Roofers Charging Sales Tax

Mike H Said:

In OH, we charge sales tax on the project if we Declare ourselves tax exempt at time of material purchase. If we do not Declare as such and pay tax on all material purchases, then we do not have to collect a sales tax from the consumer.

twill59 Said:

Isnt social engineering the point of the present system? Isnt that what has drove us to the extreme edge of nuttiness?

Social engineering is what complicates all taxes- it matters not whether it is an income tax, sales tax, fair tax, flat tax, VAT, or any other kind of tax. All of the politics behind one kind of tax over another is just bloviating.

natty Said: You are saying the same thing as lefty and it simply makes no sense. States may be different as to what they tax and at what rate, but the principle behind a sales tax is the same. Some thing is being taxed at some point in a sale. In OH, what is being taxed?- the service or the material or both? It cant be the way you are stating it. And you are not tax exempt because there are tax exempt organizations. If you have a sales tax license you can provide that to your material supplier which is a claim that you will resell the material and that you will collect the tax upon resell.

I fail to see your issue. How you can say "... simply makes no sense", well, doesn't make sense. The law is the law, and until they consult you on the system, all I can surmise is.... it makes sense.

At the POS, they will ask "are you tax exempt?", and if you want to split hairs over that terminology, I'll leave you to your own vices.

Egg, The way you explained it, it is the same with us.

I live right on the line of two extremes in sales tax. In Oregon(7 miles away), there is no sales tax. Here in Washington. it's one of the nations highest, 8.4%. That goes for materials and labor, so the state gets a pretty healthy chunk of everything I do. As for buying personal things, there are large shopping centers at the first exit of both bridges into Oregon and pretty much everything we buy over $100, we make the trip there to buy.

I initially started doing most of my work in Oregon, but moved to Washington because at the time there was a substantial WC savings here vs Oregon. But I gradually developed builder clientele here in Washington and didn't charge or collect sales tax from them, meaning the builders were liable for it.

One of my best customers got audited and the sales tax on the work I had done for him was almost $50,000. We agreed to split the difference and I did two roofs for him for free for my part even though it should have been obvious to him I wasn't charging him the sales tax.

I remember being insulted by a customer who was trying to avoid the sales tax when he said "I guess ALL you guys want to be paid in cash."

Mike H Said: The law is the law,

And it is a shame that you don't even know the law of your state. You can't even tell me the thing being taxed.

And, "tax exempt" has a specific legal meaning. For example, in TX, a church is exempt from all sales taxes. I once roofed a minister's home. It was owned by his church. I filed their tax exempt form with my supplier and we paid no sales tax on the materials.

natty Said:

Mike H Said: The law is the law,

And, tax exempt has a specific legal meaning. For example, in TX, a church is exempt from all sales taxes. I once roofed a ministers home. It was owned by his church. I filed their tax exempt form with my supplier and we paid no sales tax on the materials.

Oh my goodness, I am seriously impressed. We do schools and churches every year. Same forms, same tax exemptions. Both of my brothers run 501 (c)3 (or tax exempt) organizations. www.thirstrelief.org www.imaginemissions.org I sit on the Board of christian school. www.gracechristianlions.org I understand what tax exempt means in it's many different forms. But thank you for the explanation.

wywoody - So, let me get this right; I build a house for a client for a contract price of $500,000; I pay the State Of Wash. $42,000 sales tax? That's like 1-1/2 times what a Realtor would get(?) That's a real OMG moment.

When a state is that monumentally thirsty it has to know it's going to be drinking people under the table.

Mike H Said: I understand what tax exempt means in its many different forms.

In OH, we charge sales tax on the project if we Declare ourselves tax exempt at time of material purchase. If we do not Declare as such and pay tax on all material purchases, then we do not have to collect a sales tax from the consumer."

Given that you may have used the term "tax exempt" loosely, what is being taxed- the material only or the entire project?

Not sure but in Texas I don't think sales tax is paid on new residential.

natty Said:

Given that you may have used the term tax exempt loosely, what is being taxed- the material only or the entire project?

We basically have two options: 1. We can ourselves exempt from state sales tax (From this point forward, I shall refer to that as "tax exempt"). When a contractor chooses to make their material purchases tax exempt, they must charge sales tax to the customer. I don't know the exact split, but it must be fairly common to do so, as many lump sum contracts and/or purchase orders specifically mention that the lump sum is inclusive of all fees, sales tax, etc.

or

2. We can choose to waive the tax exemption and pay sales tax at the point of purchase (ie, the supplier). There are some fine hairs to split in making this choice and one must be very clear about their business. Every few years my accountant will review our situation before making the declaration that we do not need to charge sales tax on our contracts as long as we continue to pay the sales tax on all material purchased, excluding those used for exempt organizations, in which case we need to file the specific tax exemption forms.

In a similar example, all of my vehicles are owned under a different company and leased back to the roofing company. At one time I had a motor vehicle dealer's license and did not have to pay tax on the original purchase of the vehicle, but did have to pay tax on all rentals. I let that dealer's license lapse and now pay tax at the time of purchase, but not on the rental.

At least in Ohio, our sales tax tends to be a one time tax on goods. Some states have a sales tax that would be better described as a VAT, or Value Added Tax, in which sales tax is applied to the increased value of any given product sold.

As for the term "tax exempt". It's not a loose usage. The term is not specifically limited to charitable, religious, educational non-profit organizations. Tax exempt can be applied to any condition when an exclusion to a particular tax applies, and that's the form of my usage throughout this conversation.

In B.C. When I started out in 1987 we had a 7% Provincial Sales Tax we paid on our materials. We never charged the customer any tax on their contracts. In 1991 the Federal Government came in with a Goods and Service tax of 7% which we charged on the total invoice. We got a credit back on any GST we paid out to conduct business eg: materials, fuel, repairs etc. The GST over the years dropped to 5% and then in July 2010 we "harmonized" the 2 taxes tand had to charge the customer 12% of the total contract price. A $10k re-roof suddenly became $11,200 after tax. The business then could claim a credit on what it paid out. The people cried out in protest so in April 2013 we went back to the old system of split tax.

Be thankful for what you have as it can get a lot more complicated when different levels of government get involved.

My biggest tax beef over the years has been the practice of collecting sales tax every time a used vehicle is sold. The bigger the lemon the vehicle is, the more times it is traded in and the more tax the government collects. Big lemon = big tax revenue

A new truck for 50K will have $6K in sales tax added on. The dealers offer these no interest over 84 months financing on these deals. The young bucks get their new 4x4 and the first 10 payments go to pay off the sales tax. They trade it off in a couple of years and wonder why they never get ahead in life to be able to buy a house. The government is laughing all the way to the bank when they collect tax again when it is resold for $35K.

Mike H Said:

We basically have two options:.

I don't mean to beat this topic to death, but you still have not made yourself clear. As a contractor, the end user ultimately pays the sales tax. That end user is the property owner. In your option 1: you seem to be saying that you collect a sales tax on the entire contract price, whereas in your option 2: you are saying the supply house collects a sales tax only on the material and no more tax is collected other than that. That can not be correct because why would you ever choose your option 1 thereby making the property owner pay a much higher tax than they probably owe?