New York's ST-120.1 lets contractors buy certain materials exempt for tax-exempt customers, while California uses CDTFA-230-C-2 and CDTFA-192 for qualifying projects. Which form applies depends on the project type, the customer and the state where the work happens, so the job should be checked against each source before a materials line is priced.
Key takeaways
- the job type, the customer and the state decide which of the three forms is checked first.
- the New York form applies in certain cases, so the circumstance should be confirmed before ST-120.1 is issued.
- the California exemption period ended December 31, 2024, so current status should be checked first.
- CDTFA-230-C-2 goes to vendors for a qualified nonprofit facility, and CDTFA-192 goes to vendors for an approved CAEATFA project.
- misuse of a purchase made under R & TC section 6369.7 leaves the purchaser liable for tax plus any applicable interest.
Why the form changes the material price
The price of a materials line changes when the purchase is exempt from sales tax, so the certificate named for that purchase matters as much as the quantity and unit cost. Estimators and owners should not assume that one state's form works in another state. The forms here come from New York and California, and each state sets its own conditions for the exemption.
According to New York State Department of Taxation and Finance, "However, in certain circumstances, contractors can use Form ST-120.1, Contractor Exempt Purchase Certificate, to make purchases exempt from sales tax." The phrase in certain circumstances is the condition to check against the job before a certificate is handed over. A practical step is to write the circumstance that applies to each job on the estimate sheet.
According to California Department of Tax and Fee Administration, "Beginning January 1, 2019, through December 31, 2024, Revenue and Taxation Code (R & TC) section 6369.7 provides for a sales and use tax exemption for the sale and use of building materials and supplies purchased by a qualified person for use by that qualified person in the construction of a qualified facility." Its status should be checked with the agency before the purchase is priced.
For the material line itself, read the construction material cost line guide alongside this comparison. Keep exempt and taxable materials on separate rows, so each row can be checked against its own certificate. A separate record for each exempt customer keeps the certificate and the project type together in one place. That arrangement makes the file easier to review at the end of a job.
Each exempt customer should have one line in the job file. The exact form name should be copied from the vendor's paperwork, because the three forms here differ by letter and number. A file built this way shows which purchases rely on which certificate. That detail matters most when a job uses more than one of the forms.
Form ST-120.1 in New York
According to New York State Department of Taxation and Finance, "In certain cases, you may be able to purchase building materials or other tangible personal property that will be transferred to your tax-exempt customer as part of the project without payment of sales tax using Form ST-120.1, Contractor Exempt Purchase Certificate." The quote names the form, the property, the customer and the project, so each of those four items should appear on the estimate.
The capital improvements page repeats the form name in a separate context. According to New York State Department of Taxation and Finance, "The contractor can use Form ST-120.1 to purchase the appliances exempt from sales tax." Appliances can therefore be priced on their own line, so the certificate is checked against that line.
The New York page also points to two bulletins for more detail. According to New York State Department of Taxation and Finance, "See Tax Bulletins Exemption Certificates for Sales Tax (TB-ST-240), and Purchases and Sales by Governmental Entities (TB-ST-700)." Both bulletins should be read before ST-120.1 is issued on a job, and each bulletin number should be noted in the job file.
A practical step is to file the certificate with the job record, together with the New York circumstance that applies to the purchase. The file should also show the date the certificate was given to the vendor. Keeping those details together gives one place to look when the job is reviewed later.
CDTFA-230-C-2 in California
According to California Department of Tax and Fee Administration, "If you are a contractor, subcontractor, or builder working under contract with a qualified nonprofit organization to construct a qualified facility, you may issue CDTFA-230-C-2, Exemption Certificate for Property Used in the Construction of a Qualified Facility, to your vendors for your qualifying purchases of building materials and supplies." The wording covers contractors, subcontractors and builders, so each party's role on the project should be stated in the job file.
