(Sales) taxing matters

If you perform out-of-state work, know your tax obligations

You probably already know that when you become involved in a project outside your home state, you need to be mindful of issues such as licensing, qualification and authorization to do business, and workers' compensation and other insurance requirements. But one area that can be confusing and often overlooked is how a state's sales and use taxes apply to contractors and their material purchases.

For example, will you owe tax on the value of an out-of-state contract? Will you have to pay sales tax on your material purchases? Are exemptions available? Will you have to submit a bond to cover taxes? Does it make a difference whether your contract is stated on a lump sum or time and materials basis?

Because failure to properly pay taxes could result in a job being stopped by state authorities and/or possible monetary penalties, you should know the answers to these questions before negotiating or bidding on a job in another state. And because states have different tax laws and those laws' effects on you can be significant, you should have a basic understanding of what sales taxes may apply before starting or even bidding a job in another state.

The general rules