Roofers Charging Sales Tax

We do, and as I understand it in Texas we have to!

The thing is, I know of no other roofing company in this region who collects sales tax and it's a big cost advantage for them. Their theory is that they pay sales tax on material, and you don't have to pay sales tax on labor. Except that you do. The statute is pretty clear that you have to collect sales tax on the total amount of the job.

What gives?

We do not have to charge sales tax on labor for construction. Places like Sears, Lowes, Home Depot... have to charge sales tax because they also sell materials. A company like mine only supplys materials.

If you charge sales tax on one thing you have to charge it on everything. Never connect a storefront with you construction business.

I was audited and warned once before. The solution turned out to be: be very careful how you word your invoices and try not to mention materials at all.

Its da gooberm $ nt.......what do ya expect?

It should be strongly noted that this is something that varies mucho from state to state

Roofguy Said:

What gives?

In Texas, all construction is divided between residential and commercial. If you do any commercial work, you must get a sales tax license because the final cost of the project is charged a sales tax -both material and labor. You can either give your material supplier your license number and they will not collect a sales tax on your material then you must collect all of the tax from the property owner, or you can let the material supplier collect the sales tax on the material then you only collect tax on the balance of the contract price.

On residential work, the sales tax is collected only on the material which you can collect or you can just pay it to the material supplier.

What gives is there are an awful lot of tax cheats out there and only a matter of time until they are caught.

twill59 Said: I was audited and warned once before. The solution turned out to be: be very careful how you word your invoices and try not to mention materials at all.

Please explain because this sounds like "creative accounting" for the purpose of tax fraud. What is the law where you do business?

Yes - Please explain

Lefty Said:

If you charge sales tax on one thing you have to charge it on everything. Never connect a storefront with you construction business.

This does not make sense. I have encountered sales tax collection on things that are not taxed under the law but I had to set them straight. For instance, if I buy a loaf of bread from the grocery store there is no tax. But if I buy it from the convenience store, they tried to tax it. No way- it was just a lazy convenience store owner.

Just because you have a store front doesn't make you liable. The tax is on the thing.

Natty, I have no idea what your example has to do with the conversation.

To make my post clearer. If you sell material to the customer, like a Lowe's and also install the product you need to charge sales tax on both.

If you do not sell materials, just supply them, you do not have to charge sales tax.

natty Said:

twill59 Said: I was audited and warned once before. The solution turned out to be: be very careful how you word your invoices and try not to mention materials at all.

Please explain because this sounds like creative accounting for the purpose of tax fraud. What is the law where you do business?

Creative accounting? :S yes, I guess so. An example to give, if you change a sheet of plywood for $55, as far as the state of indiana is concerned, you actuallly SOLD that sheet for $55.

Like lefty said, im not running a store

Lefty Said: Natty, I have no idea what your example has to do with the conversation.

To make my post clearer. If you sell material to the customer, like a Lowes and also install the product you need to charge sales tax on both.

If you do not sell materials, just supply them, you do not have to charge sales tax.

In my example, I was illustrating how I have encountered sales people trying to charge a sales tax when the law didn't require a sales tax. Apparently Lefty in PA and twill in IN have understood their sales tax laws to only tax construction labor if it is provided by a store that also sells materials. That does not seem fair or right. In TX, all material sales must add a sales tax, but that sales tax is only paid once by either the contractor or the material supplier who sells the material. Then only the labor on commercial projects is charged a sales tax. On residential projects, there is no sales tax on labor.

For example, if I contracted to reroof an office building for $10K and material cost me $5K, I would give my sales tax number to the material supplier and they would not charge me a sales tax. Then I would have to collect a sales tax from the property owner on the entire $10K. But, if I contracted to reroof a residential home for $10K and material cost me $5K, I would just pay the sales tax on the $5K material to the supply house. There is no sales tax on labor on residential projects in Texas.

twill59 Said: An example to give, if you change a sheet of plywood for $55, as far as the state of indiana is concerned, you actuallly SOLD that sheet for $55.

So are you saying IN double taxes? Do you pay a sales tax on the $10 sheet of plywood when you buy it then your customer pays another sales tax on the entire contract price? Does IN tax residential construction projects? And are you saying that there is some way to avoid these taxes by wording your invoices a special way?

I dont know what the true law says. I suppose it would have to go to court to get the answer. As I read this now, I wonder if I had some mistaken agent push the wrong interpretation at me. My understanding before this was yes, the sales tax only gets paid once. Seems like in practice that is true still. Anyway this was like 10 yrs. Ago and ive never heard back from them. But I did adjust my wording on the invoices to minimize mentioning material. Just a PIA thing.

I get so sick of dealing with these government-think bullies. Ironically, I just got a notice from the State Comptroller - evidently I sent in our monthly tax return but I fail to put a check in there.

In spite of the fact that I've never been 1 day late in the past, they sent me a nasty letter, demanding I go to a hearing to show why my account shouldn't be cancelled. Cancelled? Cancelled????? Does that mean I wouldn't have to screw with it anymore, or that they they think I should just go out of business?

It's madness. And if there is one thing I hate it is calling up morons and kissing their butts because their egos are so delicate.

twill59 Said: But I did adjust my wording on the invoices to minimize mentioning material. Just a PIA thing.

You could look up the IN law. My guess is that the revenue agent was trying to catch you marking up the price on the material. If so, you would be liable for the sales tax on the markup. A lot of home repair outfits mark up the material then the homeowner pays more in sales tax than they should. I would think a better practice would be to invoice the job at material cost and let the supplier collect the sales tax. This only works in states that don't tax residential home repairs like TX.

I still can't make sense out of what Lefty said.

I can see a lot of issues with invoicing material separately. Customers generally can't comprehend the cost of doing business and maintaining his roof for 15 years and most would think we're making too much "profit" on their job.