[Grumpy]

This e-mail just came in 5 seconds ago...

Hope all is well with you. The roof is great and we appreciate the great quality work and great customer service. I have a small question for you if you don’t mind. I’m in the process of doing my taxes and as you know I’m sure, this year taxpayers are allowed to deduct sales tax for 2004. Our contract stated a final price of $6479.00 Do you have a breakdown of the taxes included in this price? I appreciate your help. Thanks



Jeeez... I could tell you the tax on the materials, after that I am lost! What should I tell this guy?

It's always been my assumption that a portion of the capitol investment is declared, and that portion is dictated by the government. It shouldn't matter how much tax "I" pay. Does it?

 

[PipeGuy]

In my state, sales tax is not collected on subcontract services. I don't think he has any claim on the sales tax you paid on account of the materials that were incorporated into the work. He paid for 'work' not materials. And another thing, if you tell him a sales tax number than he's likely to flip out when he extrapolates what the material cost was and compares it to the price paid.

 

[Teetorbilt]

Taxes are different in every state.
Here we charge tax on materials AND labor in most industries. Labor, by itself, is not taxable. Home improvement is called capitol improvement and is not taxable, commercial property is. Sales tax is applied to the end sale only. If I was a roofer here, I would not pay sales tax on the materials and the homeowner would not have to pay sales tax due to it being a capitol improvement. On a commercial building or in my marine business, the sales tax would be shown on the invoice.
I don't know how they do it up north but everybody ensures me that it is bigger and better.

 

[Grumpy]

Home owners may write off capitol expenses for home improvements. I'm just not sure how the whole process works.

Here I do not need to charge customers taxes on services. Only materials must pay taxes at time of purchase unless you have tax exempt status.

 

[Teetorbilt]

You don't have a tax#? I'm curious as to how you are working this. If you are doing what I think that you are doing, you're losing the amount of your tax rate or passing it along to your customer which is making your bids that much higher. Here it's 6% and if you're in a competetive business, that can make or break a deal.

 

[Grumpy]

I have a tax ID #. This customer is asking about a tax write off.

I'm not losing anything.

Home improvements are a write off in the state of IL. I think the customer is highly confused as to how the write off process works.

In the state of IL a contractor is not required to charge taxes on services. Therefore I'd say 99% of services do not sharge taxes. I am not charging my customers any taxes.

 

[Teetorbilt]

I guess that the question is why are you paying any taxes on materials?

Jeeez... I could tell you the tax on the materials, after that I am lost! What should I tell this guy?

I don't pay tax on any materials unless they are for my own use. If the job is taxable, I charge and collect the tax. If the job is capitol improvement, I don't charge or collect. That means that there is no sales tax charged and no writeoff for the owner, he can only write off what he paid (theoretically).

 

[PipeGuy]

I guess that the question is why are you paying any taxes on materials? I don't pay tax on any materials unless they are for my own use. If the job is taxable, I charge and collect the tax.

Teetor - if you charge and collect the tax, but don't pay tax, where does it go - in your pocket?

If the job is capitol improvement, I don't charge or collect. That means that there is no sales tax charged and no writeoff for the owner, he can only write off what he paid (theoretically).

I understand this but that's not how it works in my state. Sales tax is paid on all sales transactions unless someone (usually the owner who is building) has a tax exempt status (church, govt.,etc.)

 

[Teetorbilt]

I charge, collect and pay the tax. I assumed everybody here understood that if it is collected it is also paid to the state. I can think of a few around here that didn't do that, the magic number seems to be about $200K in back taxes. It get's you in the paper.
In your case, as often in mine, you are subbing and the tax burden is passed up the chain.

 

[Mike Finley]

Holy crap batman - Everyone really should know their states sales tax laws like the back of your hand or like Teetor said you are going to be paying the piper one of these days.

In Colorado if I show on a bill - materials and labor I have to collect sales tax on the material and pass it on to the state and county. If I just show a lump sum no sales tax is due.

When it comes to sales tax the thing to remember is The end user always has to pay the sales tax.

- If you go to the lumber yard, buy lumber for a job and don't use a tax exempt certificate, you pay the sales tax and the lumber yard pays the sales tax to the state and county. You are considered the end user. (You can't charge the customer sales tax on the material either!) (You are eating the sales tax out of your profit too!)

