# Sales Tax



## MinConst (Oct 16, 2004)

Out of curiosity, how do you guys and gals in other states need to deal with Sales Tax at the time of purchasing supplies?
I have been in contact with our NYS Sales tax and it was confirmed that contractors in NY need to pay sales tax at time of purchase and are allowed to claim the credit on our reporting forms. Along with copies of receipts and the invoice to the customer showing sales tax was collected. This sucks. In a past business I just left a resale certificate with the vendor as a blanket and didn't pay the tax at point of purchase. Now as a contractor I have new rules. This creates more paperwork and record keeping. Is this done in other states?


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## JustaFramer (Jan 21, 2005)

Resale cert. 

They must not trust NY contractors.


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## rservices (Aug 3, 2005)

*wisc sales tax*

Im sure it's more complicated than this, but I run a small repair company and I was told that if I paid the tax on the purchase of items I would not have to charge tax on the resale ( items involved with Repairs) They do allow a reasonable mark-up for resale, Services dont need to be taxed. 

I choose to do it that way instead of getting involved in the hole tax deal, with all the differnt tax's by country, and for god knows what I sounded good to me.

Once in the system it's knothing but paperwork and headaches.

If I change the nature of my company this would have to change.


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## Teetorbilt (Feb 12, 2004)

Paul, you would have to bring this up! From what I gather from this and other sites, it's a nightmare wherever you are.

Here, they figure that double taxation (illegal) is better than no taxation. I have a tax# which I use for major accounts but don't bother to establish an account when in Timbuktu and only need 4 screws. Most of the time, I just build it into the price.


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## slickshift (Jun 14, 2005)

As I am the "user" of the materials, I must pay the "sales and use" tax (as it's now officially called) on them at the time of purchase

Homeowners and new construction I do not have to collect sales tax from
Work on a "revenue generating property" I must collect it for labor
(notice I say collect not charge...I'm not charging them anything, it's the state and I use the term collect to ensure they know that)

Generally I do not separate materials from labor on an invoice, but with commercial, if asked, I will
The reason is, now get this...the commercial entity doesn't have to pay sales tax on materials because it's not the "user" of the materials (I was)

Well, of course I charge them to cover the sales and use tax on the materials I had the pay, it's part of the materials
So they get to "write off" the sales and use tax I payed on the materials

If they ask I will itemize for those clients
I still have to collect tax on my labor

So if I bought $100 of materials (+tax) and did $100 worth of labor (must collect tax) the bill would be

Labor $106.00
Materials $106.00

And they would get to write off the 6 bucks that I already paid in sales and use tax on the materials

It used to be our materials were sales tax exempt for this reason
Too much abuse of that system led to this arrangement


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## Grumpy (Oct 8, 2003)

In IL we are not required to charge our customers sales tax on "Services". The materials do require sales tax, however I as a contractor pay that tax when I purchase the materials and add that tax into my lump sum bid.

You asked, I told. That's how it works in IL.


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## Teetorbilt (Feb 12, 2004)

I forgot to mention 'capitol improvements'. If an item becomes a permanent part of a structure, it is not taxable. Now we travel into some really weird ground and it all depends on who you talk to at the tax dept. Load bearing walls, no tax. Non load bearing walls, maybe. Exterior paint, maybe (it CAN be removed). And on and on and on.

Their biggest answer is when in doubt, charge tax. They work for the state and this is their retirement, why cut your own throat?


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## MinConst (Oct 16, 2004)

And I though NY was the only mess when it comes to taxes. I look at it like Teetors sales tax people say. If in doubt collect the tax. But it burns me to collect a tax on top of a tax. I pay 100 bucks for materials pay 8 bucks in sales tax. Charge the customer 108 + another 8% or keep records that take me extra hours each quarter. We just can't win.
I figured there must have been mucho abuse with contractors to make states do this sort of separation between business types.


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## Bob Kovacs (May 4, 2005)

It's nuts everywhere. In NJ, if you're doing "capital improvement" work on a residence, you pay the tax on materials when you purchase them, and just pass that cost directly to the customer- no tax on labor. If you're doing "repair" work, like sewer cleaning, you charge tax on labor and material (normally you use a resale cert to buy the materials with no tax- otherwise it's a PITA to keep it all organized).

To make matters worse, the state has set up "Urban Enterprise Zones" in some of the depressed inner city areas like Newark and Trenton, where the tax rate is 3% instead of 6%. You need to get certs for jobs in those areas to prove that that work was completed in the UEZ so it isn't taxed at 6%.

And, of course, there's always work for non-profits, government, and other groups that are tax exempt- you need a different cert for those jobs to avoid collecting sales tax or paying it on materials.

Isn't life grand????

Bob


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## pitterpat (Sep 25, 2005)

Grumpy said:


> In IL we are not required to charge our customers sales tax on "Services". The materials do require sales tax, however I as a contractor pay that tax when I purchase the materials and add that tax into my lump sum bid.
> 
> You asked, I told. That's how it works in IL.


Same way I do it in Indiana.


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## Speedy Petey (Sep 30, 2003)

Paul, I was told by the tax folks (through my accountant) that I should pay tax on my material. I do not have to charge it for labor or material for cap impr work. They said I should just figure it into my markup. I am not convinced this was right but this is how I do it. 
I could use a resale cert and charge tax but this would not look right to the customer. I also could not pay and not charge tax but at the end of the year I would get slammed with a huge tax bill. 

Here is some good reading:
[url=http://nystax.custhelp.com/cgi-bin/nystax.cfg/php/enduser/std_adp.php?p_sid=qABADAsh&p_lva=&p_faqid=981&p_created=1081880990&p_sp=cF9zcmNoPTEmcF9ncmlkc29ydD0mcF9yb3dfY250PTE5JnBfc2VhcmNoX3RleHQ9d2hvIGRvIEkgY2hhcmdlIHRheCB0bz8mcF9zZWFyY2hfdHlwZT0zJnBfY2F0X2x2bDE9fmFueX4mcF9zb3J0X2J5PWRmbHQmcF9wYWdlPTE*&p_li=]Shoud I charge tax? [/URL]


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## MinConst (Oct 16, 2004)

Yea I've read that. Clear as a Bell huh. Our wonderful state is so easy to deal with isn't it? That is exactly the type of confusion that made me start the thread. My CPA has been trying to figure it all out since I asked her weeks ago. Some say this some say that. I am doing it the way the tax guy said on the phone. The Cap Imp. has so many holes it is up to us to decipher. And if were wrong they will come knocking.:thumbdown


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## reveivl (May 29, 2005)

If you're following the advice "of the tax guy on the phone", make sure you get his name (s). If he's wrong it won't mean anything, but at least you can drop someone else in the sh*t too. And it makes you more credible with them if you can say "So-and-so told me to do it this way on this date." Rich.


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