Contract Sales Tax and Financing

Disclaimer – this and subsequent articles on this subject are not intend to be legal advice, merely an example for discussions between you and your legal advisor.

Please keep in mind, many of these terms are applicable towards post frame building kits and would require edits for cases where a builder is providing erection services or materials and labor.

TAXES: Appropriate sales tax will be added for deliveries in (states tax is collected in). Stated prices do not include any sales, use, excise or other taxes payable on account of this transaction, unless specified, and all such taxes now in effect and/or hereafter levied which are applicable on this transaction are in addition to such price and shall be paid by Purchaser. Upon demand, Purchaser shall furnish Seller with paid receipts for any or all of these taxes. Certain states (including but not limited to: CA, CT, DC, FL, LA, MA, MD, MS, NY, TN, TX, WY) require drop shippers who are registered in those particular states to collect sales tax from Seller (and subsequently Purchaser) on transactions. In the event Seller is charged tax, Purchaser will be invoiced and funds will be automatically charged to Purchaser’s originally used form of payment, with a minimum 48 hours notice by email. Purchaser will receive a paid receipt for any such taxes paid, so same can be deducted from any payments made by Purchaser to local taxing authorities. Sales/excise or use tax rates, if stated, are subject to adjustment to conform to published rates in effect at time of payment in full. If the sales or use tax is not applicable, Purchaser shall provide Seller with the necessary and properly executed sales tax exemption certificate(s).

My commentary:

Purchasers – do not try to skirt sales taxes by paying cash to a builder, or buying a kit in a no tax state (e.g. Montana or Oregon) and hauling it to a tax collecting state. There is a very high probability you will be caught and the penalties and interest are painful. Building kit providers without physical nexus are not obligated to collect sales taxes unless they reach a predetermined threshold of sales in a given state, this does not absolve Purchaser from paying what then becomes a Use Tax.

Builders have nexus (a physical presence) within the state the building is being erected and are therefore required to collect and remit any applicable sales taxes.

FINANCING: If improvements are to be financed by a lender of Purchaser’s choice, Purchaser agrees to provide Seller with lender’s confirmation of all financing in place and Purchaser’s loan has been closed. Seller is to be automatically notified of change in Purchaser’s status of insurance, financing commitments and/or financial net worth. Should Purchaser be unable to obtain outside financing Purchaser agrees to complete Seller’s credit application. Purchaser agrees to sign all necessary papers needed by financial institutions, and to furnish all data and documentation requested by same, Purchaser’s failure to furnish said documentation within ten (10) days of written request by Seller or Seller’s agents or Purchaser’s failure to sign loan documents after they are drawn up, shall entitle Seller (at Seller’s option) to terminate Agreement and if so terminated, Purchaser further agrees to remit immediately to Seller a minimum of $500 or 10% of the Sales Agreement (whichever is greater). Should Seller be unable to obtain financing for Purchaser, for the amount of this Agreement only (or balance after down payment), and no drafting of plans has begun, Seller may terminate Agreement, no charges will be incurred to Purchaser and any and all down payments received by Seller will be refunded in full. Whether financed or not, Purchaser agrees to authorize Purchaser or Purchaser’s agents to make all written or verbal inquiries to Purchaser’s bank, lending institutions or any other credit reference of Purchaser, necessary to verify credit worthiness. Agreement is subject to credit approval and may be terminated at the option of Seller if said contract cannot be financed or sufficiency of funds cannot be adequately determined. A certificate of Completion of Acceptance of Work form, once it is signed by Purchaser, becomes final and binding on Purchaser and as such, Purchaser may not claim incomplete performance or failure to perform according to Agreement documents.

My commentary:
Surprisingly, a fair number of Purchasers make only a half-hearted attempt at obtaining financing. Often Seller has done a fair amount of work in assisting Purchaser and deserves to be compensated for same, should Purchaser not follow through.

This series will continue next with Building Codes – you will not want to miss this one!

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