Free guide for contractors
Do contractors charge sales tax in California?
General information, not tax advice. Tax rules change and depend on the details of each job. Confirm how they apply to your business with your accountant or the state's revenue department before relying on them.
CA California
Depends on the jobNot on materials, but in California fixtures a contractor furnishes and installs, such as plumbing and lighting fixtures, are taxable sales.
California treats a construction contractor as the consumer of the materials it furnishes and installs. The contractor pays tax when buying them.
Fixtures are different. A contractor is the retailer of fixtures it furnishes and installs, and tax applies to those sales. The state's list includes plumbing fixtures, lighting fixtures, air conditioning units, furnaces and prefabricated cabinets.
If the contract does not state a fixture's price, its sale price is taken to be what the fixture cost the contractor.
Anything a contractor sells without installing it is taxable, and a contractor making such sales must hold a seller's permit.
It turns on: whether each item is a material or a fixture; whether the contract states the fixture's price; whether items are sold without installation.
Watch out for
- Itemizing materials or labor does not by itself make the contractor the retailer of materials. That takes a contract that passes title before installation and states the materials' price separately, or a time-and-material contract billing 'sales tax' on marked-up materials (18 CCR § 1521(a)(8), (b)(2)(A)2).
- A cabinet is a prefabricated fixture only if 90% of its direct cost is incurred before it is affixed; custom built-in cabinets are materials (18 CCR § 1521(c)(2)).
- On a United States government contract, the contractor is the consumer of both materials and fixtures (18 CCR § 1521(b)(1)(A)).
“Construction contractors are consumers of materials which they furnish and install in the performance of construction contracts.”18 CCR § 1521(b)(2)(A)1