Is it standard practice to collect tax on labor? I had a landscaper give an estimate on some work, and on the separate invoice for the estimate there was an included charge for tax. I don’t recall ever being charged tax on an estimate before.
Is this just something I never noticed before?
Andy
Said least is often said best,
but said best is often said least.
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Replies
I've never heard of tax on an estimate, sounds pretty strange. In fact, I only ever have to charge tax on jobs where the owner of the property is making money on it (ie: it's a rental house or business), or unless I'm doing something that's considered tangible property (ie: custom furniture that will be moved when the homeowners move).
FYI - I'm in CT, might be different in other areas.
Justin Fink - FHB Editorial
Your Friendly Neighborhood Moderator
It's different everywhere you go, JF. Here in WA contractors are retailers and we charge sales tax on the entire invoice amount of labor and materials. When I give an 'estimate' I indicate that tax will be added per state law. We don't have a state income tax, so maybe that makes up for it.
So are you saying that you charge sales tax on the sale of a new home?
Yes. I am pricing a new house at around $380K right now. Tax on that will add around $30K.
Here in KS we do not charge tax on labor for residential work. For commercial work the entire job cost, including labor, is subject to sales tax.
It's going to be a purely local thing though so check with your local gov't
I guess I got the whole thread sidetracked - the original question is whether it's common to charge tax for an estimate. I would think no.Justin Fink - FHB Editorial
Your Friendly Neighborhood Moderator
When you say 'estimate' are you meaning only that an estimate was produced on paper, and that the owner paid for it, and that the contractor charged tax on it?
That sounds iffy to me. Generally tax is charged on 'tangible personal property' and I wouldn't think that a piece of paperwork would qualify. Maybe I'm not understanding your question.
I've had the following issue a few times. Someone asks me to do what is essentially consulting work. Look at a project and give an opinion. I am classified by the state as a retailer. If I invoice for work like that do I charge tax?
funny how different people read things differently ;)
Yeah...I'm going to tweak the title of the thread. Then it will really explode...Justin Fink - FHB Editorial
Your Friendly Neighborhood Moderator
Come to think of it...maybe I'm the one who's wrong. We need to get some clarification on this one.Justin Fink - FHB Editorial
Your Friendly Neighborhood Moderator
I was told by a business where I once worked that they charged sales tax on materials and labor when they remanufactured materials such as milling or making cabinets.
AndyE the rules and regulations regarding Sales Tax differ from state to state but in New York unless the work being performed can be described as a Capital Improvement (and an affidavit asserting that can be filled out) a Contractor's Labor is subject to Sales Tax.
What that means is any repair or maintenance work a contractor performs he needs to collect NYS Sales Tax on. What happens is:
And in case you want to know well what about the sales tax on materials if the contractor pays the sales tax at the time he or she purchases the materials then its been paid so you (the client aren't and shouldn't be taxed twice) however in the case of manufacturing operations such as some architectural woodworking shops for instance they are buying materials wholesale with a tax exempt certificate so they aren't charged any tax on the materials they buy when they buy them but then they charge you Sales Tax based on the value of the finished object they then produce and you pay it at the time of that sale to you.
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Jerrald,Thanks for the link to the form. I will include a copy of it to the landscaper after I call and get this straightened out. I am sure it is just an oversight on their part.AndySaid least is often said best,
but said best is often said least.
AndyE - " Jerrald, Thanks for the link to the form. I will include a copy of it to the landscaper after I call and get this straightened out. I am sure it is just an oversight on their part. Andy"
I don't know Andy, you said this is "an insurance fix. (Neighbors car came through my yard.) ". That makes it repair work and not a Capital Improvement so it sure sounds like it's subject to NY State Sales Tax on the labor.
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<<That makes it repair work and not a Capital Improvement so it sure sounds like it's subject to NY State Sales Tax on the labor.>>And I called the Landscaper to ask about that. Spoke to the woman in the office that does the accounting and that is what she told me too. Said if it was a rip out and replace it would be capital improvement, but since it is repair it is subject to tax. She also said "well if insurance is covering it then you will be reimbursed for the tax, too." I just didn't realize the distinction between the two 'til I got the answers here. Breaktime scores again. Thanks guys.AndySaid least is often said best,
but said best is often said least.
According to "IP 99 (19) - Building Contractor's Guide to Sales and Use Tax" published by the CT Dept of Revenue: page 14
"A contractor's labor is not subject to tax when the service is rendered to:
New construction, Owner occupied residential property, charitable organizations, low and moderate income housing, out of state contracts, real property owned by hospitals, hazmat remediation (my paraphrasing)"
In essence, when I got my permit I asked the fella at the tax office and he told me (borne out by this book) that I get no tax exemption, I collect no sales tax nor do I remit any to the state... HTH
PaulB
The devil's in the details! Page 38 of the same publication says under landscaping:
"The contractor must charge tax on the labor to install and the materials when the service is performed on: new construction, owner occupied residential property, existing commercial property, existing industrial property, existing income producing property" (emphasis added)
However... the estimate is not any of the above, so I would say he got himself a 6% bonus (or he's remitting it to the state... ummm yeah).
Paul and All,It is more like an 8.125% bump. I am in NY and of course pay more for the privilege of living here.It is "only" $6 and the estimate amount is credited for work done, but I have had other contractors, tree services do work and there was never any tax, but I did have to sign the affidavit for Capitol Improvement at the end of the job.This is an estimate for an insurance fix. (Neighbors car came through my yard.) This is my house, owner occupied, no commercial or rental on the property. The proposal for the work says nothing about an affidavit and states that prices do not include sales tax. Guess I need to make a call an get that clarified before I sign anything.Thanks for the fast responses.AndySaid least is often said best,
but said best is often said least.
Ahhhhhhhhhhh once again I confused you with AndyEngle... a fellow resident of the state that taxes taxes. Wish I had a NY answer for you.
Your not the first, and had I been aware of him when I first joined the site I may have chosen a different tag. I have gotten a 'NY' answer, no jokes about mobsters or 'getting the bird', so I think my questions have been answered.AndySaid least is often said best,
but said best is often said least.
My tax man told me that Tax only needs to be collected on labor if the work is repair work.
Home improvement labor is not taxable.
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