Sales tax

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electrofelon said:
Actually pretty much yes. I cant remember the last time I did something that wasnt a capital improvement. I dont actually work that much in NYS, most of my work is in the Seattle area.
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If you have an individual invoice with just a reasonably small amount of parts on it and only one to four hours of labor, it probably at least makes auditor want to look a little harder at it.

If your invoice has description of work that was done it may help some, either direction in determining if it was capital improvements.
 
My labor is not taxable here, there had been times in past where some of it was, depended on those capital improvements situations to some extent. That was a mess when those services were taxable labor. Had contractors (not just electricians) that never had sales tax permits and been in business for years because they were primarily doing services that were not taxable all of a sudden getting notices that they needed to apply for tax permit and begin to collect and remit tax. Then about a year maybe two later they changed the laws back to the way they always had been in regards to taxing labor on those applications.
 
kwired said:
If your invoice has description of work that was done it may help some, either direction in determining if it was capital improvements.
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Install new ceiling fan with new wiring and switch= labor and material all taxable because the fan can be removed and used somewhere else. Fan is considered tangible property.

Install new wiring and switch for ceiling fan= no tax for customer, capital improvement, no mention of installing or supplying tangible property (fan). Customer must sign a completed Certificate of Capital Improvement for you.

Install new lights, wiring and dimmer= labor and material all taxable. "Lights" is not defined.

Install new recessed lighting with new wiring and dimmer= no tax for customer, capital improvement because nothing can be easily removed and used elsewhere. Includes no tangible property. Customer must sign a completed Certificate of Capital Improvement for you.

See how important the wording of work descriptions is?

-Hal
 
hbiss said:
Install new ceiling fan with new wiring and switch= labor and material all taxable because the fan can be removed and used somewhere else. Fan is considered tangible property.

Install new wiring and switch for ceiling fan= no tax for customer, capital improvement, no mention of installing or supplying tangible property (fan). Customer must sign a completed Certificate of Capital Improvement for you.

Install new lights, wiring and dimmer= labor and material all taxable. "Lights" is not defined.

Install new recessed lighting with new wiring and dimmer= no tax for customer, capital improvement because nothing can be easily removed and used elsewhere. Includes no tangible property. Customer must sign a completed Certificate of Capital Improvement for you.

See how important the wording of work descriptions is?

-Hal
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Again depending on local tax jurisdiction rules, "repair existing ceiling fan" might not be deemed a capital improvement, replacement may or may not be.

When we had that short time where some labor was taxable, building a new home the labor was not taxable, adding an addition, depended on how much value that addition was compared to rest of the home, and was sort of a mess to deal with. Most additions were not taxable, but some were. This was just the labor, rules involving materials never changed during that time and there was and still is cases where you as contractor pay tax on your purchase and do not charge tax to customer and others where you must charge tax to customer whether you paid tax on your purchase or not, you can take credits when you file your return if you collected from customer and also paid on your purchase, otherwise that would be a double taxing on same items.

What is just about criminal IMO in this state is charging sales tax on sale of a used automobile and other similar items. These taxes are not charged by dealers or other sellers, but rather are collected at time you register and pay other fees related to that vehicle. You can get around this by selling the vehicle at no cost or even for just $1, especially for cases where say grandpa decides to give his old car to the grandchild.
 
I dunno... ceiling fans (and chandeliers &c) considered 'removable and usable elsewhere?' If a fixture is 'special,' I can see a homeowner removing it and taking it with them when they move. But until then, a fixture is generally put in one place and left there.

Where is it that a ceiling fan is considered 'tangible property?'
 
hbiss said:
Who's paying tax twice?

-Hal
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The home owner is

This is what you said so someone is paying twice or you are once and they are also on the same item. Or am I reading that incorrectly

Yeah, the customer gets charged tax on the total of the material, plus the tax you paid for it when you bought it, plus your markup, but that's life.
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PaulMmn said:
I dunno... ceiling fans (and chandeliers &c) considered 'removable and usable elsewhere?' If a fixture is 'special,' I can see a homeowner removing it and taking it with them when they move. But until then, a fixture is generally put in one place and left there.

