(1) Whenever a contract for the performance of public construction or reconstruction has been awarded by any governmental agency, including the federal government, and a contractor sublets a contract in connection with such construction or reconstruction, the contractor awarding the subcontract must complete and file with the department of revenue a contract award report (form PC-1) which must contain the information specified in ARM 42.31.2131.

(2) Any contractor subletting a contract is also required to withhold 1% of the amount due his subcontractor but will not transmit such amount to the department.   He will complete the gross receipts withholding report (form PC-2) checking the box marked "Subcontractor Allocation."   The amount withheld (amount shown on line 8 on form PC-2) will then be credited to the subcontractor and deducted from the original 1% which was withheld from the prime contractor.   For failure to file the allocation report within the required 30-day period, provided for in ARM 42.31.2132, a penalty of 10% of the tax withheld from the subcontractor shall be due from the prime contractor.