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contractstatuteprecedentcorporation

contractcorporation

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Sterling Custom Homes Corp. v. Commissioner of Revenue, 391 N.W.2d 523

Facts

Sterling Custom Homes Corporation, a Wisconsin corporation, manufactures prefabricated custom home component packages based on designs provided by builders or home buyers. The components, which range in price from $20,000 to $200,000, are delivered to the construction site after the builder has prepared the foundation according to Sterling's specifications. While Sterling's employees supervise the unloading and placement of the components, the builder is ultimately responsible for the erection and completion of the house, which does not include mechanical installations.

Sterling, a Wisconsin corporation, prefabricates custom-designed home component packages ranging in price from $20,000 to $200,000. Based on the ideas and rough sketches brought by builders or home buyers, Sterling makes formal drawings of a custom-designed house.

Issue

Whether Sterling's sales of prefabricated custom home component packages to contractors are considered retail sales subject to sales tax under Minnesota law.

Rule

Sales of building materials, supplies, and equipment to contractors for the erection of buildings are classified as retail sales under Minnesota sales tax statutes. A supplier of tangible personal property is not considered a contractor or subcontractor if they do not perform the actual construction work.

Sales of building materials, supplies, and equipment to owners, contractors, subcontractors or builders for the erection of buildings or the alteration, repair or improvement of real property are 'retail sales' or 'sales at retail' in whatever quantity sold and whether or not for purpose of resale in the form of real property or otherwise.

Analysis

The court analyzed the nature of Sterling's business and its role in the construction process. It determined that Sterling's activities, while involving some supervision at the job site, did not equate to the responsibilities of a contractor or subcontractor. Instead, Sterling was classified as a supplier of building materials, similar to the precedent set in Duluth Steel Fabricators, Inc. v. Commissioner of Taxation, where the court found that the sale of prefabricated components constituted retail sales subject to sales tax.

We hold, therefore, that Sterling, like Duluth Steel, is a supplier of materials and that the sale of a prefabricated custom home component package is a 'retail sale' subject to sales tax.

Conclusion

The court concluded that Sterling's sales of prefabricated custom home component packages are retail sales subject to sales tax, affirming the Tax Court's ruling.

Affirmed.

Who won?

The Commissioner of Revenue prevailed in the case, as the court upheld the Tax Court's finding that Sterling's sales were subject to sales tax, reinforcing the classification of Sterling as a supplier rather than a contractor.

The court's final decision or holding in 1–2 sentences.

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