SALT Report 3052 – The Wyoming Department of Revenue issued guidance regarding the tax responsibilities of vendors who act as contractors. Generally, Wyoming allows a vendor who sells items to also act as a contractor to purchase materials from its suppliers on a wholesale for resale basis. This allows the vendor to purchase certain items without paying sales tax and to determine the taxability of these items when they are subsequently removed from inventory for use.
Wyoming provides this option because it is often difficult to determine at the time of purchase, the items that will be sold by the person acting as a vendor, and the materials and supplies that will be consumed by the person acting as a contractor.
Therefore, rather than requiring a person to pay tax to its suppliers on the materials that will be consumed by the person acting as a contractor, and purchasing materials on a wholesale for resale basis as a vendor, the state allows those who act in both capacities to maintain a “tax free inventory” and to determine the taxability of these items at the time the materials are removed from inventory.
For example, if a customer purchases a new faucet, the vendor will charge sales tax on the retail price and report and remit the tax on its sales tax return. Or, if a customer brings in a piece of pipe for rethreading, the store should charge sales tax on the service of rethreading the pipe and report and remit that tax on its sales tax return.
In situations where a customer hires a store to install new shower fixtures and unclog a drain in the customer’s home, the business will be acting as a contractor performing services on real property. Therefore, when the business removes any fixtures, materials or supplies from its inventory to complete the service, it will owe tax on the cost of those items and should remit the tax on its sales tax return.
Because of this, when the contractor completes these services, the invoice provided to the customer should not contain sales tax. Rather, the contractor should embed the tax in its overhead or insurance charges. Even if the contractor separates the labor charges from its charges for materials, there should not be a line item of sales tax on an invoice given to a customer for a service to real property.
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