Sales Tax and 'Big-Box' Chains

What do you think? We’d like to know. E-mail your thoughts to us at: barbara.loehr@cygnuspub.com
Please include your full contact information along with your message.

Have a question and looking for feedback from industry peers? This month, KBDN listens in on dialogue between industry professionals as excerpted from the KitchenBathPros.com online Design Discussion Forum.

Sales Tax and 'Big-Box' Chains

QUESTION

I just found out that when our local (mid-CT) Home Depot sells countertops (installed), they do not charge sales tax. We are primarily a countertop replacement business, so this may affect me more than some others here, but it was very disturbing to find out that they charge nothing (it seems, not even a value-added tax). Is there a correlation with kitchen sales as well?
- Tom C. Mat

RESPONSE 1

There should be accountants and tax attorneys in your area that specialize in tax law. It sounds like it may be time for a free consultation, but tax laws vary everywhere. I know that here in Tennessee, we used to only have to tax materials for a job which was at least 10 years old. There was a loop hole that allowed the company to show the profit as labor and therefore not have to pay taxes on the extra monies. That hole has since been sealed. I have also heard tales in other areas where, in an effort to improve the communities, taxes were exempt on home improvements for a time. I have never known this to be the case anywhere in my area.
- BoxesEtc

RESPONSE 2

We don't charge sales tax if we install the product. Instead, we use a certificate of home improvement from the government signed off by the client.
- Bell1

RESPONSE 3

About a year or so ago, we also learned about the 'big box' stores not charging sales tax on solid surface when it was being installed. We have since started doing the same thing (here in Ohio). It turns out that our fabricators already include sales tax when they're installing the countertops. So, if you charge sales tax, the customer might be getting double-taxed. Our countertop fabricators have it written on their estimates, something like "all taxes included." Of course, if you're a fabricator and the retailer, charging tax might still need to be done in your situation.

We are currently researching sales tax on installed kitchen cabinets too, mainly because we've had several clients asking us about our sales tax. They are saying that Home Depot and Lowe's are not charging this! That means that KraftMaid or American Woodmark, for instance, would have to charge the home centers tax on the cabinetry for installed jobs only. Wouldn't that get confusing? My business partner has contacted a tax advisor – I will let you know when I hear more.
- Kompy

RESPONSE 4

I have an accountant come in every month, and we have discussed this many times as to when it is appropriate to charge sales tax on what kind of job. My state (CT) has a rather screwy tax system on home improvements.

A friendly competitor called the state Dept. of Revenue on this matter, and was told that sales tax should be charged on the countertop. When my friend told him that Home Depot was not charging tax, the Department of Revenue guy said that Home Depot was correct! If this is the case, shouldn't Home Depot at least pay a value-added tax? The accounting costs for this must be quite a burden to a smaller business, but not much (comparatively) for a larger business. This is just another case where it is harder for the small custom shop to do business.
- Tom C Mat

Installation Damage

QUESTION