Contractor’s Fee for Overhead Costs Not Taxable in Rhode Island

Tuesday, January 30th, 2018

 
 
Construction materials on desk.
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Rhode Island
Construction

The Rhode Island Division of Taxation recently ruled that markup fees charged on a construction contract were not taxable.

The taxpayer was a construction contractor that charged its customers for labor, materials, and a 15% markup fee. The taxpayer testified that the 15% fee covered overhead costs. The Division argued that the fee was for materials since the taxpayer separately stated materials charges on invoices.

Rhode Island does not tax contracting services, but requires contractors to pay sales tax on materials unless the contractor is acting as a retailer. If the contractor is acting as a retailer, the contractor should charge the customer sales tax on materials. The ruling determined that the taxpayer's fee was for overhead costs, not materials, and was therefore not taxable.

https://www.ttrus.com/Contractor's Fee for Overhead Costs Not Taxable in Rhode Island


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TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

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