Construction Law
Sales Tax and the Construction Industry
As a construction business grows, so does the number of responsibilities a contractor is forced to deal with on a daily basis. Many contractors choose to partner with an experienced CPA and a Lakeland construction attorney to ensure that their financial and legal obligations are being satisfied. By doing so, many contractors can avoid issues that undermine the success of their businesses while simultaneously protecting their bottom line against avoidable expenses.
In this brief article, our Lakeland construction attorneys will discuss the importance of understanding how sales tax can affect your construction business. Once you begin to generate revenue that breaks your personal records, you want to make sure that you are supporting your success with experienced professionals who understand how to apply your short-term gains to your long-term goals.
Paying and Charging Tax in Florida
According to the Florida Department of Revenue, “In Florida, the taxing of property improvements, installation, and repairs varies according to the exact nature of the transaction.” For the most part, transactions are tax-exempt when they involve items or services that result in a permanently installed structure. However, it’s recommended that contractors take the pricing arrangement into account before deciding on whether or not they will charge tax for the following:
- Carpeting
- Carpentry
- Dock, pier, seawall
- Driveway
- Electrical
- Elevator or escalator
- Landscaping
- Masonry
- Roofing
- Tile
Construction Contracts and Tax
The type of contract used to facilitate a construction deal will also affect whether or not sales tax should be charged. If you are utilizing a lump sum, cost plus, fixed fee, guaranteed price, or time-and-material contract, you are considered the “final consumer,” which means you are required to pay sales tax to your suppliers for any and all purchases. Furthermore, contractors should not pass these tax expenses onto the entity purchasing the structure. If you are hired to repair or install “tangible personal property,” all parts and labor are taxable. However, if the job does not require the purchase or installation of any parts, it is considered a “labor only” job and is not taxable — pending the proper documentation.
Related: 3 Potential Pitfalls of Lump Sum Contracts for Contractors
Purchasing Materials Under Tax-Exempt Status
The Florida Annual Resale Certificate gives contractors the ability to purchase materials without paying tax if they intend to resell them or use them to complete a project. In order to do so, contractors must provide a copy of their Florida Annual Resale Certificate to their supplier. If these materials are not used for their intended purpose, the contractor will be required to pay sale tax on those items and potentially a discretionary sales surtax.
Related: Working With Suppliers
It’s also worth noting that contractors who plan to purchase materials from out-of-state vendors that are not registered in Florida are “liable for use tax and surtax.” Clearly, there’s a lot of nuance to Florida’s tax laws, which is why we recommend investing in professional partnerships that take the guesswork out of keeping your construction business on track. For more assistance, consult the Lakeland construction attorneys at Cotney Attorneys & Consultants.
If you would like to speak with a Lakeland construction lawyer, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.