In an extraordinary session last week the Senate passed Senate Bill 227, a bill that will allow contractors to directly purchase construction materials on behalf of their tax-exempt clients without paying the sales tax. The proposal was originally included in the tax reform package of the budget by the Joint Finance Committee. However, the governor vetoed the language included in the budget that would allow the exemption, saying the language was “too broad” but he was supportive of the intention. In his veto message, Governor Walker encouraged legislation to be introduced with amended language.

The bill would allow a sales and use tax exemption for materials sold to a construction contractor who will use the purchase materials for a facility being contracted to be built by the county, municipality, school district, or nonprofit organization.

The final version of the bill also exempted the sales tax on materials used for county-city hospitals, sewerage commissions, metropolitan sewerage districts, and joint local water authorities.

After unanimous approval by the Joint Committee on Finance and passage by the Senate, the legislation now heads to the Assembly.