? on markup's

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SmithBuilt

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Just curious how some of you price your work?

I charge an hourly rate for the truck and 2 men, and markup the materials similar to what MD and busman do.

I total the materials add tax and then mark up the total per the chart.

Or should I MU the materials individually then total. I would make more it just seems tedious trying to MU every little item.

I do not add any profit or overhead to the bottom line when I use this method. I consider that included in the hourly rate and MU of materials.
 
In Maryland, if you itemize and markup material, you are required to pay sales tax (to the state) on the marked up portion of material. That is one reason why it is better to flat rate prices. The "mark up" is built in to the price, but is not itemized. Labor here is not taxed, so the flat rate price is combination of the material (at cost) and the rest is non taxable labor. It saves us from having a tax and use license and the paperwork that goes along with it

Rich
 
Yes you read right I include the sales tax of the material to be marked up.

I will need to talk to my accountant about paying taxes on the mark up amount. I don't think we have to, we pay tax on the material when we buy it. But after that we don't charge the customer tax on labor or materials.

Including the built in mark up in the flat rate price would be easier, I just think my customers would have a hard time with the high flat rate price.
 
romexking said:
In Maryland, if you itemize and markup material, you are required to pay sales tax (to the state) on the marked up portion of material. That is one reason why it is better to flat rate prices. The "mark up" is built in to the price, but is not itemized. Labor here is not taxed, so the flat rate price is combination of the material (at cost) and the rest is non taxable labor. It saves us from having a tax and use license and the paperwork that goes along with it

Rich
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Humph! When I applied for a sales tax and use license they literally told me that as a contractor, I was not eligible. They said I was supposed to pay the sales tax when I bought the materials, and that was the end of it.

I mark up my cost of materials as well, and since sales tax is part of my cost, that is also marked up. But the state has already collected my taxes, so they ain't getting any more from me. :mad:

A x B x C = the same thing as A x C x B.
 
Here in AZ as a contrator you are required to have TPT in every city you do business in. You do not pay tax on material because you are required to pay that city you are doing business in, the sales tax on material and some labor. We only get a 35% deduction for labor. Some cities might lets you get away from paying tax on labor but it is a very grey area and is easier to just pay it. It does not come out of your pocket, your charging the customer for it.
 
SmithBuilt said:
Yes you read right I include the sales tax of the material to be marked up.

I will need to talk to my accountant about paying taxes on the mark up amount. I don't think we have to, we pay tax on the material when we buy it. But after that we don't charge the customer tax on labor or materials.

Including the built in mark up in the flat rate price would be easier, I just think my customers would have a hard time with the high flat rate price.
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silly question, (and I do expect an equally silly answer)...why on earth would a flat rate price necessarily be higher than you are charging now?

and if a flat rate price was higher, why? and why are you charging less and losing money?

maybe it's time to learn your true costs and charge accordingly....and find customers who are willing to let you make money...

ok, so that is multiple silly questions and an obvious statement...shoot me..
 
why on earth would a flat rate price necessarily be higher than you are charging now?
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I now markup materials, I believe the flat rate romexking is referring to would be only an hourly rate not any markup on materials. Therefor I would have to raise my hourly rate to make up for the lost markup. I know it equals the same in the end but imagine my customers reaction when I tell them a rate higher than all my competitors.

maybe it's time to learn your true costs and charge accordingly....and find customers who are willing to let you make money...
Click to expand...

yes and yes, please lead the way. How do you do the above, most importantly find the right customers. I tried some of the calculators posted in another thread and don't believe I can charge those rates and keep or find customers.
 
SmithBuilt said:
I know it equals the same in the end but imagine my customers reaction when I tell them a rate higher than all my competitors.
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Give them a price that includes materials?
 
Are we required to pay federal taxes on the money we make from marking up? Say you buy a plug for 2$ sell and sell it for 10$. Would'nt you owe the the feds taxes on 8$?
 
CAsparky said:
Are we required to pay federal taxes on the money we make from marking up? Say you buy a plug for 2$ sell and sell it for 10$. Would'nt you owe the the feds taxes on 8$?
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You are confusing gross profit with net profit.

The difference between material costs and selling price equals gross profit. Things like overhead, operating expenses, etc are paid for with those funds, and once all the bills are paid, you are taxed on the net profits of operating your business, assuming there is anything left to tax.... :roll:
 
CAsparky said:
Are we required to pay federal taxes on the money we make from marking up? Say you buy a plug for 2$ sell and sell it for 10$. Would'nt you owe the the feds taxes on 8$?
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Sales tax is a state tax, not a federal tax, and in my state, yes if you sell material for more than you paid for it, you must charge sales tax and remit the tax to the Comptroller's Office. It is true that you did pay tax on it when you bought it, but the item is not being sold for more money and thus more taxes are due.

The easiest way to resolve this issue is to make a simple phone call to your state tax authority, but have whoever you speak to give you the answer in writing.
 
SmithBuilt said:
I now markup materials, I believe the flat rate romexking is referring to would be only an hourly rate not any markup on materials. Therefor I would have to raise my hourly rate to make up for the lost markup. I know it equals the same in the end but imagine my customers reaction when I tell them a rate higher than all my competitors.



yes and yes, please lead the way. How do you do the above, most importantly find the right customers. I tried some of the calculators posted in another thread and don't believe I can charge those rates and keep or find customers.
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OK, there have been dozens of in depth discussions on this board regarding this...if you are unclear or want more information, send me an EMail of PM...I will go through it step by step with you.

But really quick for here...

Any flat rate system you use will be based on your rates, not anyone elses.

The difference is, instead of telling Ms. Jones that installing a new circuit will be $70/hr + material. Spend 2 hrs doing the job and $15 in material. Then totaling up the bill to $165 (with 40% margin on material) and surprising Ms. Jones.

By using a flat rate system, you will look at the job and know it should take you 2 hrs and about $15 in material. So you calculate the price based on your rates..in this case $70x2= $140 labor and $15/.6=$25 in material cost....So before you start, you can tell Ms. Jones it will be $165 to install that circuit.

What Romexking was referring to was for purposes of state taxes...by going flat rate, he can tell the state that he didn't mark up his material and that he charged $150 for labor...so he doesn't have to pay and sales tax.

As for determining your costs and finding customers...well, there is big money to be made in that...but I will say this...If I know that I need $80/hr for 8 hrs a day to cover costs and make a profit...and my customers will only "allow" me to charge $60/hr....well, I better find new customers or a new hobby.

honestly, feel free to email or PM me, i'll answer anything I can.
 
I should have mentioned when I posted my markup chart (which is just a mathematical conversion of Marc's chart so I can't take any credit); I use mine on the price of the item without sales tax, so 5% (the Virginia rate) of the markup shown is not profit, it's tax.

Mark
 
emahler said:
OK, there have been dozens of in depth discussions on this board regarding this...if you are unclear or want more information, send me an EMail of PM...I will go through it step by step with you.
...........
honestly, feel free to email or PM me, i'll answer anything I can.
Click to expand...

This is a sincere offer...ANYONE with a question should take him up on his generous offer ~ although I (personally) would prefer the questions asked in the forum to help out the "wall-flowers".
 
it is a sincere offer...problem with having the threads here is that there are guys who I believe sincerely are afraid of success...and they don't want anyone else to succeed financially either...so threads get lost and tossed and taken in directions they need not go..

in addition, the premise is simple...but the implementation takes way more than can be conveyed in a post.

good luck.
 
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