Sub And Taxes - Business - Contractor Talk

Sub And Taxes

 
Thread Tools Search this Thread Display Modes
Old 07-02-2009, 10:58 AM   #1
Registered User
 
raydzi's Avatar
 
Trade: general contractor
Join Date: Nov 2005
Posts: 11
Rewards Points: 10

Sub And Taxes


i'm a GC and i just got a bill for rough in work by a plumber.
we agreed time and material.well he is trying to charge me tax.i never payed additional tax.i never deal with t&m so i'm asking what you guy's think.
raydzi is offline  

Warning: The topics covered on this site include activities in which there exists the potential for serious injury or death. ContractorTalk.com DOES NOT guarantee the accuracy or completeness of any information contained on this site. Always use proper safety precaution and reference reliable outside sources before attempting any construction or remodeling task!

   

Advertisement

 

Old 07-02-2009, 11:05 AM   #2
I own stock in FotoMat!
 
480sparky's Avatar
 
Trade: 132 on Bush, I've got him at gunpoint!
Join Date: Jan 2009
Location: Iowa
Posts: 12,155
Rewards Points: 12,310

Re: Sub And Taxes


Demand a copy of his tax permit.

Tax permits are also public record. You can probably locate it on the state's web site.

Advertisement

__________________
This post has been modified from its original version. It has been formatted to fit this screen and edited for content.
480sparky is online now  
Old 07-02-2009, 11:23 AM   #3
Pro
 
rwa's Avatar
 
Trade: Construction Manager
Join Date: May 2009
Location: Frisco, Texas
Posts: 523
Rewards Points: 348

Re: Sub And Taxes


I'd have a few questions (and tax laws are particular to the state where the work is being done). Is he invoicing for tax on labor, material or both. Is he itemizing the cost of materials and invoicing for a reimbursement on the tax he paid on those materials?
rwa is offline  
Sponsored Links
Advertisement
 
Old 07-02-2009, 11:47 AM   #4
Registered User
 
raydzi's Avatar
 
Trade: general contractor
Join Date: Nov 2005
Posts: 11
Rewards Points: 10

Re: Sub And Taxes


Quote:
Originally Posted by rwa View Post
I'd have a few questions (and tax laws are particular to the state where the work is being done). Is he invoicing for tax on labor, material or both. Is he itemizing the cost of materials and invoicing for a reimbursement on the tax he paid on those materials?
i work in pa.he is charging tax on labor and materials
over 30 years in business and i never got wacked with tax by a sub
raydzi is offline  
Old 07-02-2009, 12:09 PM   #5
Pro
 
mikec's Avatar
 
Trade: Boss
Join Date: Jan 2007
Posts: 600
Rewards Points: 510

Re: Sub And Taxes


Here in Connecticut we only charge sales tax on labor for commercial work.
If it is residential I would want to see his supply house invoice for reimbursement, then a bill for his hours with out any sales tax tacked on.
mikec is offline  
Old 07-02-2009, 02:31 PM   #6
Pro
 
rjconstructs's Avatar
 
Trade: Residential remodel
Join Date: Apr 2009
Location: Oklahoma City, Oklahoma
Posts: 712
Rewards Points: 270

Re: Sub And Taxes


Maybe he's confused. Sales tax on labor? I haven't run on to that here.
rjconstructs is offline  
Old 07-03-2009, 09:50 AM   #7
Nunya
 
tsb's Avatar
 
Trade: Concrete Prep
Join Date: Jul 2008
Location: Central TX
Posts: 62
Rewards Points: 73

Re: Sub And Taxes


It's state specific.

In Texas sales tax is due on labor for commercial remodels but not new or residential. Not sure about T&M situations

I would call your local tax office and ask them in what circumstances sales tax is collectible.
tsb is offline  
Old 07-03-2009, 10:36 AM   #8
JumboJack for president!
 
XanadooLTD's Avatar
 
Trade: Hilti walking billboard
Join Date: Oct 2007
Location: Ohio
Posts: 747
Rewards Points: 500

Re: Sub And Taxes


this sounds crazy to me. All of our subs include that in their price. It is on them to file after we 1099.
XanadooLTD is offline  
Old 07-03-2009, 11:04 AM   #9
Pro
 
We Fix Houses's Avatar
 
Trade: Remodeling / Carpentry
Join Date: Aug 2007
Location: Greensboro, NC
Posts: 1,778
Rewards Points: 2,348

Re: Sub And Taxes


The bottom line is that most states / local jurisdictions require sales tax be collected by the revenue authority on the mark up of materials or any materials that are not exempted by a tax exempt certificate. But the sales tax will be collected at some point. Your considered a reseller (us contractors) so you have to pay the sales tax on the mark up. I / we have already paid the sales tax on the net amount when the materials are purchased. The state wants to collect the sales tax on the difference.

