The construction Products Association wants the proposed Planning Gain Supplement to be scrapped.
Under the plans, contractors would have to pay a tax on the projected increase in value of a development.
CPA chief executive Michael Ankers has written to Chancellor Alistair Darling asking him to redirect money received from business rate receipts to local councils instead.
Mr Ankers said: “We propose that local authorities should be entitled to retain the first five years of business rate receipts on a development.
“This would provide councils with a clear source of additional funding to support the infrastructure needed for development in a fair and non-discretionary way.”
The association fears firms will be hit by the Government extending the tax’s initial remit to include the extractive industry.
Mr Ankers added: “Product manufacturers and suppliers are alarmed that the Government has chosen to extend the proposals to other forms of supposed ‘planning gain’.
“These are not activities which can be compared to the housing sector and it is wholly inappropriate to impose an additional tax burden like this.”
Mr Ankers said quarrying developments would be hit hard under PGS. Currently contracts for most quarrying sites involve firms having to restore the site for future public use. He added: “Unlike housing developments, quarrying projects don’t earn their money straight away.”
The Government will decide next month if the PGS will go ahead.
It is thought the proposed tax will be set at 20 per cent of profit from each site sold and could raise as much as £500 million a year for the Treasury.