NJ EC's : When to charge sales tax?

[JES2727]

During a class today, the discussion was about costs, the instructor said "We don't charge sales tax on these jobs" ( he was speaking generally, not meaning any particular type of job). I said "We don't??" Someone else said "Not on labor, material only". I've been charging sales tax on the total invoice amount, except on jobs considered new construction or capital improvement. Does anyone really know what's right??
And while I'm on the subject, if you are charging sales tax, as I am, are you also paying sales tax to your supplier, as I am? If you're paying sales tax when you buy your material, and then charge your customer sales tax for the same, that's double taxation and I think there's got to be a way to avoid it.

 

[infinity]

As far as I know you only have to collect sales tax on repairs or service calls, etc. Other jobs that qualify as capital improvements do not require you to collect sales tax. You are required to fill out an ST-8 form for each capital improvement job that you do not collect sales tax on.

 

[celtic]

Here are few links to (hopefully) clear up any inconsistancies:
Publication S&U-3

Contractors doing business in New Jersey have special responsibilities under New Jersey?s sales and use tax laws. This bulletin explains the rules that apply to contractors for paying sales or use tax to suppliers and collecting sales tax from property owners.

St-8, Certificate of Capital Improvement

A registered New Jersey contractor must collect the tax on the amount charged for labor and services under the contract unless the owner gives him a properly completed Certificate of Exempt Capital Improvement.

While you're at it, you might be able to help the HO out with a 5 year abatement on the inevitable property tax increase:
5 Year Property Tax Abatements and Exemptions

Abatements and exemptions from property taxation are available to qualified property owners where the municipality has adopted an authorizing ordinance. Under the 5-Year Abatement and Exemption Law, an ordinance may provide for abatement and/or exemption for new construction of dwellings, conversion or conversion alteration into dwelling use, and improvement to an existing dwelling.

[FONT=Verdana, Arial, Helvetica, sans-serif][SIZE=-1]Form E/A-1 [/SIZE][/FONT](PDF 112K) (which must be filed within 30 days of completion of the improvement, conversion or construction) may be obtained from the assessor's office.

 

[satcom]

If you have a service call:

Service Labor $25 (Taxable service)

! - Zinsco Breaker $10 ( The sales tax was paid on the breaker when you purchased it)

NJ Sales Tax 7% 1.75 (Tax on the service labor only)

Total Amount $36.75

You recover the sales tax on the material when you mark up your material.

Example: the breaker cost you $5 plus tax, and you marked it up to $10

 

[infinity]

The tax on materials is dependent on how you figure the cost of the item(S). For example:

Service call -$100.00
Parts -------$50.00 (pretax)
Tax @ 7% --$10.50

Total: $160.50

Service call -$100.00
Parts -------$53.50 (tax included)
Tax @ 7% ---$7.00 (on service call only)

Total: $160.50

 

[satcom]

You never charge tax on material, the tax was paid, when you purchased the material from your vendor.

 

[tyha]

thats something new. only about 10% of our sales is service but service rate doesn't include tax because I dont pay any on it (is this wrong) I mark all the material at 30% which the tax that i pay is inclusive with that. Im I supposed to be paying the state 7% of my service call rate. My accountant says no.

 

[satcom]

thats something new. only about 10% of our sales is service but service rate doesn't include tax because I dont pay any on it (is this wrong) I mark all the material at 30% which the tax that i pay is inclusive with that. Im I supposed to be paying the state 7% of my service call rate. My accountant says no.

Yes, the service call was always taxable, the state offers excellant one and two day tax information sessions, well worth your time, no cost, unless you get hungry, or you can go to any of the local offices, and have them help you with any of your concerns.

This is for New Jersey EC's

 

[tyha]

Yes, the service call was always taxable, the state offers excellant one and two day tax information sessions, well worth your time, no cost, unless you get hungry, or you can go to any of the local offices, and have them help you with any of your concerns.

This is for New Jersey EC's

Yeah, im in NC . sorry about that. I can just go off the advice from my accountant. been audited twice in 5 years with no trouble yet.

 

[infinity]

You never charge tax on material, the tax was paid, when you purchased the material from your vendor.

So you give the customer a break by paying the 7% sales tax for them on the material?

 

[satcom]

So you give the customer a break by paying the 7% sales tax for them on the material?

How are you giving him a break when you mark-it up, you pay $5 plus the tax from your vendor, and sell it for $10 or $7 or $25, the state tax was satisfied, you can charge whatever you want once the tax has been paid.

 

[infinity]

How are you giving him a break when you mark-it up, you pay $5 plus the tax from your vendor, and sell it for $10

You're not if you actually mark up the material on the invoice.

In your example you mark up was 100% less what you paid for the sales tax. If you typically markup was 100% then you lost the amount of the sales tax on the item.

My example was for the actual material price and didn't include any markup.

 

[dduffee260]

You never charge tax on material, the tax was paid, when you purchased the material from your vendor.

What if the material was purchased for a non taxed project such as a church, school, post office, etc?

In NJ are you allowed to get a resale certificate for tax?

 

[satcom]

You're not if you actually mark up the material on the invoice.

In your example you mark up was 100% less what you paid for the sales tax. If you typically markup was 100% then you lost the amount of the sales tax on the item.

My example was for the actual material price and didn't include any markup.

I think your confused on what you have to pay, the state does not care what you sell it for, once the tax is satisfied.

Check your PM

 

[infinity]

I think your confused on what you have to pay, the state does not care what you sell it for, once the tax is satisfied.

Check your PM

I'm not confused (Thanks for the PM). And yes I agree that once you've paid the sales tax on the material Trenton doesn't care how you get that money from the customer. They do want their 7% on the labor.

 

[satcom]

What if the material was purchased for a non taxed project such as a church, school, post office, etc?

In NJ are you allowed to get a resale certificate for tax?

We have a lot of exempt customers, you charge them for the material with the tax. and they can file for credit on the tax.

If they filed an exempt certificate with you , then no tax on the labor portion of the bill.

 

[celtic]

What if the material was purchased for a non taxed project such as a church, school, post office, etc?

In NJ are you allowed to get a resale certificate for tax?

Yes.
That'd be an ST-13 ~ CONTRACTOR?S EXEMPT PURCHASE CERTIFICATE

The customer would need an ST-5 ~ Application for ST-5 Exempt Organization Certificate

 

[infinity]

With all of these rules and exemptions it's no wonder the state is broke. And I'm glad that I had to pay retroactive sales tax on my one year gym membership.

 

[satcom]

I was just thinking, It's too bad they don't offer CEU's for attending the tax information sessions.

When I first started on this tax stuff, my mind was smoking.

 

[celtic]

I was just thinking, It's too bad they don't offer CEU's for attending the tax information sessions.

That would be an awesome CEU....double-edged sword, though..