Virginia Sales Tax...?

SASR

When is it appropriate to charge and collect sales tax?

To my knowledge, one would charge sales tax to the end user. However, we just had a situation where the end user provided the material, we manipulated it, and subsequently returned it. Hence, it was labor only...Should sales tax be charged?

I have scoured the interwebs, but finding information on the VA tax site is....well....not easy. Any sources would be appreciated!!

naptown CR

nope

tinner666

You only charge sales tax when buying and selling merchandise is a part of your business. My roofing and Sauce businesses are seperate entities. I charge and report/pay sales taxes with my retail sales.

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Frank Slate Roof Repairs, Richmond, Va.

Century Man

I'm a contractor who specializes in home remodeling. Since I have to pay sales tax on the supplies I purchase for each job, can I then charge my clients sales tax on those materials?
No. As a real estate contractor, you are considered to be the user of the materials under Virginia law. Therefore, you must pay sales tax on your purchases of building supplies. The law does not allow you to charge your clients sales tax on the materials for which you have already paid the tax.

This information was aquired from this web address.
http://www.tax.virginia.gov/site.cfm?alias=businessfaq2

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Arlington, Alexandria, Fairfax remodel
Northern Virginia interior and exterior remodel
FW&D Remodeling Services blog

Aframe

In General

re: Century Man, right on

You would have the tax you paid on materials you supply included in your markup. Not as a separate charge

P.Williams

I'm confused. You mean we can't include the tax we pay on materials on our bills to customers when working T&M or Cost+, and that we're supposed to incorporate these taxes into our profit and overhead rates? Or that we just can't list it as "tax" on bills to customer, or something even different?

ottagosoon

You can write your bill any way you want.

Plywood $20.00
sales tax $ 1.00
Labor $20.00
TOTAL $41.00

or
Plywood $21.00
Labor $20.00
TOTAL $41.00

Just remember if you buy something on line and that company did not charge you sales tax, remember to send the amount of tax you would have paid into your state. It is a down economy and the state needs your money. sorry their money.

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Can't Say That Here!!!

P.Williams

I'm still confused. Ottagosoon's answers doesn't seem to jive with the link Century Man gave -- like, from the website:

I'm a contractor who specializes in home remodeling. Since I have to pay sales tax on the supplies I purchase for each job, can I then charge my clients sales tax on those materials?

No. As a real estate contractor, you are considered to be the user of the materials under Virginia law. Therefore, you must pay sales tax on your purchases of building supplies. The law does not allow you to charge your clients sales tax on the materials for which you have already paid the tax.

Maybe I'm not the sharpest knife in the drawer, but what does that mean for Cost Plus and T&M?

Aframe

As ottagosoon wrote, you would write up your bill to customer like that


What Century Mans link is saying is that "you" do not add sales tax charges to your marked up material cost to your customer.

So not like this

Material Plywood $23.00 ($20.00+10% MU ($2) +$1. tax you paid)
Tax on material 5% 1.15
Labor 1 hr 20.00

Total $44.15

With Cost Plus and T&M, it's not that you are not passing on the tax you paid for the materials, you are not additionally taxing the marked up price for the materials witch included the tax u you paid.

With T&M, if you don't mark up materials, what ever you paid with tax is what you bill customer.

If you were charging your customer a tax on the marked up price, they would be paying the tax twice.

P.Williams

That's cool, but when in Virginia (not Taxachusetts or yonder) does a contractor charge sales tax?

tinner666

A sales tax is added onto charges for material by the state.

If I pay $950.00 for materials, + $50.00 in tax, I charge $1,000.00 for materials + 20% markup, ie $1,200.00.

The tax I pay is included in the material charge. Pure and simple.
What do you want to do, add 4.5% tax to the $1,200.00? There isn't even a tax form for that.

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Frank Slate Roof Repairs, Richmond, Va.

P.Williams

Thanks tinner666. What's got my mind reelin' is the state's offical description linked by Century Man:

I'm a contractor who specializes in home remodeling. Since I have to pay sales tax on the supplies I purchase for each job, can I then charge my clients sales tax on those materials?

No. As a real estate contractor, you are considered to be the user of the materials under Virginia law. Therefore, you must pay sales tax on your purchases of building supplies. The law does not allow you to charge your clients sales tax on the materials for which you have already paid the tax.

What Virginia builder charges sales tax on anything (labor, materials)? This info also makes it seem like the sales tax can't be passed along. From looking around the internet, I think different states operate under different rules.

tinner666

Our cost is our cost, including sales tax. It can not be singled out and taxed again.

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Frank Slate Roof Repairs, Richmond, Va.

JamesKB2

It sounds like it's the same as it is in MI. When you buy the materials from your supplier, your supplier charges you sales tax on the supplies. This final fee for materials is your cost basis for them.

Then, you install said materials. YOU DON"T COLLECT SALES TAX on them. Since they are being "used" or installed, you're not a retailer. They're supplies to you or the job, not items sold to the customer (like cash and carry).

You charge the customer your cost for the supplies (including the tax you paid) and your markup. You're not a retailer, your a contractor. (installed sales)

Chris Johnson

Could you guys imagine if there was sales tax in construction? All these threads about illegals and unlicensed guys would now be another few % points cheaper since they would avoid that tax as well.

Mind you the gov't of Canada tried to combat it the GST, I wonder how that's working out for them?

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Chris

Magnettica

This topic has piqued my interest since I'm about to start my own EC business.

So if I sell a 200 amp upgrade and materials for the job are say $900.00, I've already paid sales tax to the supplier, am I responsible for paying sales tax to the state now on that $900?

I know this thread is Va, but I'm in NJ.

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Aframe

Magnettica, you paid the tax when you bought it, that's it

JohnCarpenter

In Texas, if you lump sum the invoice to the customer, you pay sales tax when you buy it. The tax is part of cost.

If you itemize the material on you invoice to the customer, you charge sales tax and buy it resale.

Never charge for the labor part.

It's all in how you do your books.

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http://www.jljacksonhomes.com

While running it is considered rude to count the people you pass out load.

TxElectrician

It is my understanding this is correct for residential and NEW commercial. However for existing commercial, sales tax is charged on material and labor.

Treeandland

The tax man came and visited me after I had been going for a couple years. He told me if I was buying plant and landscape materials and providing to the customer I needed to buy them tax exempt, seperate the materials on my invoice, showing materials, tax and labor and then send them a report/pay the tax each quarter.
I settled for buying some of my stuff like that but never breaking down my invoices. They wanted to know if I marked up the materials and tax me on the marked up price too! I just told them I make my money on the labor

Supposedly a new law was recently passed where landscapers don't need to report anymore and can go back to just paying the tax at the supplier. I still have a couple accounts that I want to change back to this but haven't had a chance to investigate it fully.