Where does a contractor get a capital improvement certificate?
When performing capital improvement work, a contractor should get a properly completed Form ST-124, Certificate of Capital Improvement, from the customer (including a customer that is an exempt organization) and should not collect sales tax from the customer for the project.
Is there sales tax on a capital improvement?
The bill to the customer might look like this: The sales tax that the contractor paid on the materials is an expense that the contractor builds into the price charged to the customer. However, because the work is a capital improvement, there is no sales tax due on the charge to the customer.
What is the definition of a capital improvement?
What is a capital improvement? A capital improvement is any addition or alteration to real property that meets all three of the following conditions: It substantially adds to the value of the real property, or appreciably prolongs the useful life of the real property.
What kind of work does not qualify for capital improvements?
Publication 862, Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property, provides detailed information on various types of work that do and do not qualify as capital improvements. Since the method of installation may affect how the work is taxed, certain work will need to be looked at on a case-by-case basis.
When performing capital improvement work, a contractor should get a properly completed Form ST-124, Certificate of Capital Improvement, from the customer (including a customer that is an exempt organization) and should not collect sales tax from the customer for the project.
What does capital improvement mean in real estate?
According to Investopedia Capital Improvement is: “the addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property’s overall value or increases its useful life. Although the scale of the capital improvement can vary, capital improvements can be made by both individual
Do you have to pay sales tax on capital improvements?
Introduction Whether or not a contractor collects sales tax from a customer depends on if the work being performed is considered a capital improvement to real property, or is installation, repair, or maintenance work. This bulletin explains what type of work is a capital improvement to real property, which is not taxable.
Publication 862, Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property, provides detailed information on various types of work that do and do not qualify as capital improvements. Since the method of installation may affect how the work is taxed, certain work will need to be looked at on a case-by-case basis.