Sales tax

[iand74]

Does anyone have a good resource for whether or not I should charge sales tax?

I'm a small business doing a mixture of time and material and bid jobs.

The way I understand it: if I charge time and material and add a % on to my materials then

I should not pay a sales tax when I buy material

Charge a sales tax for the customer after I mark up


But if I do a bid job and don't seepage labor and material then

I can pay sales tax at time of material purchase

Not charge a sales tax for the customer on the bill.

Any advice would be appreciated.

Thanks

 

[infinity]

What state are you in?

 

[mjf]

Yep, states have different laws.

The only time I don't pay sales tax on purchases is if it's for a Tax exempt customer (non-profit, municipality, federal credit union, etc) and I have their tax exempt ID number. They also don't get charged sales tax by me.

As far as charging customers and paying state sales tax, capital improvements (with proper paperwork filled out) are exempt. All materials used for service or repairs gets charged and paid.

 

[LEO2854]

Does anyone have a good resource for whether or not I should charge sales tax?

I'm a small business doing a mixture of time and material and bid jobs.

The way I understand it: if I charge time and material and add a % on to my materials then

I should not pay a sales tax when I buy material

Charge a sales tax for the customer after I mark up


But if I do a bid job and don't seepage labor and material then

I can pay sales tax at time of material purchase

Not charge a sales tax for the customer on the bill.

Any advice would be appreciated.

Thanks

Here we pay the sales tax up front,there is no sales tax on labor.

However each states has different laws and regulations.

 

[petersonra]

It is different in every state and sometimes even within a state on just what gets charged sales tax.

In some states there is tax on both labor and materials. Most states only tax materials.

Some states do not tax materials used in capital projects, but for repairs it is taxed.

Some states the sales tax is paid by the contractor when he buys the material and in other states the contractor has to charge it to the customer and then remit it to the state.

 

[ramsy]

In my State, enforcement actions by the Contractors State License Board (CSLB) published in the public domain, help clarify laws that apply to contractors.

I am not aware of any comprable enforcement body that clarifies State sales tax reporting in similar fashion, unless State sales tax enforcement is combined with income-tax reporting.

 

[Fulthrotl]

Does anyone have a good resource for whether or not I should charge sales tax?
Any advice would be appreciated.

Thanks

in california, at least.... you can file for a resale permit,
and you don't have to pay tax when you buy something using the permit,
but then you have to collect sales tax on it when you sell it, and then you
have to send the tax money in, and maintain records, anda, anda, anda.

so, in effect, you are an unpaid agent for the state of california, subject
to audit, and all the regulatory crap that goes with this volunteer position.

if i buy material, pay the tax on it when i purchase it, i'm done. the state
doesn't have any interest in what i'm doing, and could care less. i can
install it, or bury it in a hole in my backyard.

+1 on plan B..... my invoices to customers never show tax, just the
amount they owe me.

 

[goldstar]

As has been previously mentioned, it depends on the State that you're in. If you're in NJ you'll probably be using the following forms :

• ST-3
• ST-8
• ST-13

The way I understand it is if you "itemize" your invoices (for time & materials) to your customer you should be charging sales tax on both labor and materials. So, you can work this out with your suppliers by providing them with an ST-3 resale form. That way they don't charge you sales tax on the initial material purchases. If you don't do that you'll end up paying sales tax on the materials up front. If you charge your customer the exact same price you paid for the materials then you'll only have to charge sales tax on your labor. But who does that ? You should be making a profit on the sale of materials. So, if you aren't paying sales tax on the initial purchase then you can mark-up the materials with the profit margin you want to make and charge sales tax on that. However, if you pay the tax at the supply house you're supposed to charge sales tax on the "difference" between what you paid and what you charged your customer. But who does that ? If you pay the tax up front, mark up the material and then charge your customer sales tax on top of that then (in essence) you're double taxing your customer.

If you quote your customer a fixed price to do a job that qualifies as a "capital improvement", you pay the sales tax on the materials up front, don't charge sales tax on your labor and fill out and have them sign an ST-8 form that you keep for your records (in the event you get audited).

If you do work for a non-profit organization, NJ or Federal organization or a qualified housing sponsor you have to provide your supplier with a ST-13 form. That way you are not charged sales tax on the materials and you don't charge sales tax to your customer on anything.

Sorry to sound like an accountant but I hope this makes sense.

 

[JES2727]

As has been previously mentioned, it depends on the State that you're in. If you're in NJ you'll probably be using the following forms :

• ST-3
• ST-8
• ST-13

The way I understand it is if you "itemize" your invoices (for time & materials) to your customer you should be charging sales tax on both labor and materials. So, you can work this out with your suppliers by providing them with an ST-3 resale form. That way they don't charge you sales tax on the initial material purchases. If you don't do that you'll end up paying sales tax on the materials up front. If you charge your customer the exact same price you paid for the materials then you'll only have to charge sales tax on your labor. But who does that ? You should be making a profit on the sale of materials. So, if you aren't paying sales tax on the initial purchase then you can mark-up the materials with the profit margin you want to make and charge sales tax on that. However, if you pay the tax at the supply house you're supposed to charge sales tax on the "difference" between what you paid and what you charged your customer. But who does that ? If you pay the tax up front, mark up the material and then charge your customer sales tax on top of that then (in essence) you're double taxing your customer.

Goldstar-
NJ contractors always pay sales tax on materials. ST-3 is for retailers and "fabricator/contractors".
It's all here:
http://www.state.nj.us/treasury/taxation/pdf/pubs/sales/su3.pdf
( see page 4, & page 8)

I pay sales tax up front and collect tax from my customer based on their total cost ( my cost plus mark-up). Yes, it's double taxation. The government's not going to come after me for sending them too much money. But if I get audited and they ask "What's the deal with all these ST-3's?" I'll have some 'splaining to do.

 

[ramsy]

in california, at least.... you can file for a resale permit,
(or without regulation) ..pay the tax on it when i purchase it, i'm done.

Thx.

 

[goldstar]

Goldstar-
NJ contractors always pay sales tax on materials. ST-3 is for retailers and "fabricator/contractors".
It's all here:
http://www.state.nj.us/treasury/taxation/pdf/pubs/sales/su3.pdf
( see page 4, & page 8)

I pay sales tax up front and collect tax from my customer based on their total cost ( my cost plus mark-up). Yes, it's double taxation. The government's not going to come after me for sending them too much money. But if I get audited and they ask "What's the deal with all these ST-3's?" I'll have some 'splaining to do.

Hi Jes

I want to believe that what you say is true but everytime I meet with accountants in my local Chamber of Commerce this is what they tell me. I generally pay the sales tax up front and make my mark-up accordingly. I charge sales tax on my labor if it's a service call. If it's a capital improvement I don't and I include an ST-8 form with my invoice. There are several contractors in my association that work the way I've described. I guess it all boils down to whether you get audited or not. Then you'll know. Not sure where you are in NJ but there's a NJ State tax office on Rt 208 (south) in Hawthorne (across from Nabisco - you can smell the cookies in the AM). You can stop in and ask them what the proper way to do this is. I've done that several times and what I described is what they've told me. That doesn't mean they're right. Maybe they haven't read the bulletin