CDTFA Revises Policy Regarding 40 Percent Unremitted Tax Penalty
McClellan Davis, LLC – Sales Tax Help
by Mitchell Stradford
1M ago
Pursuant to Revenue and Taxation Code section 6597, any person who knowingly collects sales tax reimbursement and who fails to remit the sales tax reimbursement to the California Department of Tax and Fee Administration (CDTFA) can be held liable for a penalty of 40% of the unreported tax amount, if the tax amount exceeds $1,000 per month and is in excess of 5% of the total tax due for any reporting period. Historically, CDTFA has been hesitant to apply the penalty in most circumstances even when the numerical thresholds are met unless CDTFA has been able to establish that the failure to remit ..read more
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Construction Services – Installation Labor
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
Construction-related installation labor (affixation or conversion of tangible personal property to realty) is taxable to varying extents in 14 states.  Since repairs to realty (restoration of real property to its original condition) were featured in the previous installment, I’ll try to avoid covering similar ground to the extent possible.  However, overlapping treatments of installation and repairs are built into the sales and use tax statutes of a few of the states, so some duplication of the applicable commentary is inevitable.    The states that tax all constructio ..read more
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Contractors that Manufacturer Materials and Fixtures
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
For sales and use tax purposes, a manufacturer can be defined as one who converts some form of tangible (generally personal) property into another form that has a different function or purpose.  Construction contractors may be regarded as manufacturers when they substantially modify materials or fixtures before installing them, rather than just buying such items in a ready-to-install state.  For purposes of this article, all references to “materials” and “fixtures” will pertain to property that contractors affix or otherwise convert to realty.  Most states expect contractors to ..read more
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Construction Contractors as End Users
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
Most states regard construction contractors as consumers (end users) of the materials and fixtures they install.  In today’s blog, we’ll examine the implications of this concept and list the states that apply it with few or no exceptions.   Under virtually all state sales and use tax laws, property that contractors affix to real estate is considered to fall within one of the following three broad classifications: Materials are generally items that lose their individual identity when incorporated into real estate.  Examples include nuts, bolts, nails, screws, lumber, roofin ..read more
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Contractors as Both End Users and Retailers – California
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
In the previous article we discussed states that unequivocally regard construction contractors as consumers (end users) of the materials and fixtures they install.  In this installment, we’ll look at California, which treats contractors as consumers of materials but retailers of fixtures.  We’re featuring California because it provides what may be the clearest example of the consumer/retailer concept in action.   We’ve previously defined materials as items that lose their individual identity when incorporated into real estate, such as nuts, nails, and screws. Fixtures are i ..read more
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Construction Services – Repairs and Maintenance
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
In the majority of states, services related to construction are not subject to sales tax.  In a large minority, however, one or more construction services are specifically included in the sales tax base. The two major forms of labor (services) associated with construction contracting are installation (affixation of tangible personal property to realty) and repairs to real property.  In some states, installation labor that results in new construction is treated differently from installation associated with a remodel or reconstruction.  In addition, the dividing lines among repair ..read more
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Construction Contractors as End Users
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
Most states regard construction contractors as consumers (end users) of the materials and fixtures they install.  In today’s blog, we’ll examine the implications of this concept and list the states that apply it with few or no exceptions. Under virtually all state sales and use tax laws, property that contractors affix to real estate is considered to fall within one of the following three broad classifications: Materials are generally items that lose their individual identity when incorporated into real estate. Examples include nuts, bolts, nails, screws, lumber, roofing shingles, wires ..read more
Visit website
Contractors that Manufacturer Materials and Fixtures
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
For sales and use tax purposes, a manufacturer can be defined as one who converts some form of tangible (generally personal) property into another form that has a different function or purpose.  Construction contractors may be regarded as manufacturers when they substantially modify materials or fixtures before installing them, rather than just buying such items in a ready-to-install state.  For purposes of this article, all references to “materials” and “fixtures” will pertain to property that contractors affix or otherwise convert to realty. Most states expect contractors to pay sa ..read more
Visit website
Construction Services – Installation Labor
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
Construction-related installation labor (affixation or conversion of tangible personal property to realty) is taxable to varying extents in 14 states.  Since repairs to realty (restoration of real property to its original condition) were featured in the previous installment, I’ll try to avoid covering similar ground to the extent possible.  However, overlapping treatments of installation and repairs are built into the sales and use tax statutes of a few of the states, so some duplication of the applicable commentary is inevitable. The states that tax all construction-related installa ..read more
Visit website
Contractors as Both End Users and Retailers – California
McClellan Davis, LLC – Sales Tax Help
by Jesse McClellan, Esq.
1y ago
In the previous article we discussed states that unequivocally regard construction contractors as consumers (end users) of the materials and fixtures they install.  In this installment, we’ll look at California, which treats contractors as consumers of materials but retailers of fixtures.  We’re featuring California because it provides what may be the clearest example of the consumer/retailer concept in action. We’ve previously defined materials as items that lose their individual identity when incorporated into real estate, such as nuts, nails, and screws. Fixtures are items that re ..read more
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