Carpet Dealers

Carpet dealers, as well as other flooring and tile sellers and cabinet installers, are often considered construction contractors and treated that way. Under this method, they pay tax on their purchases of carpeting, tile, wood, etc. and make no taxable sales to their customers, just as other contractors.

However, you will see variations. I think the reason is the nature of the transaction. Flooring and cabinets are often bought in a retail setting or out of sample books. The customer really thinks of themselves as buying the actual product, and the services of the installer are incidental.

However, in the standard construction contractor situation, the customer doesn't care too much about the building materials. They are primarily concerned with, and think of themselves as really buying, the finished product.

That's my story, anyway.

For whatever reason though, some states do treat the sale of flooring and cabinetry as the sale of installed tangible personal property. The sale of the product would be taxable to the customer just like any other sale of TPP and possibly even the installation charges.

So there are two main variations (with lots of complications):

1. The seller pays tax on the product when he buys it and doesn't charge his customer any tax at all.

2. The seller buys his product for resale, and then charges his customer tax, just like a normal sale of TPP.

Your cheapest source of information on this will be the state web sites. In my experience, most of them have a publication dealing with this situation because it's the kind of thing that citizens (voters) will ask about. If there isn't anything obvious, look for contractor information, or start digging around in the statutes and regulations.

If you're the buyer, don't assume the seller is doing it right. I've met too many of them that didn't have a clue and were doing it the wrong way.

And guys, if you're looking for a way out, just tell her that the sales tax issues are just way too complicated. You had better put off that purchase until you can figure it out.

Sales Tax Guy

See Disclaimer

Here's information on our upcoming seminars and webinars

And please don't forget to visit our advertisers!

Picture note: You'll understand the last paragraph if you have a look at the photo.