Have a Tax Question? Ask a Tax Expert
This varies by state; which state are you in?
Something does not add up. This is from the Indiana website: "Contractors working under a lump-sum contract must either pay sales tax at the time the construction materials are purchased or use tax at the time the construction materials are incorporated into real property, if the materials were purchased exempt from sales tax as evidenced by a customer’s properly completed exemption certificate."
In Home Depot collecting the revenue for both the product and the install? The only think I can imagine is that they are shifting the sales tax liability to the installer when they do the work.
I can also tell you, as a former HVAC/R contractor myself; Home Depot negotiates a very low prices to pay contractors. Most contractor do the work because they don't have enough business and would rather make less per hour than nothing at all. So, competing with Home Depot is difficult, if not impossible.
Yes, at some point someone has to pay the sales or use tax on goods. Indiana appears to be similar to every other state, and that is if the job is fixed price the tax is on the entire job, but if broken out just on the goods. If you are using the same installer, why not ask him? I also find the Government to actually be helpful, give them a call and ask why Home Depot doesn't charge tax when making the sale. Now, it could be Home Depot is factoring the tax from the sale and reporting it. Remember, sales/use tax does not have to be charged, it is technically the liability of the company selling and some companies elect to us the factoring approach to reporting sales/use tax.