[GCJet]

Hello...I'm working with a client who's looking to have a custom home built on a construction management agreement, where it's an open book, cost plus type contract, where we charge a fixed CM fee. His other clients are not charging him sales tax on their proposed CM fee, where as I've been advised by my accountant to charge sales tax on this fee as well. My question is, how do you all go about this in your states and business, do you charge sales tax on your fee's or not?

 

[concretemasonry]

If it a sales tax, it is a local and state tax issue. Most states do not yet charge a sales tax for professional services.

Much depends on the billing methods too and who pays the material. As an example, it make up materials to a higher amount for handling and picking up you must collect the higher tax on the "new cost" and eat the tax unless your accounting is such that it allows appropriate credits and payment and pay the "profit" on the mark-up.

Every location (city, state, etc.) has different laws. that is why accountants are used. "Hip pocket accounting" can get you introuble and get on the radar.

 

[ranteso]

Get another account you trust and have confidence in.

Your state dept of taxation (website) will have a complete list of what is and what is not taxable, to include exemptions.

normally professional services are not taxed as stated above.

and you don't charge sales tax, you collect it for the state.

 

[GCJet]

Thank you for your insight concretemasonry and ranteso.

 

[thom]

Here in NM you would charge the tax then send it to G but first you would be required to register your business with the state and any local G's you are working in.

Of course if you were compensated as an employee, withheld taxes, employer supervision, etc, you would not charge tax but your employer would be required to register.

Someone is responsible for legal compliance during construction. Someone is the GC. If you are merely advising the HO regarding running the project, the HO is the GC and must comply, you are merely his agent. On the other hand, if you are making decisions you might be the GC. So, what does it matter? It will matter if/when someone gets injured. It will matter if/when a neighbor sues. It will matter when G comes looking for taxes. It will matter down the road if/when there is a construction deficiency, real or imagined. It will matter if/when you and the HO have a disagreement that cannot be amicably settled.

These questions are what determine your role and whether you are an employee or an independent contractor and how taxes are handled.