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As a contractor, it's important to keep track of sales tax when buying construction materials. The type of contract and materials used can impact tax responsibilities. In Texas, sale tax rules for repairing and remodeling real property differ for residential and non-residential properties.
Residential Repair and Remodeling
Labor Costs are nontaxable. Materials are taxable
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- Lump sum contract: If you are a contractor for a residential repair or remodel job and charge customers in a lump sum contract, you will have to pay tax on all your supplies and taxable services when you buy them, but you do not have to charge tax to your customers.
- Separate contract: If you charge customers in a separate contract, you will submit to the vendor a resale certificate and charge sales tax to customers on materials you bought. You still have to pay tax for all suppliers not reselling to your customers.
Non-residential Repair and Remodeling:
Both labor costs and material costs are taxable. Certain types of work on non-residential property are taxable, including:
- rebuilding real property;
- upgrading any part of an existing structure;
- replacing any part of an existing structure, except for minor replacement of parts during maintenance of the real property, such as replacing a belt on a machine; or
- Repairing damaged, broken, or defective parts of a structure.
You don't need to charge tax when you work for a governmental agency or customers who submit resale or exemption certificates.
The labor to repair non-residential property damaged in an area declared a natural disaster by the President of the United States or the Governor of Texas is not taxable
- At Arnold CPA, we are committed to providing high-quality and personalized service to our clients. Our goal is to help you minimize your tax burden and ensure compliance with the law. If you have any questions or need help with construction sales and use tax in Texas, please don't hesitate to contact us.
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