Section 40-9-22 - Nuclear Fuel Assemblies.
Section 40-9-24 - Property Tax Relief Fund.
Section 40-9-25 - George Lindsey Celebrity Benefit, inc., Alabama Special Olympics, inc., Etc.
Section 40-9-25.1 - Magic Moments.
Section 40-9-25.2 - Habitat for Humanity Organizations and West Alabama Youth Services, Inc. (Ways).
Section 40-9-25.3 - Rainbow Omega, Inc.
Section 40-9-25.4 - Farley L. Berman Foundation, Inc.
Section 40-9-25.5 - American Bowling Congress.
Section 40-9-25.6 - Christian Children Homes, Inc.
Section 40-9-25.7 - Franklin Memorial Clinic, Inc.
Section 40-9-25.8 - Birmingham Civil Rights Institute.
Section 40-9-25.9 - Bridge, Inc.
Section 40-9-25.11 - Little Sisters of the Poor.
Section 40-9-25.12 - Service Guild of Birmingham, inc., Early Intervention Program.
Section 40-9-25.13 - Big Oak Ranch, Inc.
Section 40-9-25.14 - Barber Vintage Motorsports Museum.
Section 40-9-25.15 - Covington Baptist Association, Inc. - Christian Service Centers.
Section 40-9-25.16 - Food Banks.
Section 40-9-25.17 - Eagles' Wings, Inc.
Section 40-9-25.18 - Alabama Marine Corps League.
Section 40-9-25.20 - Community Action Association of Alabama.
Section 40-9-25.21 - Lifesouth Community Blood Centers.
Section 40-9-25.22 - Southern Research Institute.
Section 40-9-26.1 - Birmingham Regional Paratransit Consortium, Inc.
Section 40-9-26.2 - Twg 2021 Birmingham Foundation.
Section 40-9-26.3 - Victims of Crime and Leniency, Incorporated.
Section 40-9-27 - Prescriptions for Vitamins and Supplements Exempt From Sales Taxes.
Section 40-9-27.1 - Insulin, Insulin Syringes, and Related Items Exempt.
Section 40-9-28 - Selma-Dallas County Historic Preservation Society and Valegrande Community Center.
Section 40-9-29 - Community Health Systems, Inc. and Walker Regional Medical Center.
Section 40-9-30 - Durable Medical Equipment; Exemptions From Certain Taxes.
Section 40-9-32 - Exemption of Shares in Corporations From Ad Valorem Tax.
Section 40-9-33 - Sales to a Contractor of Certain Personal Property to Be Incorporated Into Realty.
Section 40-9-34 - Hudson-Alpha Institute for Biotechnology.
Section 40-9-35 - Alabama Association of Rescue Squads.
Section 40-9-36 - Volunteer Fire Departments and Fire Protection Districts.
Section 40-9-37 - Military Death Benefits.
Section 40-9-39 - Food Pantries in Talladega County Which Distribute Food for Charitable Purposes.
Section 40-9-39.3 - Birmingham Holocaust Education Center.
Section 40-9-39.4 - Specified Community Foundation Entities.