If you are an individual building contractor, it’s important to stay on top of tax rules and know how the latest laws affect what you can and cannot deduct, as shown below.
Taxes Paid for Fixtures and Materials
The operations associated with the work performed by building contractors are normally divided up into three different taxable classes: cost-plus, lump-sum, and time-and-material class.
Either sales or use tax may apply in the case of the following five operations linked to the aforementioned classes:
- The installation, erection, or leasing of various types of buildings.
- Contracting work for the erection of a specific type of building on a client’s property.
- Building sales without installation—for instance, pertaining to prefabricated buildings currently in “knock down” condition.
- Remodeling work for existing buildings.
- The sale and/or installation of machinery and equipment designed for building work.
As in the case of erecting new buildings on a client’s property, repair, and remodeling work on existing buildings require tax expenses for both the use of materials and fixture installations in order to perform the desired work.
While taxes required for the cost of materials need to be paid according to the price paid by the contractor for acquiring the materials in question, taxes applied for fixtures bought to replace broken installations need to be determined according to the retail price of the new fixture.
There are plenty of tax-related issues to keep in mind, regardless of your specific field of operations. Aside from the items presented above, there are also several other tax expenses associated with the construction industry related to lease installments for the installation or leasing of a building: Tax applies for materials and fixture installations the same way as in the case of regular construction projects, and for the sale and installation of construction equipment as well.
We welcome the opportunity to put our construction accounting expertise to work for you. To learn more about how our firm can help advance your success, don’t hesitate to contact Kathy Corcoran at (302) 254-8240.