Purchasing Agent Agreements

A building contractor cannot use your nonprofit organization’s exempt status to buy materials exempt for use in a lump-sum contract.

However, you may designate a contractor as your purchasing agent, allowing them to make tax-exempt purchases of qualifying materials, equipment, and supplies used to improve real property.

To do this, you must have Nonprofit Exempt Status and the written contract must clearly state the following:

• You appointed the contractor as your purchasing agent
• You take title to all materials and supplies at point of delivery
• You are responsible for the risk of loss on all materials and supplies
• You are responsible for all defective materials and supplies including those incorporated into real property
• These requirements apply to the prime contractor and every subcontractor who supplies both materials and labor.
   

The purchasing agent exemption does not apply to purchases or leases of equipment a contractor uses to complete the construction contract.

For more information, see Contractors and Other Property Installers and Revenue Notice 17-10, Construction Contracts with Exempt Entities.