In reality (small - med) contractors registering with the state to send in the addl sales tax is rare. By doing so you just get on the list to be audited at some point. Your plumber probably got wind of this at some point and is making the appropriate changes in his bookkeeping. He may purchase materials tax exempt then collect it on his selling price, or has made a formulation to be sure its covered and its under his sales tax collected account.

Just ask for an explanation. This may become more common. I will say that I / We / Us are responsible to pay the sales tax on the mark up of materials. Some will include it in the total job cost, others may not.
We Fix Houses is online now  
Old 07-04-2009, 07:54 AM   #10
Pro
 
Pearce Services's Avatar
 
Trade: Commercial Loading Dock and Door Contractor
Join Date: Nov 2005
Location: Southeastern Massachusetts
Posts: 1,365
Rewards Points: 100

Re: Sub And Taxes


Someone has to collect and submit the tax, I prefer to pay it at the earliest point in the process.

I pay the distributor, and let them have the burden of compliance. As long as my invoice says that I paid the tax I am covered.

I bill lump sum, and place all my profit on labor, then I do not have to deal with the state for the difference.

But if it is T&M, and sales tax is part of the M, why wouldn't you pay it? If you think he is BSing you, get set up to collect sales tax with your state, give him the appropriate documentation, and have him remove it from his billing. (I do not recommend this, because you will always be in the system)
__________________
Kevin

www.BadcoDoors.com
Pearce Services is offline  
Old 07-04-2009, 09:25 AM   #11
Registered User
 
raydzi's Avatar
 
Trade: general contractor
Join Date: Nov 2005
Posts: 11
Rewards Points: 10

Re: Sub And Taxes


paying tax on materials is one thing....he is taxing me on labor and material
raydzi is offline  
Old 07-04-2009, 09:45 AM   #12
Pro
 
We Fix Houses's Avatar
 
Trade: Remodeling / Carpentry
Join Date: Aug 2007
Location: Greensboro, NC
Posts: 1,778
Rewards Points: 2,348

Re: Sub And Taxes


You're in PA right ? I couldn't find the regs for PA but this is for your neighbor. I would expect this to be in more states asap ?

http://www.state.nj.us/treasury/taxa.../sales/su2.pdf

http://www.state.nj.us/treasury/taxa.../sales/su3.pdf
We Fix Houses is online now  
Old 07-04-2009, 09:51 AM   #13
Pompass Ass
 
bwalley's Avatar
 
Trade: Certified Building and Certified A/C Contractor
Join Date: Jan 2009
Location: Plant City, Florida
Posts: 2,090
Rewards Points: 1,000

Re: Sub And Taxes


Quote:
Originally Posted by raydzi View Post
paying tax on materials is one thing....he is taxing me on labor and material
Check with your state department of revenue to see if labor and material are taxable, and also see if the sub has the appropriate tax certificate.

If he does he isn't charging you sales tax, he is collecting it for the state.

If he doesn't have the proper certificate to collect sales tax, I wouldn't pay.

In the future make sure the bid specifies who pays the sales tax.
bwalley is offline  
Old 07-04-2009, 10:08 AM   #14
Lack Of All Trades
 
Darwin's Avatar
 
Trade: Construction & Home Improvement Services
Join Date: Apr 2009
Location: Southeast Michigan
Posts: 1,232
Rewards Points: 500

Re: Sub And Taxes


Quote:
Originally Posted by raydzi View Post
i'm a GC and i just got a bill for rough in work by a plumber.
we agreed time and material.well he is trying to charge me tax.i never payed additional tax.i never deal with t&m so i'm asking what you guy's think.
Why pay tax on physical service? Not required in my state. Just on products installed, my friend.
Darwin is offline  
Old 07-18-2009, 09:39 AM   #15
Registered User
 
raydzi's Avatar
 
Trade: general contractor
Join Date: Nov 2005
Posts: 11
Rewards Points: 10

Re: Sub And Taxes


well after i told him i thought it was bogas,he removed tax...on labor only.
raydzi is offline  
Old 07-20-2009, 05:07 PM   #16
Project Manager
 
CookeCarpentry's Avatar
 
Trade: Project Manager
Join Date: Feb 2009
Posts: 2,642
Rewards Points: 2,016

Re: Sub And Taxes


Ray -

I work in PA. The law can be interpreted a couple of ways. If it is repair work, he can charge tax (he almost has to because he will be taxed for it at the end of year) because it can be accounted for in a different way depending on how he does his taxes.

