Business FinancesQuestion 1204 of 1605
A subcontractor invoices $9,000 including $600 of California sales tax on materials. On a lump-sum construction contract where the sub is the consumer, the sales tax is:
a.A cost of the job that ultimately is embedded in the price to the owner
b.Paid separately by the CSLB
c.Illegal to charge
d.Refunded to the general contractor
Explanation
When the contractor/subcontractor is the consumer of materials, sales/use tax is a job cost. It is embedded in the price rather than itemized as a tax to the owner. Contractors must include material tax in their estimates so it is recovered in the contract price.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)