Contractors and sales tax
If you’re a contractor improving real property, remember: You shouldn’t charge sales tax to your customers for materials used to improve real property. You should either pay sales tax to your vendor or pay a use tax to Idaho on all purchases of materials used in these projects. Your contract bid should be high enough to cover any sales or use tax you paid without itemizing these taxes on the bid or the billing for the work done.
If you charge sales tax on the bill, your customer can refuse to pay it or request a refund for it later. If you charge sales tax in error and your customer pays it, you must still report and pay the sales tax collected to the state. In addition, since you improperly charged a sales tax to your customer, you’re still required by law to pay a use tax to the state on the materials installed during the real property project.
Please share this important information with your bookkeeper or accountant!
For more information, visit the Tax Commission’s Contractors Working in Idaho Web page.
tax pros general