Where is it that a ceiling fan is considered 'tangible property?'
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Absolutely. Because it CAN be removed without damage and used elsewhere makes it tangible. Doesn't matter what the homeowner might do.

Dennis Alwon said:
The home owner is... This is what you said so someone is paying twice or you are once and they are also on the same item. Or am I reading that incorrectly
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electrofelon said:
Some people might "pay twice" just to avoid the hassle. Like in Washington if I pay tax at the source when buying materials, its extra paperwork when filing the sales tax for deducting tax paid at source, so I imagine some people dont bother to deduct the tax paid at source.
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Correct. Also, you don't think of it as paying the tax twice. The contractor marks up or includes the tax he paid at the supply house in the price he charges the customer for the item because that's what he paid for it. It's just another amount you have to add to the cost of the material like a shipping charge.

Even if you bought an item at HD, paid sales tax on it at the time of purchase and handed it to the customer without any installation or anything, if you billed him through your company you have to collect sales tax on the item cost plus the sales tax you paid to HD. Why? It's a retail sale to your customer and you have to collect sales tax on it. If you only showed the actual item amount and charged sales tax on that you would be losing money because you paid HD the tax and now you are paying it again to the state.

There are ways around that like I said with resale certificates and claiming credits if you want to spend the time and money on all the extra work. So what it amounts to is the customer has to pay one way or another.

-Hal
 
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hbiss said:
Even if you bought an item at HD, paid sales tax on it at the time of purchase and handed it to the customer without any installation or anything, if you billed him through your company you have to collect sales tax on the item cost plus the sales tax you paid to HD. Why? It's a retail sale to your customer and you have to collect sales tax on it. If you only showed the actual item amount and charged sales tax on that you would be losing money because you paid HD the tax and now you are paying it again to the state.

-Hal
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That's why you get a tax certificate so you don't pay the sales tax at HD, charge it to the customer, and forward the sales tax to the state. How the state divvies up the money between the state, county, city, etc. is another issue!
 
PaulMmn said:
That's why you get a tax certificate so you don't pay the sales tax at HD
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Sure. You give THEM a resale certificate. But the problem is it's going to have to be a blanket certificate which means that you don't pay tax on anything in HD. You'll also have to have an account and stand in line at the pro desk to check out. I doubt that there are many companies that resell what they purchase from HD so I wouldn't be surprised if they tell you they can't do that unless you were a major player in the service and repair business.

Same goes for supply houses. Contractors pay sales tax and figure it out later.

-Hal
 
PaulMmn said:
That's why you get a tax certificate so you don't pay the sales tax at HD, charge it to the customer, and forward the sales tax to the state. How the state divvies up the money between the state, county, city, etc. is another issue!
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In NC we have to categories by county
 
hbiss said:
Correct. Also, you don't think of it as paying the tax twice. The contractor marks up or includes the tax he paid at the supply house in the price he charges the customer for the item because that's what he paid for it. It's just another amount you have to add to the cost of the material like a shipping charge.

Even if you bought an item at HD, paid sales tax on it at the time of purchase and handed it to the customer without any installation or anything, if you billed him through your company you have to collect sales tax on the item cost plus the sales tax you paid to HD. Why? It's a retail sale to your customer and you have to collect sales tax on it. If you only showed the actual item amount and charged sales tax on that you would be losing money because you paid HD the tax and now you are paying it again to the state.

There are ways around that like I said with resale certificates and claiming credits if you want to spend the time and money on all the extra work. So what it amounts to is the customer has to pay one way or another.

-Hal
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I have tax free accounts at home depot, lowes and some online sites as well as with my suppliers. Tax should only be charged on the last sale. That isn'5t difficult at all especially with qb's report for sales tax.
 
