Construction Sales and Use Tax

Описание: Work in construction? Watch as Connie Zoerink and Tram Le from TaxOps’ SALTovation Team discuss what to consider when handling taxes in this space.

TRANSCRIPT
I think one of the biggest issues that we face, um, is actually determining how to classify somebody who's working in the construction space. How we, how do we classify them for each state's purposes, because it can be completely different state to state.

I think the key thing there is right, every state defines what a contractor is and their activities to even like be categorized as a contractor.

And once they're, you know, they fit into that. Characterization or that category, you know, then you're dealing with, oh, how should I charge? Or, you know, pay tax.

Yeah, it's very complicated. Um, you would think that it would be something simple, um, just building things. Um, but there are a lot of pieces and parts that are involved in kinda determining how one to classify.

And then two, how to actually, um, Resolve and take care of your tax obligations, um, whatever

those might look like. So really understanding like how a state defines a contractor and how they prescribe, you know, retailer versus, versus the consumer can be very difficult.

Absolutely. I think even going down to the level of, you know, a general contractor versus a subcontractor, um, that can make a difference in your responsibilities for tax, um, as well as what kind of tax you would be, um, remitting or collecting, charging, um, and of course varies by a state by state basis.

Nothing can be the same. Depending on what you're doing, it might be different. Um, if you're building a building or if you're just repairing a building or altering or modifying a building can also make a huge difference, um, in how you're classified and, and what kind of tax you're paying.

Yeah, no, absolutely, and I think the, the rules that I really, really like to deal with are the building permits, especially in Colorado.

I mean, Any you'd like to share? Um, yeah, it varies by jurisdiction. That's what I would say varies wherever you're at. If you cross the street, it might be different. Um, building permit process might be different in a different city. So, um, the building permits in Colorado, um, are typically done at the home.

City level, there may be some county level, um, permits as well that need to be pulled. Um, and in those you will be paying, typically use tanks on your materials that are used in the um, In the project. Um, and there can be some variations. There might be some sales tax involved in that as well, uh, in the project as well.

So, um, it's just really, it, it can get very complicated, um, very weedy and um, very detailed and so, uh, it's something that you wanna pay attention to for sure.

Yeah, and I think kind of one of the biggest challenge. The building permit and remitting tax. You know, as part of that process is, I think in Colorado, many jurisdictions require the contractor to, you know, pay a tax based on the estimated value of materials.

And it's like they really don't know, but they're having to pay up front. And then after the project is done, or you know, if they're installing something or they. Actually, you know, part of the building process, they have to wait until the project is done and then they have to go through this crazy reconciliation process, which is, you know, it's time consuming and you might not have all the right records, but I mean, it's almost like a true up that you have to do and then, yeah, pay more or, you know, get some potential tax.

Absolutely. And typically it's a very short period of time. Time to, to do the reconciliation, to, I wanna say like 90 days, um, is a, is a pretty typical, uh, time to, you know, at the close of the project you have 90 days to reconcile that tax and get it either remit more or, um, or just have your records to them so that they can refund any difference.