Sales Tax In Massachusetts

[jzadroga]

I have some confusion about sales tax in MA. My accountant has given me advice and the state has told me otherwise. Obviously I will do what the state wants but I was curious of how other MA contractors deal with it.

The state tells me that I should be paying sales tax when I buy taxable materials in almost all instances. I should not be charging sales tax to my customer other than the selling price of the materials. (No sales tax line item)

My accountant says:

For a home owner I don't pay sales tax for materials. I do charge the homeowner sales tax and pay it to the state.
For a GC I dont pay sales tax on materials. I don't charge the GC sales tax. The GC charges sales tax to the homeowner.

How do you deal with sales tax?

 

[69gp]

I have some confusion about sales tax in MA. My accountant has given me advice and the state has told me otherwise. Obviously I will do what the state wants but I was curious of how other MA contractors deal with it.

The state tells me that I should be paying sales tax when I buy taxable materials in almost all instances. I should not be charging sales tax to my customer other than the selling price of the materials. (No sales tax line item)

My accountant says:

For a home owner I don't pay sales tax for materials. I do charge the homeowner sales tax and pay it to the state.
For a GC I dont pay sales tax on materials. I don't charge the GC sales tax. The GC charges sales tax to the homeowner.

How do you deal with sales tax?

From my experience if the job is tax exempt you do not need to pay taxes.
All homeowners pay tax.
When you buy from a supplier you pay the tax then. But if you sell an item for more than you paid you are required to collect the difference and pay the tax. An example would be say you bought a panel with breakers and it cost you $200.00 you would pay $12.50 to the supply house for the tax. Now you use the panel and mark it up 20% you are now required to pay the sales tax on the $40.00 profit you made off the sale or another $2.60.

I never give breakout pricing for material versus labor I only quote lump sum. If someone wants to nit pick the cost of material versus labor its not worth doing the job. i would always put the cost of the markup into the labor so that if you are ever audited they cannot trace the markup on material. I did get caught about 20 years ago on a generator that I bought out of state and did not pay the sales tax on. it was my fault for not paying the tax at the end of the year.

If you are the low bidder most people won't argue with you about the material cost vs the labor.

just my 2 cents

 

[SPERRY2557]

Mass sales tax

Mass sales tax

I just went thru this also.

Called the state and asked how to do this. Guy on the phone says your a contractor, we allow you to pay taxes when you purchase your material and consider the matter closed. I said but you must want the sales tax collected on the mark up? He actually said no we consider that a gift to you. Never heard that one before. Especially in the Peoples Republic of Taxachusetts. So next I go to my accountant. She says I have to buy tax exempt as a reseller, mark up then collect the taxes and send into the state on a quarterly basis. Now I'm confused so I call the state back and again they confirm what the previous guy said. So I'm paying the accountant and I do it her way. Too much paperwork. I attended a small business tax seminar put on by the state. The last thing the speaker said was essentially the same as my accountant, but then he says UNLESS your a contractor. Because there are so many contractors they simplify their end of collecting sales tax by having us pay upfront. Much easier. You still have to file quarterly but the paperwork is greatly reduced.

Check with your accountant before doing anything. Good luck.

 

[CT Tom]

Sounds like the same rules in CT.

 

[gadfly56]

In NJ you do NOT pay tax to the supply house. You give them an ST-3 reseller's certificate and that's that. If you do work directly for the customer, you charge him sales tax. If you do work for a GC, you tell him to give you an ST-3 and that's that.

 

[goldstar]

A lot of good advice so far. :thumbsup: I know we're talking about the Peoples Republic of Taxachusettes (that was a good one - laughed for a long time) but NJ is not far behind. We discourage so many business to stay here (with our tax laws) that they're moving out in droves. Here is a link to the NJ-ST-3 form

http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st3.pdf .

I don't know if MA has a similar form but the long and short of it is, is that the states (no matter which ones they are) want their "vig". As was previously mentioned, if you choose to pay the sales tax at the supply house and you bump up the price of materials to your customer you will have to pay the sales tax on the difference between what you paid and what you charged your customer. Try keeping track of that accounting nightmare.

If you are doing work that qualifies as a capital improvement (in NJ) you can use an ST-8 form :

http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st8.pdf

I'm not sure if MA has a similar form but in this case if you quoted your customer a fixed price, in the form of a proposal contract, for total labor and material (and not an itemized invoice) you don't have to charge any sales tax as long as you paid the sales tax on the material you bought at the supply house.

I use this form in most case for the work I do but generally speaking, I only charge sales tax on my labor if I go out on a service call to make a repair. I've never charged sales tax on materials I've installed. I know we're all entitled to make a profit on what we sell but can you imagine letting your customer know that you bought something for a dollar, then marked it up 20% and then charged her 7-8-9-10% sales tax on top of that ? How long would you be in business ?

 

[gadfly56]

A lot of good advice so far. :thumbsup: I know we're talking about the Peoples Republic of Taxachusettes (that was a good one - laughed for a long time) but NJ is not far behind. We discourage so many business to stay here (with our tax laws) that they're moving out in droves. Here is a link to the NJ-ST-3 form

http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st3.pdf .

I don't know if MA has a similar form but the long and short of it is, is that the states (no matter which ones they are) want their "vig". As was previously mentioned, if you choose to pay the sales tax at the supply house and you bump up the price of materials to your customer you will have to pay the sales tax on the difference between what you paid and what you charged your customer. Try keeping track of that accounting nightmare.If you are doing work that qualifies as a capital improvement (in NJ) you can use an ST-8 form :

http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st8.pdf

I'm not sure if MA has a similar form but in this case if you quoted your customer a fixed price, in the form of a proposal contract, for total labor and material (and not an itemized invoice) you don't have to charge any sales tax as long as you paid the sales tax on the material you bought at the supply house.

I use this form in most case for the work I do but generally speaking, I only charge sales tax on my labor if I go out on a service call to make a repair. I've never charged sales tax on materials I've installed. I know we're all entitled to make a profit on what we sell but can you imagine letting your customer know that you bought something for a dollar, then marked it up 20% and then charged her 7-8-9-10% sales tax on top of that ? How long would you be in business ?

This is exactly what our friends across the pond have to do with their value added tax (VAT).