Do you need to charge sales tax on labor in Texas? The answer as usual is not always.
Transcript
Is labor taxable in Texas? I’m Mansoor Ansari with Nexus Tax Defense. Let’s discuss the taxability of labor and construction jobs. The labor to repair, remodel, or restore residential real property is not taxable, but the total amount charged for repairing, remodeling, or restoring commercial property is taxable. Taxable commercial property jobs can include rebuilding any real property as well as upgrading any part of an already existing structure. An exception to the rule on commercial property is actual maintenance contracts. That means that the ongoing maintenance to the extent of labor is not taxable on commercial property. Another exception to taxable commercial property is new construction. When your contract is for any of the following jobs the construction labor is not taxable. 1. Building new structures. 2. Completing unfinished structures. 3. The initial finish out of work to the exterior or interior of the structure. Finally, let’s talk about the five percent rule. If you are doing both remodeling and adding new square footage, then your entire transaction will be held taxable if more than five percent of the job is dedicated to remodeling. This is why it is important to itemize the invoice and separately charge tax on the taxable portions. Call us if you have any questions. Thanks.
