Do Plumbers Charge Sales Tax? Labor and Materials by State

Why there's no single answer

The agencies split on the same handful of questions, and each answers them its own way:

• Real property or goods? Florida's rules treat contracts to improve real property (Rule 12A-1.051) differently from repairs to goods that stay movable (Rule 12A-1.006), and its mobile home brochure puts a home with an MH decal on the goods side. Tennessee draws the same line between a central air system and a window unit.
• What kind of job? New Jersey, New York and West Virginia tax repairs but not capital improvements. Iowa taxes repairs and installations but not new construction or remodeling.
• Residential or commercial? Texas and Kansas don't tax repair labor on a home but do on an existing commercial building.
• How is the contract written? In Texas, Colorado and Indiana, a lump-sum contract and a contract that prices materials separately are taxed differently.
• Material or fixture? California treats piping and wiring one way and fixtures such as furnaces and plumbing fixtures another.
• Which tax? Hawaii, New Mexico and South Dakota reach contracting through a general excise, gross receipts or contractor's excise tax rather than a plain sales tax. Delaware has no sales tax but taxes the contractor's gross receipts.

That's why the job cost calculator asks how you handle tax (pay it on materials when you buy, collect it from the customer, or not sure) instead of assuming a national default.

The 50 states and DC, one row each

Each row gives the agency's answer on repair and installation labor for work on buildings, the distinctions it draws, who pays the tax on materials in the usual case, and the agency pages behind the row with the date or revision they print. The buttons show one answer at a time or sort the rows by state, labor answer or materials. Where the pages read don't settle a point, the row says so: check with the state.

In short, 29 of the 51 say this labor on buildings is generally not taxed, 12 tax it for some jobs or properties and not others, 5 tax it generally, and 5 have no statewide sales tax. On materials, the contractor pays the tax when buying them in 28, the customer pays it in the price or on the bill in 3, and in 15 it depends on the job or the contract. In all, 2 rows carry check with the state for a point the agency's pages leave open.

What the groups have in common

• Taxed generally (5). Hawaii's general excise tax and New Mexico's gross receipts tax fall on the business's gross income or receipts and are commonly passed on to customers. South Dakota's 2% contractor's excise tax can be listed on the bill. Mississippi taxes plumbing, electrical and HVAC work at 7% on homes and small jobs and puts a 3.5% contractor's tax on nonresidential contracts over $10,000. Washington (custom construction) has the prime contractor collect retail sales tax from the landowner on the gross contract price.
• No statewide sales tax (5). Montana, New Hampshire and Oregon have no general sales tax. Delaware taxes the contractor's gross receipts instead. Alaska has no state sales tax, but several cities and boroughs levy one, and state law lets a borough's sales tax reach services.
• Depends (12). The line is repair against capital improvement in New Jersey, New York, North Carolina and West Virginia; repair against new construction or remodeling in Iowa; a home against a commercial building in Texas and Kansas, and an owner-occupied home of one to three units against commercial, industrial or rental property in Connecticut; routine maintenance against construction and major repairs in DC; maintenance, repair, replacement and alteration against new construction and large alterations in Arizona; nonmechanical parts against mechanical and electrical equipment in Arkansas; and listed items such as furnaces in Wisconsin.
• Not taxed (29), but the billing still matters. Georgia's contractor FAQ and Alabama's FAQ tie the labor exemption to labor stated separately on the invoice (Georgia's pages don't say how that applies to real property work: check with the state), and in Nebraska an Option 1 contractor that doesn't separate its labor is taxed on the whole charge. Cleaning and routine maintenance can be taxed where repair isn't: HVAC system cleaning in Minnesota, cleaning furnaces, ducts and drains in Nebraska, cleaning ventilating systems in Ohio, and central air conditioning maintenance and filter changes in Pennsylvania, where residential air conditioning maintenance and repair are not taxed.

A worked example: one Texas job, two contracts

Texas shows how much the contract wording can matter. The Comptroller's Publication 94-116, Real Property Repair and Remodeling, dated March 2007 on the page and still the version the Comptroller's publications list links to, says:

• Labor to repair, remodel or restore residential real property is not taxable. Residential means family dwellings, apartment complexes, nursing homes, condominiums and retirement homes, but not hotels or properties rented for less than 30 days.
• Under a lump-sum contract (one price for the job), you pay tax on your supplies and materials when you buy them and don't charge the customer tax.
• Under a separated contract (materials and labor charged separately), you give suppliers a resale certificate, collect state and local tax from the customer on the materials, and charge at least what you paid for them. The construction labor stays nontaxable.

Here is one residential repair both ways. Materials cost $1,100.00 before tax, the job is priced at $2,400.00, and the combined state and local rate is an example 7%:

The separated contract leaves you $77.00 more and costs the customer $98.00 more. Neither is a loophole; what counts is that your paperwork matches the contract you actually wrote. On a nonresidential building the answer changes: the total charge for the repair is taxable, except separately stated permit fees you pay for the customer. The publication is old, so confirm the current rules (it lists Comptroller rules 3.291, 3.356 and 3.357, among others) with the Comptroller before you rely on it.

What to put on your estimates and invoices

• If you collect sales tax, show it as its own line. Sales tax you collect is held for the state, so the job cost calculator keeps it out of revenue and profit; Hawaii's GET and New Mexico's GRT are taxes on your business even when passed on. How any of these is treated for income tax depends on how your state imposes it, so ask your accountant.
• If you pay tax on materials as the consumer, that tax is part of your materials cost. Mark up the tax-paid cost, not the shelf price; how much to mark up plumbing parts covers the markup itself. Michigan, North Carolina, North Dakota and Utah say a contractor in that position may not show the tax as a separate line to the customer.
• Make the contract, the invoice and the certificates match. In Texas, Florida, Colorado and Indiana, how the contract prices materials and labor can change who owes the tax, so your estimate template, your invoices and your supplier certificates all have to tell the same story.
• Keep the paper. Texas wants documents showing that maintenance work is scheduled and periodic. Florida taxes a labor-only repair to goods unless your records show no parts were used. New Jersey and New York expect a certificate of capital improvement from the customer (Form ST-8 and Form ST-124).

How to get a firm answer for your state

This is general information, not tax advice. Each row in the table links the agency's own page, and the IRS keeps a page of links to every state's and DC's government website (IRS). Before you change your invoices, ask your state revenue department or an accountant who works with contractors:

1. On residential repair, new construction and commercial work, am I the consumer or the retailer of the materials I install?
2. Does that change if I list materials separately from labor, and does it have to be in the contract or is the invoice enough?
3. Which items do you treat as fixtures, or as goods rather than real property?
4. Is my repair labor taxable? My maintenance agreements, cleaning and tune-ups?
5. Do I need a sales tax registration, how often do I file, and when do I owe use tax?
6. Which local rate applies: where I buy the materials, or where the job is?

Get the answer in writing where your state offers written guidance, and keep it with your tax records.

Bottom line

Whether a plumber, HVAC tech or electrician charges sales tax is a state question with several moving parts: the property, the job type, the contract wording and sometimes the item. Across the 50 states and DC the agencies give at least four different answers. Find your state in the table, read the agency page it links, and build your estimate and invoice templates to match.