Labor Tax

So if @GotWood only installed flooring, but didn't supply/sell the flooring to the end customer, he would not have to charge tax for labor?

It sounds like he would have to charge tax on all installs if any of the installs included supplying flooring?

I'm not a business owner, but this is an interesting topic that I never knew about.
 
Fabrik8 said:
So if @GotWood only installed flooring, but didn't supply/sell the flooring to the end customer, he would not have to charge tax for labor?

It sounds like he would have to charge tax on all installs if any of the installs included supplying flooring?

I'm not a business owner, but this is an interesting topic that I never knew about.
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That's the way I understand it. Yes
 
GONOVRIT said:
Anyone have any idea what other states have this tax?
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I don't recall the states, but National news mentioned other states implementing a labor tax, while at the same time eliminating an income tax. NC didn't exactly do this.
 
If you call me and ask me to install your floor that you bought from Lowe's, I have to charge you tax.

As for builders/retailers go, they will pay me a labor rate and tax me via 1099 and I will not be responsible for the tax. They will collect that from the end consumer and remit to Raleigh.

That is my understanding
 
GotWood said:
If you call me and ask me to install your floor that you bought from Lowe's, I have to charge you tax.

As for builders/retailers go, they will pay me a labor rate and tax me via 1099 and I will not be responsible for the tax. They will collect that from the end consumer and remit to Raleigh.

That is my understanding
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That's because you also sell the flooring.

If I am reading this correctly, and I have not looked at what Ben has posted.

If you, beginning this year told your customers they have to pay the hardwood floor company for all materials directly, paying you only labor. You will be avoiding the tax. You cannot be a retailer & avoid the tax.
 
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I buy the wood and pay sales tax. I give the wood for free! but my labor is very high.
 
I hate to say this, but it sounds like it would have been easier to deal with and understand if they just made it flat out tax on all labor, no exceptions, regardless of whether anything is sold, etc.

How about this, Maryland has a "fabrication labor tax", where you pay tax on labor to "finish a product"... but installation labor is not taxed.
Fabrication and Labor Charges
 
RatLabGuy said:
I hate to say this, but it sounds like it would have been easier to deal with and understand if they just made it flat out tax on all labor, no exceptions, regardless of whether anything is sold, etc.

How about this, Maryland has a "fabrication labor tax", where you pay tax on labor to "finish a product"... but installation labor is not taxed.
Fabrication and Labor Charges
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Your derailing this thread with your yankee speculation.. o_O

Don't confuse us simple minded folks..:p


Hell we are still trying to figure out what the NC state dept. of revenue wants from us!
 
I don't think it matters where Jims customers get the wood. If he installs it, and charges money...he is supposed to pay the Labor tax. He could charge it to the customer or eat it himself.

Either way...it's gonna hurt small business like ours. If we do not charge customer this tax...then we are breaking the law. If we charge the customer...and they pay..then all is well (except, now we have more paperwork)

If we charge customer the tax, say in an estimate, and the customer refuses..we either loose their business, or we'll eat the tax.
We loose some.
 
Dylan W. said:
I don't think it matters where Jims customers get the wood. If he installs it, and charges money...he is supposed to pay the Labor tax. He could charge it to the customer or eat it himself.
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The link that Ben posted above (although not from NC Dept. Revenue) seems to be saying that over 50% of your sales have to be from retail sales to qualify as a retailer:

Example: NAICS code 238330 (flooring contractor). 2015 sales: retail sales of carpet not installed by contractor $70,000, with $30,000 from real property contracts installed by the contractor. Effective March 1, this contractor is deemed to be in the retail trade because 70% of sales are taxable retail sales. Contractor must treat all transactions after March 1 as retail sales with customers and collect sales tax, even though before March 1 the business was able to exclude real property contracts from tax.

