# Tax question



## noahweb (Feb 9, 2010)

What do you charge for the tax on your remodeling jobs?

Just the typical sales tax (8.25%)?

Not sure how all that works


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## Elite_Drywall (Feb 23, 2009)

Charge 30% of the job, when you file your taxes IRS will charge 30% in taxes of what you made. Also an extra $500 for being self employed.


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## rselectric1 (Sep 20, 2009)

Noah, I'm sorry but I must be frank with you. Sales tax is charged on a state and local basis and varies.

With all the questions you have posed on the forum in the last couple days, I can tell you are a very detail oriented person and that is one of the things that will make a GC successful. I wish some of the GC's I sometimes work for as a sub had your attention to detail.

However, the questions you are asking smack of inexperience. I know you have admitted to being new, but please consider some co-op ventures with an experienced GC who can mentor you as well as hiring an accountant and a lawyer who can advise you accordingly. Yeah, you will have to spend some of your profit, but I can almost guarantee that you will be ahead in the end. By bringing on an experienced GC as a co-op, you will learn the do's and don't of the jobs and he will save you untold headaches and losses.

Please don't take this personally. None of us were born with all the answers, and I personally have endured a bunch of black eyes learning things the hard way. I admire your attention to detail immensely.

Don't be afraid to pose your questions here as most of us regulars are willing to help out a potentially great future GC.

Just don't base all your decisions on what you glean from CT.


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## pcplumber (Oct 12, 2008)

*You don't charge sales tax when contracting*

Of course, check with your accountant.

When you contract a job, your contract price includes the materials, the tax you paid at the supply house (which is the best option), and labor. When you are not doing a 'Time & Materials' job you never break down the materials. 

If you are doing a 'Time and Materials' job your question is obvious. You break down the materials and charge the sales tax rate for your area only if you have a resale permit (license).

But, my advices is; never apply for a resale permit and never re-sell materials. Make every job a 'contract' job that includes labor and materials, even when doing a $50 job. This way, you never have to report to the board of equalization (sales tax board).

The way we do this legally is; we pay sales tax at the supply houses when we buy our materials, include the materials in contracts and don't have to report to anybody.

About 30 years ago, I had a resale license. I didn't know what I was doing and was estimating the cost of materials used on jobs. I was audited and had to pay $17,000 plus $13,000 for late fees and penalties. I closed my resale account 30 years ago, pay sales tax at supply houses, and never had another problem.

Now, if you buy a valve at a supply house, pay $10 for the valve, charge the customer $30 for the valve, and charge sales tax, you would be doing something illegal when you don't have a resale permit. Therefore, don't sell supplies. Only include them in contracts.

When a home buyers purchases room additions and homes there is no line on the sales agreement for materials used to build the homes.


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## We Fix Houses (Aug 15, 2007)

Pretty much what PC said and my view also on this thread

http://www.contractortalk.com/f16/sub-taxes-61062/


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## Five Arrows (Jan 30, 2010)

*State Specific*

If I get the intent of your post it is in reguard to sales tax. This is a state specific issue as not all states have this. Also you don't charge sales tax you collect it. You do not get to pick and choose what is taxed this is set by the taxing body.

I can only speak to Washington state but here is the scoop.

You need a state issued UBI universal business identifier number. On a quarterly basis you will need to file a report/ payment with the dept of revenue. In addition to state taxes and business license you will need to have a license for every city you do business in. Each requiring a quarterly report sent to them. Sales tax rate is determined by address (seriously) Every jurisdiction has it's own tax. Every tax collection jurisdiction has it's own code that you will need to report.

As a special present the state will hit you with a Business and Occupation tax because generate and collect taxes for them  I digress.....

If you do not collect the correct tax you are fined for over collection and personally responsible for under collection.

If you build spec houses the materials are taxed to you when you buy them. When you sell the house it is not subject to sales tax. If you build or remodel for a customer the materials may be purchased tax exempt and the total contract (regardless of materials included or separated) is subject to sales tax.

Rob


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## griz (Nov 26, 2009)

On the Southern West Coast (Calif) if you pay the sales tax on material when you buy it your not on the hook to pay any sales tax. You don't want to be involved with the Franchise Tax board any worrying about sales tax.


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## noahweb (Feb 9, 2010)

Elite_Drywall said:


> Charge 30% of the job, when you file your taxes IRS will charge 30% in taxes of what you made. Also an extra $500 for being self employed.


IRS charges 30% of profit, not gross revenue, correct?


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## noahweb (Feb 9, 2010)

Rsectric....

