Here's a new twist on home improvements!

My brother received estimates to remove his curent stair assembly and replace it with something sleeker and more appealing. He received a quote of $8500 and, considering the fabrication and work involved, he accepted the contractor's offer. So good so far.

He was required to put 1/3 down to cover the costs of obtaining the parts and start fabrication of said parts. He was also told that on each 1/3 payment, he would have to pay 7.5% sales tax. My brother consented and gave the contractor the money. In conversation with one of his friends, my sibling found out that when repairs or renovations are made to real property, the contractor will pay the initial sales tax on materials and pass the costs along to the consumer in the form of a lump sum bid. In my brother's case, the contractor gave him the bid and THEN charged him sales tax on the total. It was only an honest oversight, but one that might have cost my brother an additional $637.50!

Here is the Q & A from the FL Department of Revenue website:(http://dor.myflorida.com/dor/taxes/quick_answers.html

Are parts and labor taxable?

In Florida, the taxation of parts and labor varies according to the exact nature of the transaction. The general guidelines are as follows:

Repairs or improvements to real property

As provided in Rule 12A 1.051, Florida Administrative Code, transactions that involve elements that are permanently installed into a structure, where they cannot be removed without destroying them in the process, are generally classified as real property contracts and are not subject to sales tax. For example, a central air conditioning unit would be considered a real property improvement, therefore repairs or service to the unit would not be subject to sales tax.
When performing repairs or improvements to real property, the contractor generally offers the customer a lump sum, cost plus or fixed fee, or guaranteed price contract. In these types of contracts, the contractor or subcontractor is considered the ultimate consumer of the materials and supplies used in performing the service. The contractor or subcontractor pays the sales tax to the supplier at the time the materials and supplies are purchased and recovers the cost of the material within the contract price quoted his customer. The labor is not subject to sales tax.

So save yourself the money - now you know the law!

Regards, Rich C.