Do contractors charge sales tax to homeowners?

In most states, no — contractors pay sales tax when buying materials and don't charge sales tax on the project. A minority of states treat contractors as retailers who collect from customers.

Is a new roof taxable to the homeowner?

A full roof replacement that qualifies as a capital improvement is typically non-taxable in consumer-model states. Repairs to an existing roof are often taxable.

Should I use a resale certificate with my suppliers?

Only if your state treats contractors as retailers. In consumer-model states (the majority), you pay sales tax at the supplier and don't issue a resale certificate.

Sales Tax for Construction and Home Improvement Contractors

Updated 2026-04-27

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

Construction sales tax is notoriously complicated because states draw different lines between taxable and non-taxable transactions. Some treat the contractor as the end consumer of materials (pay tax on purchase); others treat the contractor as a retailer (collect tax from the customer). Getting this wrong creates large audit exposure.

Contractor as consumer vs contractor as retailer

In most US states (including California, Texas, Florida, New York), a contractor installing materials into real property is the END CONSUMER of those materials. The contractor pays sales tax when purchasing materials from suppliers and does NOT charge sales tax to the customer on the installed project.

In a minority of states, contractors are retailers — they buy materials tax-free (using a resale certificate) and charge sales tax to the customer on the full project price. This flips the relationship completely.

Capital improvements vs repairs

In consumer-model states, CAPITAL IMPROVEMENTS (new construction, permanent additions, installing a new roof) are non-taxable to the customer. REPAIRS and maintenance (fixing a broken roof, painting, plumbing repair) are often taxable.

The definition of capital improvement is a three-part test: permanently affixed, substantially increases property value, and intended to remain permanently. Get this wrong and you may have undercollected tax from the homeowner.

Material vs labor breakouts

Some states tax materials but not labor. Invoice format matters: if the invoice is a flat project price, the whole invoice may be taxable. If it separately states "materials: $X, labor: $Y", only the material portion is taxed.

Sales tax on subcontractor work

When you hire a subcontractor, the tax flow depends on state rules AND on whether you're the retailer or the consumer. If you're a retailer-model contractor hiring another retailer-model subcontractor, you can issue a resale certificate to them and collect tax once at the top of the chain.

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 contractors charge sales tax to homeowners?: In most states, no — contractors pay sales tax when buying materials and don't charge sales tax on the project. A minority of states treat contractors as retailers who collect from customers.
Is a new roof taxable to the homeowner?: A full roof replacement that qualifies as a capital improvement is typically non-taxable in consumer-model states. Repairs to an existing roof are often taxable.
Should I use a resale certificate with my suppliers?: Only if your state treats contractors as retailers. In consumer-model states (the majority), you pay sales tax at the supplier and don't issue a resale certificate.