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?

Lefty Said: It gives companys like us a slight advantage over the stores that also install their products.

Now what I first posted should make sense to you.

According to this, PA imposes a sales tax on "property that is furnished and installed in the performance of con- struction activities." There is nothing in there that taxes the installation service or labor, or whether or not you have a store front, etc. So, if lowes is collecting a sales tax on the total contract price, then they are collecting a tax that is not owed.

When I get time, I will investigate OH sales tax laws.

NJ sales tax on labor only on all repair work not material tax is already paid. Labor and material have to be broken out. On roof projects no sales tax they're capital improvement. I know I got hit pretty good one year.

Lefty Said: It gives companys like us a slight advantage over the stores that also install their products.

Now what I first posted should make sense to you.

No, it does not make sense. Either you have incorrectly stated the sales tax law or someone is collecting a tax that is not due. No law would be constitutional that gave someone an advantage within the same class of persons. It seems to me that if your state does not impose a sales tax on services and only taxes goods, then a place like lowes could set up a service division separate from its retail goods division and not collect a sales tax on services.

clover83 Said: MikeH: Curious about your rental setup, we are in a transition phase of doing the same thing. Do you have the rental company pay for all expenses on the trucks? We dont currently, but Im checking in to the legality of it.

There is no tax advantage for us to have a different company either. You need to charge 6% sales tax on the rental charge. Plus all the added paperwork.

It gives company's like us a slight advantage over the stores that also install their products.

Now what I first posted should make sense to you.

clover83 Said: MikeH: Curious about your rental setup, we are in a transition phase of doing the same thing. Do you have the rental company pay for all expenses on the trucks? We dont currently, but Im checking in to the legality of it.

Roofing company pays all expenses. The company that owns the vehicles is nothing more than a holding company. The purpose is largely to simply protect our vehicles from being lost in the event of a bad law suit. At one time, ownership was distributed to create an "arm's length" transaction, thereby providing some tax shelter as well, but now I own 100% of both companies, and the "closely held" or "related" companies are taxed at a combined income rate. Still, if something really bad were to happen, at least I would still have all my trucks to open up again..... 68 years and counting, so far so good, knock-on-wood.

natty Said:

Mike H Said:

We basically have two options:.

I dont 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?

I am apparently perfectly clear, because your reply would indicate that you understood what I said perfectly.

As to why anyone would choose option 1? Beats me.

MikeH: Curious about your rental setup, we are in a transition phase of doing the same thing. Do you have the rental company pay for all expenses on the trucks? We don't currently, but I'm checking in to the legality of it.

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?

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.

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

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.

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

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?

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