I have a question about how to charge sales tax in NJ if I am a contractor?
I own a property maintenance company in NJ, and I mostly perform maintenance and not capital improvements. The majority of my work includes painting, repairs, cutting grass, etc. When I prepare an invoice, I charge labor separately from materials. I do charge 7% sales tax on labor, but not on materials because I pay sales tax when I purchase the materials. So for example, if I painted a customer’s door, I might charge $100 plus 7% sales tax labor, and then if I purchase $14.20 in materials, I charge them $14.20. Am I doing this correctly?
I should clarify when I purchase the materials, I am paying sales tax on them at that time.
You should only charge tax on the service. Contractors are responsible for pay tax when they purchase materials because they are considered the “user” of the materials.
For contractors not doing capital improvements:
A contractor’s charge for servicing, repairing, or maintaining real property is taxable, and the contractor collects the tax from his customer. (N.J.S.A. Sec. 54:32B-3(b)(4) ; N.J.A.C. Reg. 18:24-5.8 ) The tax should be collected only on the service, since the contractor is responsible for paying tax on the material used in performing the service.
Sounds like you’re doing it right.