Who is exempt and from what
Public bodies and many nonprofit groups are exempt from sales tax in most states. The exemption belongs to the owner. The question for a bidder is narrower. It is whether the exemption reaches materials that a contractor buys for the owner's project.
Why the answer depends on the state
States treat contractors in different ways. In some states, a contractor can buy materials for an exempt owner tax free with the right certificate. In other states, the contractor is treated as the user of the materials and pays tax anyway. Some states split the rule by the type of owner or contract. The same job in two states can have two answers.
Where to look in the bid documents
- The instructions to bidders. Many state plainly whether to include sales tax.
- The supplementary conditions, under taxes.
- The bid form. Some ask you to acknowledge tax-exempt status.
- A general contractor's bid invitation or scope sheet.
- An exemption certificate or project number included in the packet.
What to do before you price
- Find the tax language in the documents and note the page.
- If the documents are silent or unclear, ask in writing before the question deadline.
- Ask your accountant or the state tax agency how the rule applies to contractors.
- Get the certificate your suppliers need before you order.
- State in your proposal whether sales tax is included.
Common mistakes
The most common mistake is to remove tax because the owner is a school. The contractor then owes tax that is not in the price. The second is to include tax when the documents told bidders to leave it out. The bid is then high. Tools, rentals and consumables can be taxed even when installed materials are not.
This article is general information, not tax advice. Check the bid documents and the rules in your state.
Takeoff Tool reads tax exempt status from the packet as a cover fact and shows the quote it came from.
Bid documents · Updated 11 Nov 2026