Warner Robins, GA, March 29--Installing school system carpet could be quite costly for a Perry construction company, the Macon, Georgia Telegraph reported.
The job - and others like it - was completed with untaxed supplies, which has prompted the Georgia Department of Revenue to audit Parrish Construction Co. The result: The company might have to pay back thousands of dollars in unpaid sales tax and fines.
But Parrish isn't the only contractor in the state that has been slapped on the wrist by the Revenue Department.
Audits like this one stem from an old Georgia law that says any time a government agency, which is exempt from paying sales tax, buys building equipment or materials and allows a contractor to install that equipment, then the contractor is liable to pay a usage tax - equivalent to the sales tax - for those items.
While some speculate the maneuver might be a tactic to save government agencies and contractors money, some contractors, including Parrish, claim they didn't know about the law, which could be costing the state and counties millions of dollars in lost tax revenue.
"It caught us by surprise like it did everyone else," said Dave Cyr, president of Parrish Construction Co. "We are not trying to evade tax, but avoid it legally.
"Any tax savings the deal would provide would be passed along to the owner. We haven't been enriched in this at all," Cyr added.
Parrish's audit started in September, company officials said. Since 2002, Parrish has had construction contracts with Houston County schools, working on at least 11 schools that were funded by a special purpose local option sales tax, according to documents obtained by The Telegraph.
The school system, which is exempt from paying sales tax, bought items like carpet, kitchen equipment and gym floors direct from suppliers without paying state taxes, school officials said.
For instance, on three of those 11 projects - contracts worth $9.8 million - about $9,000 in usage tax for the carpet was not paid, documents showed and Parrish officials confirmed. The school system bought carpet totaling $19,975.82 to renovate Centerville Elementary School in 2004. The system bought the items direct without paying $1,398 in sales tax. The system then turned the materials over to Parrish and deducted the amount from their contract with Parrish.
The school system also spent $71,825 for carpet and tiling in a five-school project, and $23,114 for a Houston County High School project. Again, no sales tax was paid by the school or usage tax paid by the contractors, Cyr said.
Whether contractors and government agencies know about the law is up for debate, and was the center of a House bill that passed the General Assembly last week.
"I'm sure there are cases where it could be an educational issue, people weren't informed of all the rules and laws," said Department of Revenue spokesman Charles Willey. "And there are other cases where people definitely circumvent ways to avoid paying taxes.
"Our main interest is that someone pays the tax," Willey said.
According to Mark Woodall, director of government affairs for the Georgia Branch of the Association of General Contractors, an Atlanta lobbying group for the state's contractors, there might be a few contractors "led astray" that capitalize on not paying the usage tax. But he said most contractors just don't know the law and are now paying back "substantial" amounts in unpaid taxes because of state Revenue Department audits.
"What happens in many instances is you have ill-informed owners, designers and contractors," Woodall said. "In many rural areas, they simply don't know."
The law had the contractors association fighting for new legislation, which would require government agencies - if they buy materials direct - to alert contractors of the usage fees so the contractors can add them in their bids before a contract is reached with the government.
