Do general contractors charge sales tax?

Sometimes. The answer depends on the state, what is installed, the contract format, and whether the work is a capital improvement or a taxable repair. A contractor can be the consumer of materials in one transaction and a retailer in another.

Do contractors charge sales tax on labor?

There is no nationwide answer. Labor may be part of a nontaxable capital-improvement or lump-sum charge, separately exempt, or taxable as repair, maintenance, or installation work. Check the state rule and make the contract and invoice classifications match.

Do contractors pay sales tax on materials?

Often, but not always. California generally treats the contractor as the consumer of installed materials. A Texas homebuilder under a separated contract is instead the retailer of incorporated materials and may buy those materials for resale before collecting tax from the customer.

Should a contractor use a resale certificate with suppliers?

Only when the specific state and transaction treat the contractor as reselling the property. Do not issue one merely because materials appear as a separate invoice line; confirm the contract and item classification first.

Is a new roof taxable to the homeowner?

It depends on the state and the project facts. A full replacement may qualify as a nontaxable capital improvement, while a repair may be taxable. Document the scope and obtain any state-required capital-improvement certificate rather than relying on the label “new roof.”

Sales Tax for Construction and Home Improvement Contractors

Updated 2026-07-18

Reviewed by Nexus by State research team using official state tax sources. Last reviewed 2026-07-18.

Construction contractors face the most complex sales tax rules in the US economy — capital improvements, repairs, materials vs labor, and contractor vs retailer classifications.

There is no nationwide yes-or-no answer to whether a construction contractor charges sales tax. As of 2026-07-18, the answer can turn on what is installed, whether the contract is lump-sum or separated, and whether the job is a capital improvement or a repair. The contractor may be the consumer for one part of a project and the retailer for another.

Contractor as consumer vs contractor as retailer

A contractor does not have one permanent sales-tax label. State rules may classify the same business as the consumer of building materials, the retailer of fixtures, or the retailer of materials under a particular contract. Classify the transaction before deciding whether to pay tax to the supplier or collect it from the customer.

Three state examples where the rule flips

California — the item controls: the California Department of Tax and Fee Administration says construction contractors are consumers of materials they furnish and install, but retailers of fixtures. For a lump-sum contract, the contractor generally pays tax on the cost of materials and reports tax on the applicable fixture measure.
Texas homebuilding — the contract format controls: under a lump-sum contract, the homebuilder is the consumer of the incorporated materials and the single charge to the customer is not taxed. Under a separated contract, the homebuilder is the retailer of the incorporated materials, may buy them for resale, and collects tax from the customer on the agreed materials price.
New York — the work controls: a qualifying capital improvement is not taxable to the customer, although the contractor still pays tax on building materials. Repair, maintenance, and installation work can be taxable instead. A completed Form ST-124 documents why a qualifying capital-improvement charge was not taxed.

Capital improvements vs repairs

Do not treat “new roof” or “repair” as a nationwide tax code. New York, for example, treats work as a capital improvement only when it substantially adds value or prolongs useful life, becomes part of or is permanently affixed to the real property, and is intended to be permanent. Its guidance contrasts building a deck or installing a hot-water heater with repairing a broken step or replacing a thermostat.

Other states define and document capital work differently. Keep the signed contract, project scope, exemption or capital-improvement certificate where applicable, and invoices showing how materials and labor were treated.

Material vs labor breakouts

Separating materials and labor on an invoice does not automatically make the labor exempt or the materials taxable in every state. In Texas homebuilding, that separation can change the contractor from consumer to retailer for incorporated materials. California instead distinguishes materials from fixtures, then applies rules based on the contract and how each item was acquired. Your contract and invoices should use the same classification.

Sales tax on subcontractor work

When you hire a subcontractor, the tax flow depends on state rules, the property installed, and the contract. California, for example, says subcontractors generally owe tax on materials they use and on the applicable cost or selling price of fixtures, machinery, and equipment. Its general contractors may not give subcontractors resale certificates for materials or fixtures installed in a construction contract.

Source notes checked 2026-07-18

Primary sources checked for this page: California CDTFA Tax Guide for Construction Contractors (date_retrieved: 2026-07-18), Texas Comptroller Homebuilders and Real Property Services (date_retrieved: 2026-07-18), and New York Tax Bulletin ST-104, Capital Improvements (date_retrieved: 2026-07-18). See how Nexus by State verifies and ages sources in the Methodology & Sources.

Compliance checklist

Determine your state's contractor classification (consumer or retailer).
Build invoice templates that separately state materials, labor, subcontractor work.
Document capital improvement vs repair for every project.
Maintain resale certificates if you're a retailer-model contractor using them with suppliers.
Use an industry-specific accountant — construction tax is not a DIY area.

Frequently asked questions

Do general contractors charge sales tax?: Sometimes. The answer depends on the state, what is installed, the contract format, and whether the work is a capital improvement or a taxable repair. A contractor can be the consumer of materials in one transaction and a retailer in another.
Do contractors charge sales tax on labor?: There is no nationwide answer. Labor may be part of a nontaxable capital-improvement or lump-sum charge, separately exempt, or taxable as repair, maintenance, or installation work. Check the state rule and make the contract and invoice classifications match.
Do contractors pay sales tax on materials?: Often, but not always. California generally treats the contractor as the consumer of installed materials. A Texas homebuilder under a separated contract is instead the retailer of incorporated materials and may buy those materials for resale before collecting tax from the customer.
Should a contractor use a resale certificate with suppliers?: Only when the specific state and transaction treat the contractor as reselling the property. Do not issue one merely because materials appear as a separate invoice line; confirm the contract and item classification first.
Is a new roof taxable to the homeowner?: It depends on the state and the project facts. A full replacement may qualify as a nontaxable capital improvement, while a repair may be taxable. Document the scope and obtain any state-required capital-improvement certificate rather than relying on the label “new roof.”