The sales tax paid by contractors becomes an expense that can be passed through to the customer as part of the overall charge for the capital improvement.Ĭontractors do not normally sell building materials to customers without installation and, therefore, cannot use Form ST-120, Resale Certificate, to make purchases of building materials exempt from tax. Purchases of materialsīuilding materials and other tangible personal property purchased for capital improvement work are taxable, whether purchased by a contractor, subcontractor, repairman (hereafter contractor), or homeowner. Since the method of installation may affect how the work is taxed, certain work will need to be looked at on a case-by-case basis. Publication 862, Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property, provides detailed information on various types of work that do and do not qualify as capital improvements. Repairing a broken step, replacing a thermostat on a hot water heater, or painting existing cabinets are all examples of taxable repair and maintenance work.
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