The wording names three conditions: a contract with a qualified nonprofit organization, work to construct a qualified facility, and qualifying purchases of building materials and supplies. A purchase that falls outside those words should be priced on a separate line, since the certificate is written for qualifying purchases. Each condition should be noted beside the matching purchase in the estimate.
A practical step is to keep the nonprofit contract in the job file beside the certificate. That pairing lets each exempt purchase be traced back to the contract that supports it. Estimators pricing a second job for a different customer should not reuse the certificate unless that customer's contract fits the same description. Separate folders for each project make that check quicker.
Materials for the qualified nonprofit facility are easier to check when they sit on their own lines, separate from other work on the same estimate. Each line should name the project so the certificate can be matched to it. The vendor's invoice for each line should also name the project, which lets the file show what the certificate covered.
The full form title is long, so the estimate can use the form number and keep the full title in the file. A cover sheet can list the form number, the nonprofit organization's name and the project name together. Consistent numbers make later review simpler.
CDTFA-192 in California
According to California Department of Tax and Fee Administration, a construction contractor, including a subcontractor, may use the sales and use tax exclusion provided by RTC 6010.8 for a CAEATFA approved project when furnishing and installing materials for a participating party. It names an approved project and furnishing and installing work. Both should be confirmed for the job.
The same page sets out the form for materials. According to California Department of Tax and Fee Administration, "they should provide their vendors with form CDTFA-192, CAEATFA Exclusion Certificate for Sales and Use Tax." Lines for other project types should not be given this certificate.
The California pages name two different code sections: RTC 6010.8 for CAEATFA projects and R & TC section 6369.7 for qualified facilities. The estimate should record which section applies to each project. That record makes it clearer which certificate belongs on which purchase. A project that could fall under either section should be confirmed with the agency before a certificate is issued.
Before the certificate goes to a vendor, the approved status of the project should be checked. The quoted rule refers to a participating party, so that party's name belongs on the project file. A short written note from the participating party can be kept with the certificate. That note should identify the project by name.
A useful check is to compare the scope of the work with the words furnishing and installing, since the quoted rule is written around that work. Supply-only purchases raise a separate question, because the quoted words describe furnishing and installing materials. Each purchase should be sorted by that test before the certificate is used.
Misuse and penalties
The California rule for R & TC section 6369.7 purchases places the liability on the purchaser. According to California Department of Tax and Fee Administration, "A purchaser that issues an exemption certificate for its purchases made pursuant to R & TC section 6369.7, and who subsequently uses the items purchased in a manner not qualifying for the exemption, will be liable for the payment of tax (calculated on the sales price of the property), plus any applicable interest."
The tax is calculated on the sales price of the property under that wording, so the estimate should show the price of each exempt item separately. The quoted sentence also refers to any applicable interest, so the amount of interest should be confirmed with the agency rather than assumed. Keeping the sales price of each exempt item on record gives the file the figure the tax is calculated on.
Washington's reseller permit rule is a separate matter. According to Washington Department of Revenue, "Buyers using a reseller permit: Misuse of a permit may result in penalties for the buyer and the permit may be revoked." That source describes a reseller permit, which is not one of the three certificates covered in this article, so it should not be read as an exemption certificate.
The New York misuse consequence should be confirmed directly with the department before a job relies on it. Penalties and revocation are named for the Washington permit. Each state's consequence should be checked against that state's own source. A check of this kind belongs in the job file beside the certificate itself.
A practical step is to note the certificate type next to each exempt purchase, so a question about use can be answered from the file. The note should include the project name and the date the certificate was given. Keeping those details together gives a single place to look when the job is reviewed. Estimators should also record any change of use before the material is installed.
Illustrative example: one exempt line
Two are exempt lines tagged to the certificate for their purchases, and the supporting contract is kept in the file. The other 8 are taxable lines priced with sales tax. If one exempt item is later used for a non-qualifying purpose under R & TC section 6369.7, the tax is calculated on that item's sales price, plus any applicable interest. The file therefore needs that price on record before the job closes.
