Industry Guide
Construction & Contractors Sales Tax
Construction contractors face the most fact-sensitive sales tax rules of any industry. Whether a contractor is the taxable consumer or a retailer turns on contract type, state rules, and how materials are billed.
Construction is one of the few industries where the same purchase can be
taxed three different ways depending on contract structure. The tax position
must be set before bid, not after the audit notice. Use the research tool
above to pull the controlling authority for your state.
The contract-type fork
Most states divide contractors into one of three buckets:
- Lump-sum / fixed-fee contractors typically consume materials and owe tax on purchases
- Time-and-materials contractors may be retailers of separately stated materials
- Cost-plus contractors may pass through tax depending on how materials are billed
Where exposure hides
- Mixed contracts with both real-property and tangible-personal-property components
- Subcontractor purchases without exemption certificates
- Out-of-state material drop-shipped directly to a job site