Business FinancesQuestion 1214 of 1632
A contractor's estimate omitted the 9% sales tax on $20,000 of materials. How much profit will this error erase if he cannot pass it on?
a.$2,000
b.$900
c.$180
d.$1,800
Explanation
Sales tax = $20,000 x 9% = $1,800. Because the contractor is the consumer and owes this tax, forgetting it means $1,800 comes straight out of profit. Estimators must always include material tax.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)