Contractor Sales Tax Washington

Contractor Sales Tax in Washington: What You Need to Know

If you are a contractor in Washington State, it is important to understand the state`s sales tax laws. Sales tax applies to retail sales of tangible personal property and certain services. However, when it comes to contracting, things can get a bit more complicated.

Here are the basics of contractor sales tax in Washington:

What is a Contractor?

A contractor is a person or business that provides services to construct, improve, remodel, or repair real property. This includes general contractors, subcontractors, and specialty contractors.

When is Sales Tax Due?

Sales tax is due on the retail value of tangible personal property used in the construction process, such as lumber, nails, and cement. However, certain materials, such as those used for foundations or structural supports, are exempt from sales tax.

In addition, sales tax may be due on the installation, repair, or maintenance services provided by the contractor. The tax rate for services is based on the location where the work is performed.

Who Pays the Sales Tax?

It depends on the type of contract. If the contract is for a lump-sum price, the contractor is responsible for paying the sales tax on the materials and services used in the project. The contractor includes the sales tax in the total cost of the project and passes it on to the customer.

If the contract is for time and materials, the customer is responsible for paying the sales tax on the materials used in the project. The contractor invoices the customer for the materials and includes the sales tax on the invoice.

It is important for contractors and customers to understand who is responsible for paying the sales tax. Failure to pay the appropriate sales tax can result in penalties and interest.

How to Register for Sales Tax

Contractors who provide construction services in Washington must register for a sales tax account with the Washington State Department of Revenue. This can be done online or by mail.

Once registered, contractors must collect and remit sales tax on taxable construction activities. It is important to keep accurate records of all materials and services used in each project to ensure the correct amount of sales tax is collected and remitted.

In conclusion, contractor sales tax in Washington can be complex, but it is important to understand the rules and responsibilities. By registering for a sales tax account and keeping accurate records, contractors can avoid penalties and ensure compliance with state law.