Free guide for contractors
Do contractors charge sales tax in Texas?
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.
TX Texas
Depends on the jobIt depends on whether the property is residential and how the contract is written. Residential lump-sum jobs carry no sales tax.
In Texas, labor to repair, remodel or restore residential real property is not taxable. Under a lump-sum contract for residential work or new construction, the contractor pays tax on supplies and materials when buying them and does not charge the customer tax.
Under a separated contract, the contractor collects state and local sales tax from the customer on the amount charged for materials, and labor is not taxed. The materials price must be at least what the contractor paid.
Repair and remodeling of nonresidential property is different: the contractor collects state and local sales tax on the total charge for the job. Separately stated building permit fees, maintenance labor, and separately stated labor to repair damage from a declared disaster are not taxed.
A contract is a separated contract when its terms require invoices or progress billings to state these charges separately. Itemizing an invoice may not, on its own, make it one.
It turns on: residential or nonresidential property; repair and remodeling versus new construction; lump-sum versus separated contract.
Watch out for
- Residential property includes apartments, condominiums and nursing homes whether or not the owner lives there, but not hotels or rentals of under 30 days (Pub. 94-116).
“Labor to repair, remodel, or restore residential real property is not taxable.”Texas Comptroller, Pub. 94-116