Form Pub. Ks-1525 - Kansas Sales & Use Tax For Contractors Subcontracotrs & Repairmen Page 24
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49and at least three prior years. Invoices and records
Nondeductible overhead items include:
related to a project performed under a Project Exemption
• building permits
Certificate (PEC) should be kept for at least 3 years.
• consumable supplies, such as form lumber and
Your sales tax records must be available for, and are
sand paper
subject to, inspection by the Director of Taxation or
• employee labor costs
authorized representative (auditor) at all times during
• lease payments for tools, equipment and
normal business hours.
machinery
• office supplies
• per diem and travel expenses
CHARGING AND
• sewer hookup fees
COLLECTING SALES TAX
• utilities
INVOICING THE CUSTOMER
THE CARDINAL RULE
There are two accepted methods contractors,
subcontractors, and repairmen may use to charge the
Contractors, subcontractors, and repairmen working
applicable state and local sales tax on their taxable labor
in Kansas are responsible for collecting the full amount
services contracts. They may bill the customer:
of sales tax due on their fees for taxable labor services.
If you are a contractor-retailer, you must also collect
1) The contract price, stating on the invoice: “All
sales tax on the retail sale of tangible personal property.
applicable sales taxes included” or
The basic rule all retailers must follow is:
2) The contract price on the taxable labor
All retail sales of goods and taxable
services plus the sales tax separately stated.
labor services are subject to sales tax
unless specifically exempt.
How you bill your customers affects how you report
and pay the sales tax you have collected on your sales
Therefore, for every retail sale of materials and every
tax return. Sales tax is to be paid on an item or taxable
sale of taxable labor services in Kansas, your sales
service only ONCE — by the final user or consumer.
receipt, invoice, or bill to the customer must:
Regardless of the billing method used, contractors and
• show that the applicable state, county, and city
subcontractors are each responsible for the tax due or
sales tax due was collected (see Invoicing the
collected on their portion of the total job. See also
Customer), or
Contractor’s Liability herein.
• be accompanied by a completed exemption
certificate.
The following examples show how the sales tax base
is computed for each type of billing method. Note that
By following this rule you will save the expense of
the examples that follow reflect only the 6.3% state sales
owing sales tax on sales of property or labor services
tax — any applicable local sales tax in effect at the job
on which you should have charged sales tax. Care
site would need to be included.
should be taken to pay or accrue sales tax on materials
incorporated into projects for exempt customers who
“All Applicable Sales Taxes Included”
did not obtain a PEC.
In this method, the sales tax is not a line item on the
invoice, but is included or factored into the total price
THE SALES TAX BASE
for the job.
The sales tax base for construction contracts is the
Hammertime Construction contracts with
total amount of money received for completion of
a restaurant to remodel a kitchen for
a job or project, known as your gross receipts*, LESS:
$12,000. This bid includes all labor,
materials, subcontractors, and sales tax.
• cost of direct materials (on which sales or
Hammertime Construction paid $4,100 for the materials
use tax has been paid or accrued), AND
($3,857.00 + $243.00 sales tax), and subcontracted the
• payments to subcontractors (on which
plumbing and electrical work to another contractor for
sales tax has been paid, when applicable).
$1,500 (all taxes included). The customer paid
* Gross receipts does NOT include the sales tax collected from the
Hammertime Construction $12,000.
customer on your taxable labor services.
Like any other retail business, your profit (including
Hammertime’s taxable labor services are:
the markup on materials) and overhead costs are
Contract Price
$ 12,000.00
figured into the total charged the customer and are
Less Tax Paid Materials
-
4,100.00
therefore subject to sales tax. A contractor may not
Less Tax Paid Subcontractor
-
1,500.00
deduct overhead expenses when figuring the taxable
Taxable Labor Services
$
6,400.00
amount of the labor services portion of any contract.
24
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