If the homeowner directly purchases qualifying tangible personal property that is used by the contractor to complete a qualifying fortification project, the taxpayer can claim all of these direct purchases when calculating the income tax credit for state sales and use tax.
A homeowner receives a $5,000 grant, which is paid directly to the contractor and the homeowner pays matching funds of $5,000 to the contractor. The taxpayer also purchases $4,000 of windows and doors that qualify for the credits. The project costs for the grants and matching funds paid to the contractor consist of tangible personal property purchases (for example, qualifying windows and doors) of $4,000 and labor costs of $6,000. The homeowner’s portion of the $4,000 of tangible personal property purchased by the contractor is $2,000 ($4,000 X $5,000 [costs paid by taxpayer] / 10,000 [total costs]). The homeowner’s total tangible personal property is $2,000 + $4,000 [for doors and window purchased directly by the homeowner] = $6,000. The homeowner’s credit for the sales tax paid would be $6,000 X 6% = $360.
This question assumes that the grant funds are not included in the income of the homeowner for income tax purposes.