Capital Improvement (no sales tax) or no?

[kwired]

No. The GC is responsible for collecting the sales tax. Therefore he is responsible for obtaining the exemption form.
Subcontractors never collect sales tax. If the sub charges the GC for the tax and the GC charges the customer for the tax, the customer is paying sales tax twice.



Regardless, you're working as a subcontractor. If you're getting paid by the painter and he, in turn, is getting paid by the customer, you're a sub.

Depends on the local sales tax laws.

Where I am at I can register on my sales tax permit in three different ways as a contractor. Option 1, I am like most retailers, I generally charge tax on all sales (that are taxable) even if sold to a GC. I also can purchase materials tax exempt though by giving the supplier the proper forms.

Option 2, I pay tax on all my purchases but do not charge tax on sales - but only on sales that are items incorporated into real estate (or something to that effect). An "over the counter sale" is still supposed to be taxed.

Option 3, I can't recall the details but I know is an option that still allows for a tax free inventory, and you may or may not be charging tax on certain sales, but ultimately you will still pay tax on majority of what you sell (that is taxable) it is just a matter of whether you pay tax on your cost or you actually collect tax on the sale price.

Any option the tax authority gets some funds on a "taxable sale" it just depends on the option selected how it gets done. You choose which option best suits your needs and go with it. You are not allowed to change that option from job to job. You maybe can get it changed but they don't expect another change for several years, not every time a different type of project comes up.

 

[goldstar]

But what are you supposed to do when the state audits the sales tax you have submitted over the year compared to your income?
Tell them to get the form from the GC?

OK. I'll try to make this simple. If you look on the back side of this form : http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st8.pdf you'll see examples of exempt and taxable capital improvements (remember, this is in the State of NJ and it may be different in other States). Now, let's say your total revenue for the year was $200K (after expenses and cost of sales you net $100K) and let's say that $50k of revenue was for taxable CI's that you performed for YOUR customer (you collexted and paid the sales tax on this), $100K was for exempt CI's that you performed for YOUR customer (you did not charge or collect sales tax on this) and $50K was for work you did with GC's as a sub (no CI forms were involved for you). If you get audited by the State they will want to see your CI forms for the exempt $100K work. You will already have paid the appropriate sales taxes on the taxable $50K work The remaining $50K is part of your net income and you will be paying INCOME tax on a total of $100K to both the State and the Fed.

BTW, If you do over $600.00 worth of work for a GC he is supposed to issue you a FED-1099 form for whatever you billed him for. Your accounting program will show what was spent for materials and expenses. The GC has to obtain State CI forms from HIS customers and keep them for his records just like you did for yours.

 

[hbiss]

First look here- http://www.tax.ny.gov/pdf/publications/sales/pub862.pdf

Then look here- http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/contractors-sales_tax_credits.htm

Subcontractors

If you work as a subcontractor performing taxable services you must be registered for sales tax purposes. You may accept Form ST-120.1, Contractor Exempt Purchase Certificate, from the prime contractor instead of charging sales tax.

When I work as a sub I always have the GC fill out a ST-120.1 then not charge any tax but you pay sales tax at the supply house when you purchase the materials. The tax on the materials are included in my material costs then I mark it up. But there is never a sales tax amount shown on my invoice.

It works like this- The GC is your customer. When he issues you a ST-120.1 you don't charge him tax. The homeowner is the GC's customer. The homeowner issues a ST-124 to the GC. The GC doesn't charge the customer tax but the GC pays tax on the materials- which he already has done through you.

In NY there is no tax on Capital Improvement labor.

-Hal