Dennis Alwon said:
I have tax free accounts at home depot, lowes and some online sites as well as with my suppliers. Tax should only be charged on the last sale. That isn't difficult at all especially with qb's report for sales tax.
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Like I said, states will have completely different ways of doing this. I can only speak from doing business in NY and what I have to do to comply. Sure, set up a bunch of accounts some for taxable and some for non-taxable items. Use them accordingly, but I don't see where Quickbooks comes in except for keeping track of your sales tax charged on you invoices. Maybe you are a company that can justify having Quickbooks do job costing and add or not add sales tax to what you pay for each item depending on the job. That's above my pay grade. Besides, most service work doesn't involve major material or dollars so it just doesn't pay to go through all that just to save some customer a few bucks. Maybe in your state there is some advantage to doing that. Not here.

-Hal
 
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So if you are the type of contractor that pays sales tax when he purchases his materials You may fall into a different category. But you better be creative & strategic with your invoice verbiage. But even then, you’re still vulnerable.
However, let’s say you purchase the materials for a panel replacement at Home Depot and paid the sales tax.
You gave your customer a quote of $1500 to replace the panel. Would you charge sales tax on top of the $1500 quote?
What I’ve learned is that “ time and material” invoicing can get you into a Jam with State tax . The way you format your invoice can get you in trouble in an audit. If You are itemizing materials even though you already paid the sales tax you may raise a red flag with the auditor. Pay the sales tax at the big box store and provide the homeowner with a quote seems to be the safer option.
Or become tax exempt and go that other option by passing it on to the customer.
like I said from the very beginning this is always a conflicting subject not only with contractors but even with accountants.
I spoke to CPAs, bookkeepers, enrolled agents, and I’ve learned that there is no solid answer. The tax system is a convoluted mess with many variables that may or may not apply to you.
By the way did you know that George Harrison of the Beatles said in an interview that he wanted to be in the electrician?
He also was inspired to write the song taxman.
 
hbiss said:
..Maybe you are a company that can justify having Quickbooks.. That's above my pay grade. Besides, most service work doesn't involve major material or dollars.. Maybe in your state there is some advantage to doing that. Not here.
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Yes, if possible Keep It Simple Stupid (KISS). However, reporting income & expenses is difficult without a transaction ledger, either by hand, spreadsheet, or something like Quickbooks.

One problem with big-dog software is you need an IT department to keep up with forced obsolescence, operating-system upgrades, backup systems, and subscriptions for separate modules and functions excluded from the basic package.

My CSV ledger has used LOTUS 1-2-3 since 1990, on WinXP since 1997, w/ thumb drive backups offline. A ledger prepares me for any CPA, IRS, or audit without bid-dog software platforms, anti-virus systems, hackers, viruses, or security breaches. My iPhone is used for online orders & bank transactions.

In States with income tax, if clients don't purchase material by retail-phone sale, or get the receipt delivered, any truck stock sold for profit after supply expenses, aka (COGS), is properly reported as income and taxed by both Federal & State tax returns.

Have not considered state sales tax exemption certificates, for CA income tax, nor read about any advantages for a minor service businesses.
 
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hbiss said:
Install new ceiling fan with new wiring and switch= labor and material all taxable because the fan can be removed and used somewhere else. Fan is considered tangible property.



-Hal
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Hal where are you getting this from? Is this your personal opinion or is the defined by the state that they consider ceiling fans easily removable?

To each their own, but IMO you are putting too much thought and concern into this. I am pretty sure the state is not going after small electrical contractors for not taxing ceiling fans. Bigger tastier fish out there.
 
electrofelon said:
..I am pretty sure the state is not going after small electrical contractors for not taxing ceiling fans. Bigger tastier fish out there.
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State homeland security monitors all social media.

Keyword hits on tax malfeasance, and manifestoes are forwarded to tax auditing authorities.

Failure to pay 7-yrs of back taxes owed results in confiscating your asset, and auctioning your house for price of the tax-lien certificate.
 
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