In some states, under time and material contracts where materials are specified separately from labor, a contractor may be considered a retailer and purchase the items that become components of the property for resale. In some states, if the entrepreneur provides a taxable service, such as . B the conversion of taxable real estate, the entrepreneur can buy the items that have been included in the property for resale. In both cases, VAT must then be levied on the selling price of the taxable materials. In general, entrepreneurs must pay sales or consumption taxes when purchasing materials to incorporate into a property. VAT is generally imposed on the “final consumer”. The end user is usually the last person to buy and use the item. When constructing or improving real estate, the contractor is generally considered to be the end user of the material personal property incorporated into the property. Entrepreneurs are considered consumers when they purchase material personal goods that are used or consumed in their construction activity, even if they are not integrated into the property. Sales or use tax must be paid when purchasing these items. In addition, all equipment used by the contractor is taxable.
The entrepreneur sells real estate or an improvement of the property and this is usually not subject to sales and use tax. The entrepreneur can pass on the cost of the tax to the buyer as part of the contract price, but cannot declare the tax as an additional tax if the tax burden falls on the entrepreneur as the buyer. However, in a separate contract or a cost-increased contract, the State may regard the sale as partial property subject to VAT and in the context of the sale of an exempt service. Under a separate or cost-plus contract, or if the property retains its character as tangible personal property, the contractor may be considered a retailer and may be able to acquire important personal property for resale. Most States include in their regulations lists of items that they consider to be tangible property when sold by a contractor. Examples: window treatments, most appliances, window air conditioners, attached carpets and other items that can be removed without damaging the structure. In many states, the structure of the contract may affect the tax liability of the transaction. A lump sum contract usually imposes a tax liability on the contractor for the material tax. When hired by agencies or organizations eligible for a sales or use tax exemption, contractors are not always exempt.
Each status must be checked individually. Contractors are generally not resellers of materials incorporated into real estate; You are considered a user and consumer of material purchased for an order. However, the nature of the contract may change the tax implications. Most states do not tax construction and real estate services. However, some do. .
