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GC Does not want to pay service/sales tax...

3K views 25 replies 10 participants last post by  JGarcia 
#1 ·
This is the first time I have sent in an invoice and the reply I get back is, "Can you take off the sales tax, we are tax exempt." Following that is an attached W-9 form. Not sure why though.

Is this common? Or even right?

My CPA was so conveniently not available today...$200/hr and you can't even get a hold of the...errr...

Any thought would really be appreciated.

Thanks!
Joe
 
#5 · (Edited)
That is exactly what I thought. I do have to pay sales tax on all the material. Time to get reimbursed. And yes I do have a line for sales tax on the invoices. But I believe it is normal practice to purchase matl., then mark it up a good bit, so I guess I do collect that sales tax even before it's included on the invoice. I use a software where you enter an item, rate, quantity and has an option of taxable or not. Labor would be taxed also wouldn't it?

What was the point of sending the W-9? I didn't "request" it. This GC has great service work for me but, I guess like all others, they hate to pay.
 
#6 ·
if they are tax exempt then they should issue you a certificate. If this was a capital improvement they should issue you a certificate to not have to pay tax on labor. The W-9 is standard to issue your taxpayer ID to get paid. The next thing they will want is a certificate of insurance.
 
#8 ·
You are showing the sales tax amounts only as a courtesy. You'll have to "bury" those amounts into your item costs, and show -0- as the amount of tax due.

You'll get the same amount of $$$ in the end, but it will appear that your unit pricing is higher, due to the embedded taxes you have already paid on their behalf.
 
#10 ·
You are showing the sales tax amounts only as a courtesy. You'll have to "bury" those amounts into your item costs, and show -0- as the amount of tax due.

You'll get the same amount of $$$ in the end, but it will appear that your unit pricing is higher, due to the embedded taxes you have already paid on their behalf.
I see what you're saying and it does make sense. So, are you saying that you don't charge sales/use tax to any of your customers since the item cost are already marked up? Or just in situations like this where they (claim or are) tax exempt?
 
#11 ·
Not sure how Texas works but here, Mississippi, we buy as tax exempt.So when we bill we charge sales tax. On both labor and materials. Now a GC can gives us a copy of his State Tax Certificate, and we do not charge sales tax. The sales tax is his responsibility and we list that money and his number on our monthly tax payment to the state. It has nothing to do with a federal tax ID.
 
#13 ·
Not sure how Texas works but here, Mississippi, we buy as tax exempt.So when we bill we charge sales tax. On both labor and materials. Now a GC can gives us a copy of his State Tax Certificate, and we do not charge sales tax. The sales tax is his responsibility and we list that money and his number on our monthly tax payment to the state. It has nothing to do with a federal tax ID.

In Mississippi, do you guys have a service or use tax? Or in any other state?

At this point, I think I will just remove the tax line like sparky says and just be satisfied with what is already "buried" in my items.
 
#12 ·
As a contractor, I am not allowed to collect/remit sales taxes. The tax folks want me to pay them up front, when I buy materials from the wholesale suppliers.

Sometimes, I will do as you did: Show sales tax amounts as a courtesy to give the illusion of lower prices. I have already paid those taxes when I bought the materials in the first place. But when dealing with non-profits, and out of state customers, they don't want to see any "taxes" on their invoices. So you have to embed the (already paid) taxes into your materials prices.
 
#14 ·
I was trying to remember if Texas had a sales tax? That's all we have and its charged on both sales and service. Meaning work done and materials used. As I said earlier since we have to collect sales tax and pay into the state our purchases are tax exempt. Therefore we're not taxed twice.
 
#15 ·
tufts46argled said:
I was trying to remember if Texas had a sales tax? That's all we have and its charged on both sales and service. Meaning work done and materials used. As I said earlier since we have to collect sales tax and pay into the state our purchases are tax exempt. Therefore we're not taxed twice.
Don't forget our use tax, you know.... I've found MS has a tax for everything! :lol:

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#21 ·
Well this sounds like the situation I am in and based on all your guys input I just need to remove the tax.

Thanks for all the help at least now I have a basis on which to make a decision.

BTW, Modern Marvels on the History Channel has a special on Nicola Tesla. The real pioneer of electricity. A/c power, fluorescent bulbs, earthquake machines, death rays...freakin genius!
 
#18 ·
JGarcia said:
In Mississippi, do you guys have a service or use tax? Or in any other state?

At this point, I think I will just remove the tax line like sparky says and just be satisfied with what is already "buried" in my items.
Up until the year before last, Arkansas did sales and use tax only, and it was handled the same way as MS. Then someone decided enough money was being paid-in, so they extended their tax to cover services, also.

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#19 ·
tufts46argled said:
Sorry I have no clue what a use tax is. Our company is 57 years old and we don't pay a "use tax"!
The books I got from the state had it in there, I think it it just to cover what the business purchases for their use if it is bought under the sales tax permit. Can't recall the tax item no., but it can be filed online the same as the regular sales tax. I think it may just be a way to assure that tax is paid on everything purchased under the permit.

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#22 ·
In NJ we pay the sales tax when we buy the materials. Here, as a service electrician, sales tax is only collected when a repair is made. Your accountant will have the info for you and if he doesn't time to find a new one. The accountant is worth every penny just for things like this. Good luck.
 
#23 ·
tufts46argled said:
No if we're buying items for our use, then we pay sales tax. Only material and/or items to be used on jobs are tax exempt. We then charge the customer sales tax on these items, then also on service.
Found the booklet... As for normal materials, I would pay the tax at time of purchase. But say I purchase parts at a supply house and at the same time purchase a meter for company use, I would collect the normal taxes from the customer and pay the state. The meter, however, I have to report the sales tax as use tax on a different form.

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#24 ·
Found the booklet... As for normal materials, I would pay the tax at time of purchase. But say I purchase parts at a supply house and at the same time purchase a meter for company use, I would collect the normal taxes from the customer and pay the state. The meter, however, I have to report the sales tax as use tax on a different form.
OK so if I am understanding you correct, sales tax on Item 'A' can only be collected once from the original supplier. Right? You can't buy a Item 'A' for 99 cents plus sales tax = 8cents (8.25% here in tx) and then turn around and sale it for $1.07 PLUS another 8.25%.

And yes Magnettica, :thumbsup: I am going to start hunting for a new CPA a.s.a.p. This is the second time I have NEEDED to contact him, and just got put on a two day waiting list. I will say this, he's a hell of a salesman! Gave his cell and email for "instant responses". Whatever. Thanks!
 
#26 ·
That is a great deal! This year alone I planned to spend about $2k on this guy (includes this yr. income taxes and a quickbooks training). He was referred to me by an EC who went out of business because of back taxes and this CPA pulled him out of a hole. So I figured he'd be worth it. But what's he worth if you can't contact him? $0.

Thanks again!
 
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