Tax On Labor?

 
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Old 04-23-2008, 08:55 AM   #1
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Tax On Labor?


Is it standard to charge tax on labor? Here is my situation: Got a proposal from a welder for work, which included labor and materials. I accepted the proposal, met him and gave a deposit for half the amount in the contract. He finishes the job and sends me a final bill. Final bill was for the other half of what we agreed upon, then he added in tax for the total amount. I told him I agreed to x, not x plus tax. He said okay but in the future I am taxable. First- if your price is x plus tax, tell me that. Second- he added tax to the entire job, not just on materials. Is that right? -Chris
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Old 04-23-2008, 09:11 AM   #2
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Re: Tax On Labor?


State law applies

In my state we tax everything (not food). If I build you a $500,000 house I'm going to charge you another $35,000 tax. I am exempt from paying tax on materials and labor that go into the house but not ancillary stuff. I must pay tax on Architectural fees, tractor rental, tools (including saw blades), dump fees, overhead expenses, etc, anything that is not included as part of the house. Since I add those costs into the cost of the building, the customer pays double tax on those items.

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Old 04-23-2008, 10:12 AM   #3
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Re: Tax On Labor?


I looked up the Texas sales tax guidelines-

http://info.sos.state.tx.us/pls/pub/...=1&ch=3&rl=300

Quote:
(b) Manufacturer's responsibilities.

(1) Collection of tax. Persons who are engaged in the business of fabricating, manufacturing, processing, or custom manufacturing must collect sales tax on the total sales price of the manufactured item or accept a resale or exemption certificate in lieu of the tax. The sales price includes the cost of materials, labor or service costs, and all expenses that are connected with production. Persons who fabricate, custom manufacture, or process tangible personal property that the customer furnishes, either directly or indirectly, must collect tax on such fabricating, custom manufacturing, or processing charge. Manufacturers shall pay or accrue sales or use tax on all items used in the manufacturing process that do not qualify for exemption from tax. A manufacturer who purchases tangible personal property tax free by means of an exemption certificate or resale certificate and subsequently uses the item for a nonexempt purpose is responsible for tax as provided in subsection (k) of this section.
If you had shown your sales tax exemption certificate, you would not have paid sales tax and would then charge your customer the sales tax.
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Old 04-23-2008, 10:49 AM   #4
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Re: Tax On Labor?


They have been talking about adding
service/labor to sales tax here.
I really don't want to be a tax collector
and have even more yummy paperwork
for the state as well.
As it is now we can just pay sales tax on
our material and pass it through....
so much easier.
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Last edited by neolitic; 04-23-2008 at 12:29 PM. Reason: spelling and eyesight
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Old 04-23-2008, 12:16 PM   #5
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Re: Tax On Labor?


Same here ,tax on material only.I work 7 different cities in 4 different counties,the first of the month is always so much fun when I figure who gets what.
I've heard talks on taxing labor,what the hell is that? This tax stuff is out of hand.I pay 35.8% for myself,up to 9.5% sales tax,and someone wants more tax money? Frickin lovely,politicians suck!
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Old 04-23-2008, 12:59 PM   #6
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Re: Tax On Labor?


In FL it gets pretty goofy. There is no tax on services UNLESS you add materials then the the whole (labor and materials) is taxable. To make things even more fun, different counties have different tax rates and you have to collect the proper amount for the county in which the work is being performed.

This means that you have to break out all of your invoices every time you send in your collected taxes. This can also be done monthly, quarterly or annually depending on how somebody feels when they issue your tax #.
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Old 04-23-2008, 06:51 PM   #7
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Re: Tax On Labor?


In NY, as a distributor and installer, I have to collect sales tax from Contractors for materials. I do not collect sales tax from HO's on my labor. But the homeowner must fill out a Capital Improvement Tax Exempt Form to get the exemption on labor. I still have to pay the sales tax on the materials I buy for stock but not to the homeowner. I have to add it into the total cost to recover it....in 35 counties and 9 different tax rates! I.E. .08375% .07625% etc..
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Old 04-23-2008, 07:54 PM   #8
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Re: Tax On Labor?


