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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12663
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I'm a flooring subcontractor dealing directly with a home

Customer Question

I'm a flooring subcontractor dealing directly with a home owner. I have a signed proposal for the work to be done, and the work has been completed. The owner still owes me the balance of the amount which is $2,000. I didn't type in the taxes due on the proposal originally, but I do need to charge the client for taxes. Am I allowed to do so at this point?
Submitted: 2 years ago.
Category: Tax
Expert:  Lane replied 2 years ago.

Hi,

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This is really a contract law issue, as much as a sales tax issue. Depending on whether there was a contract here, you may have to eat the sales tax on this one.

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For a contract to exist, there has to be an offer and acceptance, " a meeting of the minds." To be binding and enforceable, a contract has to have sufficient information about the nature of the goods or services to be provided, quantity and price.

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BUT a proposal can be drafted so that, if it is accepted by the party to whom the proposal is made (your customer), which is typically signified by signing the proposal, then it may become a binding contractual agreement.

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So you COULD add in the tax and see what happens, there's nothing illegal about doing so, BUT your customer may have a breach of contract action available if he doesn't want to pay it ... saying that you have a contract for 2000, "period."

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Did the customer sign the proposal?

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Customer: replied 2 years ago.
the client signed the proposal.
There is no "period"There are 5 line itemed sub totals inbthe proposal and at the bottom I typed it as
"Grand Total $34,908" with no period. There is nothing in the proposal that references tax.
Customer: replied 2 years ago.
I am licensed also if that makes a difference.
Expert:  Lane replied 2 years ago.

What I meant by "period" was that if he signed he has a contract to pay you 34,908 and that's all (no additional sales tax).

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Depending on your state sales tax laws,I'm guessing that you are supposed to collect sales tax and pay it in... in some states, it depends on whether you break out the material cost ... so you can always add what's legally supposed to be there and say, "well of course there's sales tax, that's state law.

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But all the state cares about is that it's paid. HE can say, "tough luck. I have a contract here for 34,908."