- If you go to the lumber yard and purchase with a tax exempt certificate you pay no sales tax on the lumber. When the job is done you bill the customer and charge him the sales tax that the lumber yard didn't charge you. You then forward that amount to the state and county once a month, 4 times a year or yearly depending on your volume. ( You aren't eating the sales tax out of your profit)

If you have a job with taxable materials where you are going to be forwarding the sales tax to the state and county, you should always show that sales tax amount on any invoice to the customer. If you don't add as a sub total on the invoice, you are eating it.

Gumpy - you need to get your accountant on the blower and figure it all out, especially as far as subs and such works.

 

[Grumpy]

Mike it's not my responsibility to figure it all out. It's the home owner's responsibility.

In the past, the home owners simply submit my final invoice to their account who then figures it out. All the accountant needs is a copy of my final invoice, or even the cancelled check.

I suspect the home owner is trying to save some $$$ and do the taxes himself and wants to write off the expense but doesn't know how.

I already paid sales tax on the materials at the time of purchase. Also the cost of that tax was figured into my estimates.

You guys are way way off track on this thread.

 

[PipeGuy]

Grumpy's right. This thread is about the homeowner's ignorance of the tax laws, not his. The thread jumped track at post #5.

 

[Mike Finley]

Jumped or not. Grumpy why do you ask a question if you all ready have your mind made up that it's the customers responsibility?

My reply is in regard to sales tax in general not the homeowner's taxes.

I don't understand why you paying sales tax on materials?

As Teetor said, if you are paying sales tax on materials you are either losing that money or you are charging more in your bid. You say you mark up your bids to make up for it. If you can mark up your bids the 6% or whatever your sales tax is and not show it as sales tax, why not keep doing it, don't pay sales tax for materials and add the tax to the final bill and increase your profits instantly by 6%?

 

[trekr]

Mike I don't understand... the 6% (here, on materials only) is going to be paid by someone. Either I'll pay it at the lumber yard and include it in my cost of materials or I could use a tax permit and then collect it from my customer. Neither option changes the customer's price or my profit. Personally, I'd much rather my supplier deal with collecting and paying the tax.

 

[Grumpy]

Grumpy why do you ask a question if you all ready have your mind made up that it's the customers responsibility?

For confirmation that I am correct.

 

[Grumpy]

Why do I pay sales tax on materials? Because EVERYONE pays sales tax on EVERYTHING they buy in the state of IL.

Don't you all pay sales tax on materials? You call the lumber yard and say I need a load of 2x4's they calculate the local sales tax and add it to the price. That's how it works here in IL. I really do think you are totally misunderstanding the question I asked.

What trekr said above is totally accurate for the state of IL. The tax is paid sometime. Either I pay it at the time of purchase or I pay it quarterly, but it's going to be paid by me. There is less paper work and hassel to pay the tax at the time of purchase.

 

[Teetorbilt]

Grumpy, I can feel your blood pressure rising from here.
In answer to your question, I rarely pay sales tax on anything.
If the item is for resale, you don't pay tax. If you are the end user(sold to the final customer) you add the tax, collect it and pay it back to the state minus whatever they pay you for the effort. Here they cap it at $25.00 unless you can prove that it costs more. I actually make buck or two off of their program.
I do have to pay taxes, upfront for a lot of items and most are written off at the end of the year.

 

[Grumpy]

You rarely pay sales tax on anything because you live in a state that doesn't charge tax on retail purchases. My brother lives there and it took him about an hour to explain to me that purchases, like loaves of bread, are not taxed.

 

[Teetorbilt]

Grumpy, we do not have tax on food basics. He would have noticed a tax on his porterhouse and the selected wine to go with it.
Food tax here is not at all what we have been discussing and I have been chastised for hijacking a thread elsewhere.
Let's keep it on topic, OK?

 

[Grumpy]

Actually he worked at Walmart for the last two years and just now got into the construction business as a Surveyor, so I doubt he was eating much porter house and drinking any fine wine

Hey This thread is so far off topic I almost don't remember what the topid was. It really is obvious I didn't make myself clear in my original thread because it seemed nobody understood what I was asking.

Then because of the misunderstanding the thread got taken a whole other direction regarding sales taxes on purchases, and that's where it stuck untiL i gracefully decided to stop caring and started talking about bread.


Mmmmm Food.