However, if this is a rough-in by a plumbing contractor, he cannot charge tax on labor.

He can on materials, but he has to show you that he is simply passing the sales tax on - for example, T&M billing, labor is $100.00 and materials (that he purchased) were $100.00 plus $6.00 for tax (total of $106.00). He cannot tax you on top of the $106.00.

I would request one of his material invoices to see if he is merely passing the tax on via an itemized value on an invoice, or if he is in fact purchasing materials and paying tax on them, then charging a sales tax on top of that - illegal - can only be taxed once.

Also, someone on here mentioned a 1099. If he is Incorporated, no 1099, but if he is a sole proprietor or LLC, must receive a 1099 after $600.00.
CookeCarpentry is offline  
Old 07-23-2009, 06:25 PM   #17
Registered User
 
raydzi's Avatar
 
Trade: general contractor
Join Date: Nov 2005
Posts: 11
Rewards Points: 10

Re: Sub And Taxes


Quote:
Originally Posted by CookeCarpentry View Post
Ray -

I work in PA. The law can be interpreted a couple of ways. If it is repair work, he can charge tax (he almost has to because he will be taxed for it at the end of year) because it can be accounted for in a different way depending on how he does his taxes.

However, if this is a rough-in by a plumbing contractor, he cannot charge tax on labor.

He can on materials, but he has to show you that he is simply passing the sales tax on - for example, T&M billing, labor is $100.00 and materials (that he purchased) were $100.00 plus $6.00 for tax (total of $106.00). He cannot tax you on top of the $106.00.

I would request one of his material invoices to see if he is merely passing the tax on via an itemized value on an invoice, or if he is in fact purchasing materials and paying tax on them, then charging a sales tax on top of that - illegal - can only be taxed once.

Also, someone on here mentioned a 1099. If he is Incorporated, no 1099, but if he is a sole proprietor or LLC, must receive a 1099 after $600.00.
i did not know that about not needing a 1099 if he is incorporated
raydzi is offline  
Old 07-23-2009, 07:38 PM   #18
Project Manager
 
CookeCarpentry's Avatar
 
Trade: Project Manager
Join Date: Feb 2009
Posts: 2,642
Rewards Points: 2,016

Re: Sub And Taxes


The only companies you need to issue a 1099 to are 1. LLC's; 2. Sole Proprietors; 3. Individuals earning more than $600.00 a year.

If the business is Incorporate or Inc., not necessary to issue a 1099, as there are procedures in place for them to report any payments you made to them for services rendered.
CookeCarpentry is offline  
Old 07-23-2009, 07:42 PM   #19
Pro
 
Dan_Watson's Avatar
 
Trade: Remodeling Contractor/Helical Post Installer
Join Date: Mar 2008
Location: South Jersey
Posts: 4,364
Rewards Points: 2,748

Re: Sub And Taxes


Ask MZ, I am sure he knows the the law...
Dan_Watson is offline  
Old 07-24-2009, 03:33 PM   #20
 
DavidNTX's Avatar
 
Join Date: May 2007
Posts: 180
Rewards Points: 150

Re: Sub And Taxes


You don't specify in your contract with the sub who is responsible for taxes or that his price includes tax?

Some jobs we do (new commercial) require us to pay sales tax on materials. Many times we are issued a tax exempt certificate from a general contractor that we can use to purchase materials tax exempt and then the gc pays all of the sales tax in the end. Sometimes we are not furnished this certificate and we pay our own taxes.

Regardless of who pays for what should be spelled out in not only his proposal but in YOUR contract. You might even check the construction documents to see if there is any mention in there about how these taxes are to be paid.

It sounds like him deducting the labor tax shows that he is trying to get away with something. This is way hell late in the game to suddenly think about sales tax on materials. This should have been known before a contract was signed. I bet it will be in the future.

Advertisement

DavidNTX is offline  


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes Rate This Thread
Rate This Thread:

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Join Now... It's Fast and FREE!

I am a professional contractor
I am a DIY Homeowner
Drywall Talk is for
PROFESSIONAL CONTRACTORS ONLY!

At DrywallTalk.com we cater exlusivly to professional contractors who make their living as a contractor. Knowing that many homeowners and DIYers are looking for a community to call home, we've created www.DIYChatroom.com DIY Chatroom is full of helpful advices and perfect for DIY homeowners.

Redirecing in 10 seconds
No Thanks
terms of service

Already Have an Account?