Contractor use tax

Definition

Tax a contractor owes as the consumer of the materials it installs into a job.

Why It Matters

The tax classification is the question and this is the answer on the contractor side of it. California's regulation says a construction contractor is the consumer of the materials it furnishes and installs, and that either sales tax or use tax applies to that purchase. Its own list of the trades names floor covering with a condition attached: permanently affixed to the floor. New York draws the line somewhere else entirely. Carpet, padding and vinyl installed as the initial finished floor in new construction or a total reconstruction is a capital improvement, and the same goods installed as a replacement are not. So the same carpet in the same building is one thing the first time and another thing after. Two shops doing identical work can sit on opposite sides of that line, and comparing their gross margins without knowing which side compares nothing.