Speculative builders are subject to real estate excise tax on the selling price of the land along with all attachments including buildings, roads, and other structures. The sale of real estate is not subject to the B&O tax or retail sales tax.  

A speculative builder is the consumer of all material incorporated into the real estate.

Speculative home builders may not use a resale certificate to purchase materials used in speculative building. Any construction contractor hired by a speculative builder is a custom prime contractor for tax purposes and not a subcontractor.

Hence, any contractor performing construction services for a speculative builder must charge sales tax on the total contract price. 

When a speculative builder sells or contracts to sell property upon which there is a building under construction, all construction completed subsequent to the date of such sale or contract constitutes custom prime contracting.

The “retail sale” does not take place until the purchasers have the “right of possession” to the real property being constructed. Typically, the right to possession is transferred on the date of closing the property conveyance.

Therefore, retail construction on what was originally a speculative house does not occur until after closing.