Example: Business sells at retail (2015 $4,000,000) and installs (2015 $1,000,000) septic tank components and systems. With 80% ($4M/$5M) of its sales from retail, the business is a retailer and must treat all sales transactions after March 1 as retail sales, including sales of installed septic tanks.

Example: Business sells kitchen cabinets at retail ($500,000 over last 3 years) and kitchen remodeling ($1,500,000 over the last 3 years). With 75% ($1.5M /$2.0M) of revenue for the 3 years being remodeling contracts for real property, this business does not meet the definition of “retail trade” with only 25% of its revenue from retail sales. This business is a “retailer-contractor”.

Example: A carpet installation contractor, who does not sell carpet at retail, agrees to provide the carpet, padding, supplies and labor to complete the contract. The business does not sell carpet at retail from any location, in or out of NC, but purchases the carpet, padding and supplies on an as needed basis from sellers and pays tax at the time of purchase on such items. This business is not in the “retail trade” since it is solely operating as a real property contractor.
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I think this is what my business falls under:

Exception: A person whose only business activity is providing RMI services, and does not meet the definition of “retail trade”, is not a retailer and is not liable for sales or use tax on its gross receipts from RMI services.

Example: A person whose only service is sharpening scissors or knives owned by customers, and does not meet the definition of “retail trade”, is not liable for tax on receipts from scissor or knife sharpening services, even though sharpening is an RMI service.
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In this paragraph, the article seems to contradict what it said earlier about 50% of all sales being retail to qualify.:

Some (but not all) examples of RMI services. Note, these are taxable if sold by a “retailer”. Remember, you are considered a retailer if you sell any items and collect sales tax thereon. Solely providing services will not cause taxation
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Finally, another 'example' with no mention of the prior 50% requirement:

Example: Auto repair shop purchases and installs a motor into a customer’s auto. The motor and the labor to install are taxable.

Example: Auto repair shop does not purchase or sell any repair parts. It only installs parts provided by the customer, and only charges for labor. Labor will be exempt from sales tax.
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GotWood said:
I lost a job today because I explained I was now required to collect tax on my labor.
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From what the article I quoted from above seems to say, if it is true about the 50% of revenue being retail triggers your responsibility for collecting sales tax, you may lose more jobs....say your materials sales last year were 55% of total revenue. You have to charge sales tax on your labor. (If it's 6.75 percent, that's $337 on a 5k job). Your competitor quoted the same job, and worked out to the same labor hours and rate you did. BUT...his retail sales last year were only 45% of revenues, so he is not subject to the sales tax on labor. So his quote beats yours by over three hundred bucks. That ain't fair.
 
Jeff B said:
The way I read this, in specifically my case. This tax does not affect me. I only install and repair. I never sell parts.

Now for the rest of the folks like @GotWood. I think that until this new tax is going to hurt business until the customers realize it's real.
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That's the way I read it, too. I don't sell parts, just labor and most of what I build is not a "motor vehicle" since it's not street legal. If I sold parts, I'd just incorporate another business just for that. It looks like there is no way around it working on what the state defines as a motor vehicle.
 
I wanted to be sure about charging tax or not because my season is starting. trying to understand that is difficult. I called them at.

Taxpayer Assistance and Collection Center at telephone number 1-877-252-3052 (toll-free).


Because I am a NOT retailer I do not have to charge tax.
 
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Wonder how this would affect a general contractor like myself...

1. If they are hired to do a remodel
2. If they are hired to do a design/build
3. If they build a spec house
 
Jeff B said:
I wanted to be sure about charging tax or not because my season is starting. trying to understand that is difficult. I called them at.

Taxpayer Assistance and Collection Center at telephone number 1-877-252-3052 (toll-free).


Because I am a NOT retailer I do not have to charge tax.
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So, could you operate two businesses in the same location... One the sells parts retail, but does not install them, then a separate non-retail installation service?
 
I honestly cannot answer any questions. I only asked about my specific circumstances. I suggest you call the number and get through the recordings. Pose your question..
 
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