A good contractor sells kitchen remodeling “packages” to its housing and commercial clients. The packages include supplying in addition to installing a fixed amount of materials. For example , one package comprises eight cabinet doors, drawer fronts, hardware, one drinking water filter, fourteen feet of countertop, molding and installation. The very contractor inquired if it was required to collect sales tax right from its customers.
Whether or not a contractor makes its sales and profits as a “package” or to the specifications of each particular work, the Department of Taxation and Finance considers formation contracts to be the sale of Edmonton Excavating Pros.
Although materials are important by the terms of most construction contracts, the Department fails to view the transaction between contractor and customer as a vending of materials. The contractor, rather, is viewed as the ultimate end user of the materials and is responsible to pay sales tax to it’s supplier. When the contractor uses the materials to perform her contract, the transfer of the materials is seen as casual to the services being performed by the contractor on its customers’ real property. As such, when the contractor invoices the customer there is no separation between labor and materials just for sales tax purposes. The total contract price, including both resources and labor, is the price of the service being sold. The fact that total price is either taxable or exempt by rationale of being performed as a capital improvement or for an exempt organization.
The contractor selling its kitchen remodeling opportunities is performing a taxable service. The sale of that company will be exempt from sale tax if the contractor is given proof of exemption, such as an ST-124 Certificate of Budget Improvement. If you read the March 2013 Update, you will know any time the Certificate of Capital Improvement is received throughout 90 days from the rendering of the service in good faith and then the form is properly prepared, the contractor will be guarded from liability in the event no sales tax was collected and that the project did not actually satisfy the definition of capital improvement.
SHORT LIVED PEDESTRIAN WALKWAYS: Continuing Look at Department’s Temporary Facilities Exploration
The Department has issued another Advisory Opinion reading the issue of temporary facilities on construction sites. The latest Advisory Opinion was issued to a scaffolding corporation that installs, rents and dismantles temporary pedestrian walkways on capital improvement projects. The business customarily charges it is customers a lump sum for the total cost of the services plus rental, and collects sales tax on the total contract cost you.
The scaffolding company enters into contracts that include rates for installation and dismantling, as well rental and permit prices. The contracts are priced as a lump sum. Invoices are convinced that the charge is for installation, dismantling, rental and lets. The Department stated that, as presented by the scaffolding company, the lump sum charge is “primarily” for the assistance of installing and dismantling the temporary pedestrian walkway. If this temporary facility is a necessary prerequisite to the construction associated with a capital improvement project, the lump sum would not be cause to undergo sales tax. The scaffolding company would be responsible to pay sales tax on its purchases of equipment just like a contractor purchasing products.
The scaffolding company also inquired about the sales tax penalties of separately stating the service charges from the lease charges on its invoices. The Department advised that charge for the service of installing and dismantling the short lived facility that is a necessary prerequisite to the construction of the budget improvement would not be subject to tax so long as the charges are located in reasonable relation to the total cost. The separately stated rentals charge would be taxable. In this scenario, the scaffolding provider would not have to pay sales tax when it purchases its equipment take into account being purchased for resale purposes.
Edmonton Excavating Pros
10720 109 St NW Unit 104
Edmonton, AB T5H 3B6
(587) 416-5622
Two points of interest during this Advisory Opinion. First, in the lump sum contract scenario often the Department subsumes the rental aspect of the contract to your service of installing and dismantling. There is no explanation of how the exact Department viewed the lump sum contract as “primarily” an agreement for services.
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