Can My Contractor Bill Me Sales Tax On His Overhead? - General DIY Discussions - Page 3 - DIY Chatroom Home Improvement Forum

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Old 12-15-2009, 05:51 PM   #31
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The contractor or merchant has to pay the state the sales taxes due whether or not the contractor or merchant collects them from their customers. But it varies by state and changes year to year as different tax revenues are needed or special interests are appeased. A lot of the time the way the law is written it is so vague that is up to the discretion of the state auditor which is why contractors and merchants will charge for goods and services where it may be doubtful that they were meant to be taxed.
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Old 01-28-2010, 03:39 PM   #32
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Originally Posted by sterling0514 View Post
I live in Washington State and my contractor is adding sales tax to his overhead that is profit. Is this right?? It's money that he is charging us for the job done. It's paid to him as income. Why would you add sales tax?
This question is ludicrous on more than one level. I don't want to sound rude or condescending, but you don't seem to have a grasp of business in a service industry, no matter what state you are in.
Why would you consider overhead to be profit? Overhead is all of the items that he is paying for to run his business that he pays out monthly (or otherwise) such as insurance (auto, general liability, workers comp and disability), licensing fees, corporation fees, office space (if he has one), office supplies (such as the paper that your contract is written on and the ink it was printed with), utilities such as the phone that you called him on and the electricity used to run the business, the truck lease, gas, and in some cases parking costs, and quite possibly the taxes that he is paying for the salaries of the labor to complete your job. Profit is what he receives after he pays materials, labor, taxes, and any and all forms of overhead that he may have to pay out to get your job done. Then that money is put into the business account, from which he will have to write himself a salary check (aka income), which he will also be taxed on (and at least in NYS, comes to upward of 40%; ie if your contractor writes himself a salary check for $1000, the IRS sees it as a check for $1400 for tax purposes).
Contractors can write contracts for jobs in a variety of ways; if he is giving you a contract for the entire job, listing everything that is included and being done for the job with no breakdown of pricing for labor vs materials, then he is including materials, labor, overhead, and any taxes he is required to charge, with an additional amount that he would like to make in profit (which he will never disclose to you and varies between jobs and contractors) included in the price. That is his right for providing the service and trying to run a profitable business.
If you don't like the price when he presents it, you shouldn't sign the contract.
If he is only disclosing additional costs for taxes after the fact, that is a different matter that deals with contract law.
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Old 01-28-2010, 05:32 PM   #33
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Nice job dredging up the past to beat on someone
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Old 12-28-2010, 03:07 AM   #34
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If your contractor charges you tax, that would indicate he is a legit legal established contactor, the kind you want in your home. (at least where I live anyways, if a contractor pays tax (which he should be) then he should be taxing customers on the final bill-materials and labour.
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