Sales tax on invoices in Idaho

Idaho contractors are the consumers of all the goods they use: you pay sales tax on your materials and fixtures when you buy them, and you don’t charge your customer sales tax on the job.

Idaho sales tax and your seller’s permit

The Idaho State Tax Commission says almost everyone selling goods or offering taxable services in Idaho must have a seller’s permit, collect sales tax, file returns and forward the tax to the Tax Commission. Use tax applies to goods used or stored in Idaho when the seller didn’t charge sales tax.

Small sellers: a qualifying small seller, an Idaho resident operating as an individual or sole proprietorship whose cumulative gross sales don’t exceed $5,000 in either the current or previous calendar year, needn’t get a permit or collect sales tax on Idaho sales, but still pays sales tax on everything it buys. Once your sales pass $5,000 for either year, get a seller’s permit within 30 days and start collecting right away.

Contractors: the consumer of everything you use

The Tax Commission counts anyone who builds, improves, repairs or alters real property, whether commercial, residential or for a government entity, as a contractor, including prime and general contractors, subcontractors and speculative builders.

• What you pay tax on: equipment, tools and supplies, and building materials and fixtures, including improvements to property owned by individuals, businesses, churches, educational institutions and government entities. If no one paid sales or use tax on something you buy or receive, you owe use tax on it.
• Fixtures include lighting and plumbing fixtures, furnaces, heating or air-conditioning units, cabinets, carpeting, garage doors and water heaters.
• Your customer’s exemption doesn’t pass to you. You still pay tax on job materials when the customer is an exempt government entity, is in an industry the Idaho Legislature exempted, holds direct-pay authority, or didn’t pay tax for any reason.
• Owner-supplied materials: under Idaho’s Rule 012, if the owner doesn’t pay tax on the materials, you’re liable for it. When an exempt owner, such as the federal government or an Idaho governmental agency, buys materials and hires you to install them, you owe the tax on their value.
• Subcontractors: if you hire a subcontractor to furnish and install materials, the subcontractor pays the tax on them.
• Jobs in states with no sales tax, such as Montana, Oregon and Alaska: a special exemption applies. To claim it, complete Form ST-103C, Sales Tax Exemption Certificate Real Property Contractors, and give it to the seller.

Contractor or retailer: plumbers, electricians and HVAC

The Tax Commission’s examples of contractors include plumbers, electricians, roofers, HVAC and mechanical contractors, landscapers, fence builders, painters, installers of plumbing fixtures and water lines, and installers of built-in home appliances. For lawn care or maintenance, ask the Idaho State Tax Commission.

Plumbers, electricians, carpet layers, cabinet-makers and mechanical contractors are usually both contractors and retailers: contractors when they install materials on a service call or contract, retailers who collect sales tax when they sell items they don’t install. If you supply and install trade fixtures, which only benefit the business occupying a space, register as a retailer and collect sales tax on them.

Rule 014 makes built-in appliances, such as dishwashers, built-in microwave ovens, stove tops, disposals, water softeners and garage door openers, fixtures once installed. Selling a complete unit over the counter with an agreement to install it isn’t a contract to improve real property if the unit isn’t affixed to the realty; if the installation charge is properly separated, sales tax is due only on the unit.

Services: separately stated labor isn’t taxed

Idaho’s sales tax applies to every retail sale, including sales, leases and rentals of goods; production, fabrication, printing or imprinting labor; and certain services the seller performs as part of a sale. Installation labor and repair labor aren’t taxed if they’re separately stated on the invoice, but parts used in repairs are.

Tax line on the invoice: none on contract work

• As a contractor: the Tax Commission says you don’t charge your customer sales tax, so your bid should be high enough to cover the tax you pay on materials, without itemizing that tax. If sales tax does show on your bill, the customer can refuse to pay it; if it’s charged in error and paid, you must report and pay it to the state and still pay tax on the materials.
• Mixed jobs: when a job mixes contract work and retail goods, separate them on your invoice and charge tax only on the retail portion.
• As a retailer: Idaho’s rules require the tax to be displayed separately from the price on the sales slip or other proof of sale. For repairs of personal property, if parts and materials aren’t stated separately from repair labor, the whole amount is taxable.

Local tax: resort cities

Some Idaho resort cities add a local sales tax, decided by their voters. A city may tax everything that’s subject to state sales tax, and some limit it to lodging, alcohol by the drink and restaurant food. The Tax Commission’s City Sales Taxes page lists these cities, with phone numbers for questions about their tax, and notes that some areas also have an auditorium district tax.

Fixtures and fabrication: two watch-outs

• Fixture or personal property: Idaho’s Rule 067 gives a three-factor test that may decide whether an article has become a fixture: annexation to the realty, adaptation to the use of that part of the realty, and the intention to make it a permanent addition.
• Fabricating for a job: if you buy steel for a specific job and fabricate it for that job, use tax is owed only on the materials. Fabricate it into resale inventory and later incorporate it into real property, and use tax is owed on its full fabricated value.