Texas Contractor Sales Tax Flow Chart
If you are a contractor in Texas and you are wondering whether or not you owe sales tax and at what point, then, this flow chart will solve your problems.
Is it the General Contractor or the Subcontractor that has to pay the sales tax?
Is a resale certificate enough to get out of paying and collecting sales tax to the Comptroller?
What happens if I mark-up the taxable items?
Take a look at the flow chart below. It clearly describes all of the situations and circumstances where you would need to understand how sales tax applies when tangible items change hands in between a number of contractors.
Whether a subcontractor must collect sales tax from a general contractor depends on several factors, including the state or locality where the work is being performed and the nature of the services or goods being provided.
General Guidelines:
- Construction Services: In many states, construction services provided by subcontractors are not subject to sales tax if they are part of a larger construction project. The general contractor may be considered the end user, and therefore, the subcontractor does not need to collect sales tax. The general contractor may need to issue a resale certificate to the subcontractor, stating that the service is part of a non-taxable project.
- Material Sales: If a subcontractor sells materials as part of their services, whether they need to collect sales tax depends on the state’s rules. Some states may require the subcontractor to collect sales tax on the materials if they are not incorporated into the real property.
- State-Specific Rules: Tax laws vary widely by state. For example, some states may tax certain types of services while others may not. It’s essential to check the specific requirements in the state where the work is being performed.
- Exemptions: Some projects, such as those for governmental or nonprofit organizations, may be exempt from sales tax. In such cases, the subcontractor might not need to collect sales tax, provided proper documentation of the exemption is obtained.
To determine the exact requirements, for Texas, take a look at the flow chart above.
Texas Contractor Sales Tax Flow Chart