Sales Tax Deduction Questions for 2006

amy2005February 3, 2007

Hi

We had a company completely remodel our kitchen this past year. We had another company paint the interior of our house. We did not buy the materials directly- the company did and of course then we paid those companies. Can we still deduct the sales tax on the cost of building materials? We live in Washington State (no state income tax) if that helps.

Thank you!

Amy

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zone_8grandma

Amy,
I'm also in WA state. The company who did the remodel should have sent you an invoice which should have stated the sales tax. FYI, they are supposed to charge sales tax on both labor as well as materials. If you don't have an invoice from them, I'd call the person you worked with and have them send it to you asap.
(The company that built our house last year sent us a year end sales tax statement showing the sales tax we paid month by month.)

    Bookmark   February 4, 2007 at 12:05PM
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jlhug

IMHO, you need to be careful claiming the sales tax deduction for sales tax that you personally didn't pay.

Is the builder who bought the materials claiming the sales tax as part of his cost of materials on his return? If so, those dollars for sales taxes paid are already being deducted by the builder. If you also deduct the sales tax that the builder paid, then the deduction is being taken twice for the same amount of sales tax. I think the IRS would frown on 2 deductions for the same dollars spent in sales tax.

If the builder is paying materials under a tax exempt numer, then reselling those materials to you and charging you sales tax, that amount should be reflected on your invoice as zone 8grandma suggests and would be deductible on your return.

I know nothing about Washington sales tax law, but I do believe that that both you and your builder claiming a deduction for the same sales tax would be frowned on by the IRS.

Hopefully this makes sense. I've rewritten it several times and am still not sure it's clear what I'm trying to say.

    Bookmark   February 4, 2007 at 5:42PM
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zone_8grandma

If the builder is paying materials under a tax exempt numer, then reselling those materials to you and charging you sales tax, that amount should be reflected on your invoice as zone 8grandma suggests and would be deductible on your return.

This is the most common way that it is done (in WA state). Your invoice should give you exactly the amount that you can deduct. If you have any unanswered questions about the charges for your remodel, I'd be on the phone calling the company.

    Bookmark   February 4, 2007 at 7:58PM
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