As a registered building contractor in the State Of Connecticut I am required by law to charge sales tax on my labor. Building contractors in this state are also required to be registered. The law requires us to charge 6 % sales tax on labor on any construction service that does not add square footage. If I were to build a new garage I would not have to charge sales tax. I would not have to charge sales tax on a new home, or new deck. Any thing considered renovation or repair requires the sales tax charge. An example of things I have to charge sales tax on are window replacement, reroofing, kitchen remodel, ornamental trims.
I adhere to the letter of this law, in spite of my abject opinion of it. Plumbers and electrician, and appliance repairmen are also required to charge sales tax on their labor. The law must be must obviously obeyed. But here is my gripe. Why does the law so arbitrarily choose our group of self employed entrepreneurs. Are lawyers, tax accountants, doctors and dentists any different than us. They are also self employed contractors. If the law was equitable wouldn’t it encompass all of us. What gives these professions “the free pass card”, while the rest of us pay. Connecticut is also currently facing a budget crisis. Lay off notices to have been sent out to many State Employees the last 2 months in an attempt to balance our budget. Repealing a law that will cut tax revenues at this time is not realistic . I just can’t understand how a law can be administered so unfairly with nothing being said about it. I wouldn’t be as upset over this if the law was applied to ALL independent persons selling a service.
The climate for working in my trade in this state is a favorable one. We earn a very nice living in our state. I understand I have to pay my share of taxes. I pay Federal Income tax, State Income tax and State Sales tax on my labor. I was wondering if contractors in other states have to charge sales tax on their labor as well.
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Here in Quebec, Canada we have to be registered, hold a union card for our trade and also a work sight safety card. We also have to charge 15% for work we perform and remit this tax we collect to the government every month or three months.They always get their cut!
Kevin
Hey Kev, are doctors, attorneys , dentist and tax accountants exempt from paying the 15 %? And do you have to pay federal income tax and Provincial income tax as well? Do you have to charge 15 % sale tax on labor for a brand new house (we only have to charge sales tax on repairs and renovations not new construction).
Edited 1/4/2003 11:01:22 PM ET by ww_aficionado
Edited 1/4/2003 11:05:04 PM ET by ww_aficionado
Everyone here in Quebec must pay a federal sales tax of 7% for any goods and service purchased (called GST) then once that tax is added to the cost of the good or service another tax of 7.5% (called QST) is charged to that total. Everyone must pay these taxes for anything purchase new or old. If I buy a second hand car for $10000 I have to pay a tax total of apprx. $1500 and if the car orginally sold for $20000 the first owner would of paid a tax total of approx. $3000. A tax will be paid everytime this car is sold until it is scrap! If you are lucky and make a good salary you will pay income taxes to the government up to 55% of what you made that paycheck and then once a year you do your annual taxes and more than likely pay more taxes. There are hundreds of other ways too the government gets our money (like 51% of the price of our gasoline goes to the government) but I hate thinking about it!!!
In all of Canada, we have a GST (Goods and Services Tax) of 7%; this is what is known elsewhere in the world as a VAT (Value Added Tax). In many provinces, this is combined with the Provincial Sales Tax to make a 15% tax in most provinces. Some charge the two separately, some combine the two.
The purpose of a Value Added tax is that everyone pays the 15%; as a business, you then file a claim to deduct the 15% you paid on the cost of everything purchased. So, for instance, if you are a wholesaler, and you buy a widget for $50, you pay $57.50 ($50 + 15%) for it; you sell it for $100 (what markup!), you charge $115.00 to your customer. At then end of the month, you send a statement to the gov't that you paid 7.50 in tax and collected 15.00, and you send them the $ 7.50 difference. (this is a simplified explanation). Some professions don't have to charge the GST; however, those professions ARE NOT ALLOWED TO DEDUCT THE GST THEY PAID.
Many complained about the 7% GST when it was introduced, however it replaced a very cumbersome system where wholesalers charged a tax based on 13.5% of THEIR COST (it was not based on a selling price). The idea of a value added tax is actually quite simple to administer; as a business, at the end of the month you add up all the GST you charged out; you subtract all the GST you paid (including GST for office supplies etc etc) and you either send in the difference or ask for the difference back.
Note that I am not defending or protesting the tax, just pointing out how it is administered.
In Illinois, there's no sales tax on labor. Never knew that there WAS a labor sales tax anywhere in the US until I read your post.
It's common in repair situations to charge more or all of the associated costs as labor, so the customer doesn't have to pay sales tax.
ie: If I have an exhaust pipe replaced on my car, the shop will charge 2 hours labor instead of one hour plus the cost of the pipe plus sales tax.
Sex and golf are the two things you can enjoy even if you're not good at them." [Kevin Costner, Tin Cup]
No sales tax on labor for residential work in Texas.