As I said earlier, we tax everything and send the tax to the state. We break it down also, reported by government entity with each having its own rate.

We have 1.75 million people and 98 different tax districts, 98 different rates.
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Old 04-23-2008, 08:02 PM   #9
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Re: Tax On Labor?


thats bull, if you want tax, show it in the estimate, if its not in the estimate tell him to f off
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Old 04-23-2008, 08:35 PM   #10
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Re: Tax On Labor?


I would like to think that most people understand taxes. I understand that if I go to the grocery store and buy a steak and some potato's it's unprepared food and there is no tax. If I order the same in a restaurant, it's going to be taxed. When I buy a pair of shoes the price says $XX.XX but I know that tax will be added at the POS.

These are basics. I'm amazed that some people could be ignorant enough not to know this stuff.
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Old 04-23-2008, 09:39 PM   #11
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Re: Tax On Labor?


The state of Connecticut has what they call a Sales and use Tax,which has many confused as to who pays and when.

The basic rule is that any work done on commercial property or multi family homes is taxable has taxable labor and materials.

However,if you pay tax when materials are purchased,than it is not taxed a when you charge the customer.

You really have to look deeply into which items or labor is exempt for every different project.

So d-rez,maybe Texas has an exemption for work done to personal property that isn't used in your business.That Texas tax guideline seems to cover the manufacturing end of the business:
(1) tangible personal property that will become an ingredient or component part of tangible personal property that is manufactured, processed, or fabricated for ultimate sale;
Depending on the project that the welder worked on,you may be exempt.

I would never add tax to a finished product without letting the client know that it is going to be added to the final estimate.
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Old 04-24-2008, 08:08 AM   #12
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Re: Tax On Labor?


I hear you, Teetor. I guess my OP was ambiguous(what?! You can't read my mind??!). 14 years in constuction and this was the first time a sub tried to tack on tax at the end. I get several quotes, and when a sub turns in a proposal, I expect to pay the price quoted, unless a Change Order was written. -Chris
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Old 04-24-2008, 09:16 AM   #13
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Re: Tax On Labor?


Here in PA materials are taxable, labor may or maynot be. I contacted the state and found out the general rule is that labor is taxable if the original purchase was taxable. You didn't pay sales tax when you bought your house, so no sales tax on labor. You did pay sales tax when you bought your mobile home so you pay sales tax on labor. I don't work on mobile homes and I pay the sales tax on the materials when I purchase them so I don't have to deal with sales tax on the customer end.
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Old 04-24-2008, 11:07 AM   #14
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Re: Tax On Labor?


Here in Jersey one of out biggest industries, is taxation, they chased out all the manufacturing and are not business friendly, so we have to check all the time to make sure the laws did not change, because if we make a little mistake, they treat the business person like a criminal and cheat, they access big penalties, so at least in Jersey check the laws, and be sure to follow the rules of the state mob.
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Old 04-24-2008, 03:02 PM   #15
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Re: Tax On Labor?


Dustball got it right - in Texas at least. A welder, if fabricating a particular item, is acting as a manufacturer in the sense that you are receiving a finished product in the end. So, labor is part of the finished product and it is taxable. Same goes for cabinet shops here too - at least that's the way the tax folks in Austin explained it to me when I set up some four years ago.
I buy materials, supplies, etc tax free and then add on the 8.25% at the end.
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Old 04-24-2008, 03:06 PM   #16
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Re: Tax On Labor?


Sales tax, business tax, income rax, transfer tax, disposal tax, recycle tax, State tax, & Federal tax, etc. Damn, so many taxes they can joke people's throats with!
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Old 04-24-2008, 05:51 PM   #17
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Re: Tax On Labor?


In Colorado, materials are taxed, labor is not. (I thought that is what our friends at the IRS were for)
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Old 04-24-2008, 10:21 PM   #18
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Re: Tax On Labor?


Ever have one of your subcontractors ask for your tax ID #?
So they could show the states sales tax comptroller, and not get nailed for the sales tax.

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