Sales Tax Rules for Contractors & Builders
These guides are designed for contractors, builders, and construction industry professionals who need clear answers to state-specific sales and use tax questions. We explain how each state taxes construction projects, materials, and labor — and how to navigate audits and disputes.
Why This Is Complex
Construction is one of the most frequently audited industries for a reason: sales tax rules for real property improvement contractors are notoriously complex. The treatment of materials vs. labor, lump-sum vs. separated contracts, and the taxability of subcontractor work varies dramatically by state — and auditors know it.
Common Issues We See
- ✓Taxability of materials incorporated into real property
- ✓Labor vs. materials separation on contracts
- ✓Subcontractor relationships and pass-through tax obligations
- ✓Exemption certificates for government and tax-exempt projects
- ✓Use tax on materials purchased out of state
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