As a contractor in Texas, it's important to be aware of your tax responsibilities. Depending on the nature of your work and the contract terms, you may need to collect sales tax on your charges and properly handle expense reimbursements.
Introduction: As a contractor in Texas, it's important to be aware of your tax responsibilities. Depending on the nature of your work and the contract. In this blog post, we'll discuss the different scenarios contractors may encounter and provide clear guidelines to navigate tax obligations. Key Takeways: 1. Lump-sum contracts: Under a lump-sum contract, the contractor is considered the consumer of the materials used in the project. The contractor does not need to collect sales tax on the materials, labor, or reimbursements included in the contract. 2. Separated contracts: Under a separated contract, the contractor is considered the seller of the materials used in the project. The contractor must collect sales tax on the materials billed to the customer and provide a resale certificate for any tax-free materials. Reimbursements related to the materials charge are taxable, while those related to the labor component are not. 3. Contractor reimbursements for equipment and consumables: Contractors must pay tax on equipment and consumables used for their projects, regardless of the contract type. Contractors should not charge tax to customers for the reimbursement of these expenses
