In Florida, the taxing of property improvements, installation, and repairs varies according to the exact nature of the transaction.
Generally, transactions that involve items that are permanently installed into a structure, where they cannot be removed without destroying them, are classified as real property and are not subject to sales tax.
You should also consider the pricing arrangement in the contract when determining whether to charge tax.
Under lump sum, cost plus, fixed fee, guaranteed price, or time-and-materials real property contracts,
the contractor is the final consumer of materials and supplies and:
• Must pay sales tax to suppliers on all purchases, including those made for the contractor’s own use.
• Should not charge tax to the customer.
Contractors who perform taxable fabrication must pay use tax on the fabricated cost of the items fabricated. When calculating use tax on the cost of items of tangible personal property manufactured, produced, compounded, processed, or fabricated, the contractor should:
• Include the cost of the direct materials used to fabricate an item if the contractor did not pay tax to the materials vendor on the purchase of the materials.
• Exclude the cost of the direct materials if the contractor paid tax when it purchased the materials.
Retail sale plus installation contracts are contracts for improvements to real property where the contractor or subcontractor lists and prices in the contract all materials to be used before the work begins. The contractor or subcontractor also must agree to:
• Sell specifically described and listed materials and supplies at an agreed price or regular retail price, and
• Complete the work for either an additional agreed price or based on time used.
Since the sale of the materials is a separate transaction from the installation, the customer must assume title and risk the loss of the materials and supplies as delivered, rather than accepting only title to the completed work.
A contractor who performs retail sale plus installation contracts:
• Should buy the materials tax-exempt for resale.
• Should charge the customer tax on all materials.