Are you in an industry that performs improvements or repairs to homes?
We recently came across the following question: Does a contractor need to charge sales tax on materials used in a project?
We are all accustomed to seeing bills broken down as parts & labor, so now we can ask: “Is your new deck a flat rate project, or does it get billed as parts & labor?” What we discovered was that in the jurisdiction where this contractor does business, the rule is that anything that is “attached to real property” is sales tax exempt to the client – meaning the materials used in a project or repair that becomes built into the home*. So, with the guidance of your CPA, you may want to consider simplifying pricing on qualifying work. It’s less confusing to the client, and saves you time and effort calculating and submitting sales tax for materials that you may not need to bill tax for*.
*This information is based on our research for this specific situation, please confirm local rules with your CPA and local State Sales Tax Administration before making any changes to how you bill.