The New York Department of Taxation and Finance has issued a bulletin discussing materialmen and the pay-when-paid option. Materialmen who make qualified sales to contractors may be able to postpone payment of the sales tax incurred until they receive payment from the contractor. The bulletin explains which sales qualify under the pay-when-paid option, and how materialmen should report these transactions on their sales tax returns. A materialman is a person or business that sells any of the following to a property owner, contractor, subcontractor, or repairman to be used for the improvement of real property: building materials; machinery, tools, or equipment; compressed gases for welding or cutting; or fuel or lubricants for the operation of machinery or motor vehicles. To qualify for the pay-when-paid option, a seller must have been a materialman during any two sales tax quarters within the most recent four consecutive sales tax quarters; must be primarily engaged (more than 50% of sales) in selling building materials to contractors, subcontractors, or repairmen (including a property owner acting as his or her own contractor) for the improvement of real property; and must be authorized by the Lien Law to file a mechanic’s lien upon the property and improvements to the property. Also, in order to qualify, a sale must be made on credit granted by the seller. Payments made with cash or sales financed by a third party where credit is not extended by the seller to the purchaser do not qualify for the pay-when-paid option. On those types of sales, sales tax must be collected at the time of the sale and remitted with the sales and use tax return filed for that reporting period. Qualifying sellers must submit Form ST-112, Annual Application for a Materialman to Remit Sales Tax Under the Pay-When-Paid Option, by June 1 of each year. Under the pay-when-paid option, a materialman must report qualifying sales as gross sales (not taxable sales) on the tax return covering the period in which the sale is made. The sales are then reported as taxable sales for the period when the materialman receives payment. The tax must be remitted within one year of the date of sale whether or not payment is received from the purchaser. When the return is filed and the sales tax due is remitted, tax is computed at the rate in effect at the time the sale was made. If the sales tax rate changes after the sale, the materialman must file a paper sales tax return for the current quarter and will have to manually enter the correct name of the taxing jurisdiction; the jurisdiction code that was in effect when the sale was made; the amount received for the taxable sale; the tax rate that was in effect when the sale was made; and the sales tax due. (TB-ST-555, New York Department of Taxation and Finance, July 27, 2012)