Your advice is well received and would never feel like someones giving it to me on the chin

but oftentimes businesses start because your thrown into it and you just need to learn as you go.

I degreed in "entrepreneurship" and come from a father who his an entrepreneur.

I openely accept the risk of inexperience, but attempt to minimize my exposure by learning here.

I am fortunate to have an attorny friend helping me form an LLC, a highschool buddy helping draft um GL insurance, and an accountant that handles my families businesses available when the time comes. But even with that I know I can't cover it all

anyways I digress too. Thanks for the continued help


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## brm1109 (Oct 28, 2008)

Here in NJ the sales tax is 7%. I collect it in the bill and then I mail the state the check at the end of the month when I file it. Just make sure you are not late, they will charge you penalties.


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## SilverFish (Nov 16, 2009)

Sorry to resurrect an old thread, but I am curious about the tax of "retailing" which is imposed on the contractor in the state of WA.

Do I:
1.) Work this into the state (6.5%) and federal (1.2%) tax total (comes to 7.7%) and get a final tax total of 8.17%?
2.) Eat this cost and take it out of my profit?
3.) Bury it in my management fees?

I am an OR contractor doing a first time project in WA.

Thanks.


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## Kgmz (Feb 9, 2007)

Silverfish,

First do you have a license to do work in the state of Washington? Contractor and Business.

If you did you would know what is required of you, they won't let you forget. 

The state would be sending you letters, forms, etc. that you have to fill out every quarter and send in even if you did no business in the state that quarter.

Edit:

Forgot you send first time project. When you got licensed in Washington they should of given you all the info you need. If not here are some links below.

Washington Labor & Industries, contractor licensing and workmens comp.
http://www.lni.wa.gov/

Washington State Business licensing
http://bls.dor.wa.gov/

Washington State Department of Revenue, sales and business tax
http://dor.wa.gov/Content/Home/Default.aspx

Washington State Employment Security, unemployment tax
http://www.esd.wa.gov/


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## SilverFish (Nov 16, 2009)

Thanks Kgmz.

I do have a license, both contractor and business. The project is located in unincorporated Clark County in Washougal, so it is not taxed the normal rate. The state and local taxes are 7.7% (6.5%+1.2%).

My question is what I am to do with the retailers (state business and occupation) tax which is 0.471% (it comes decent amount of money given the size of this project). According to the folks at WA DOR, I (my company) am responsible for this tax and not the client, so I am not allowed to pass it on to the client. I don't like that. I would not have to pay this tax if it were not for the job.

I want to know what others are doing with this tax: Eating it, passing it on, hiding it in management costs, etc.?

Thank you for the links, I have them in my browser bookmarks as I us the e-file function monthly.

I am looking for a general answer of what others do with this tax as I would like to do the norm, not reinvent the wheel.

Thanks.



Kgmz said:


> Silverfish,
> 
> First do you have a license to do work in the state of Washington? Contractor and Business.
> 
> ...


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## Kgmz (Feb 9, 2007)

B & O tax, yes you are responsible but there is no reason why you cannot charge the client more to cover this, just don't list it as a line item. Basically you are paying this tax with your profits hopefully, now who is to say how much profit you can make.

I have always had a problem with Washingtons B & O tax, they say they do this since we do not have a income tax. But you pay this tax whether you make a profit or not, whereas in Oregon with their income tax you only pay if you make a profit.

As for the B & O rate, you have a typo or something there. The B & O rate is .00471 and has been the same for the last 30 years or as far as I can remember. That number has been stuck in my head forever. In reality you are only paying $47.11 on every $10,000.00. or $471.10 on a hundred thousand dollar job.

B & O tax rates
http://dor.wa.gov/Content/FindTaxesAndRates/BAndOTax/BandOrates.aspx


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## SilverFish (Nov 16, 2009)

Thanks Kgmz, that's what I figured I would do with it. It's nice to know others in the area are doing the same.

There is no typo. 0.471% translates to 0.00471 in decimal form when calculating.


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## Kgmz (Feb 9, 2007)

My mistake, didn't pay attention to the percentage sign.

So used to just punching in .00471 and multiplying on the calculator.


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## Randy Bush (Mar 7, 2011)

Glad we don't have a sales tax yet. I even will do the paper work to not pay it when going to surrounding states.


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## dprimc (Mar 13, 2009)

B&O tax is part of your operating costs and should be used to figure out what to charge in the first place. It isn't 'passed along' but certainly needs to be considered in pricing. 

Dave


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