Which form fits which job
The table below lists the quoted wording for each publisher in this comparison.
A New York job with a tax-exempt customer points to ST-120.1 when the circumstance in the source applies. The circumstance should be confirmed against the New York page before the certificate is handed over. Appliances named on the capital improvements page can be priced on their own line.
A California project for a qualified nonprofit organization points to CDTFA-230-C-2, provided the work is a contract to construct a qualified facility. The estimate should label that project as a nonprofit facility job, so its purchases stay on separate lines. The label should match the name used in the contract.
A California project approved through CAEATFA points to CDTFA-192 for materials, provided the contractor is furnishing and installing materials for a participating party. Lines for that project should be marked with the approved project name. Lines for other work should be kept off that certificate. The project's approval should be confirmed before any line is marked.
A job that fits none of these descriptions needs a different check before any certificate is handed over. That check should start with the state's own source and its stated terms. Records of the check belong in the job file. A note on which source was used keeps the reasoning visible to the next reviewer.
Once the material lines are set, the guide on markup and margin rates is the next place to check the estimate. Exempt and taxable lines should both pass through that check before the bid is issued. Keeping exempt and taxable lines distinct at this stage keeps the pricing easier to trace. Each line's certificate should be listed beside its markup.
Next step
Your next step is to ask each exempt customer which certificate applies before you price tax on materials. Record the answer in the job file, so the certificate and the price line match.
FAQ
What does ST-120.1 do in New York?
ST-120.1 lets a New York contractor buy certain materials and appliances without sales tax in certain cases. According to New York State Department of Taxation and Finance, in certain cases you may be able to purchase building materials or other tangible personal property without payment of sales tax using Form ST-120.1, Contractor Exempt Purchase Certificate, when the property will be transferred to your tax-exempt customer as part of the project. According to New York State Department of Taxation and Finance, the contractor can use the form to purchase appliances exempt from sales tax. The circumstances the page describes should be checked against the job before the form is issued.
Which California form covers a qualified nonprofit facility?
CDTFA-230-C-2 is the certificate for that case. According to California Department of Tax and Fee Administration, a contractor, subcontractor or builder working under contract with a qualified nonprofit organization to construct a qualified facility may issue CDTFA-230-C-2 to vendors for qualifying purchases of building materials and supplies. The form's full name is Exemption Certificate for Property Used in the Construction of a Qualified Facility. The nonprofit contract should be kept in the job file beside the certificate.
What form is used for a CAEATFA project?
CDTFA-192 is the form for an approved CAEATFA project. According to California Department of Tax and Fee Administration, a contractor buying materials for an approved CAEATFA project should provide vendors with form CDTFA-192, CAEATFA Exclusion Certificate for Sales and Use Tax. The exclusion under RTC 6010.8 applies when the contractor is furnishing and installing materials for a participating party. That scope should be confirmed before the form is handed over.
What happens if exempt materials are used for a non-qualifying purpose?
For purchases made under R & TC section 6369.7, the purchaser owes the tax plus any applicable interest when the items are used in a non-qualifying way. According to California Department of Tax and Fee Administration, a purchaser that issues an exemption certificate for purchases made under R & TC section 6369.7 and then uses the items in a manner not qualifying for the exemption will be liable for the payment of tax, calculated on the sales price of the property, plus any applicable interest. That liability is stated for this California exemption, and the New York misuse rule should be confirmed with the department.
Is the California 6369.7 exemption still in effect?
The stated period ended December 31, 2024, so its current status should be confirmed with the agency before any exempt purchase is priced under that section. According to California Department of Tax and Fee Administration, the stated period is January 1, 2019 through December 31, 2024.
Is a Washington reseller permit an exemption certificate?
A reseller permit is a separate rule from the three certificates in this article. According to Washington Department of Revenue, misuse of a reseller permit may result in penalties for the buyer and the permit may be revoked. Washington penalties and revocation should be checked on the Washington source before any Washington purchase is made.