When do contractors pay sales tax on clean-up activities?


AGC continues to receive inquiries from contractors regarding the payment of sales taxes on final cleaning subcontracts. The Department of Revenue notes that it’s important to distinguish between tools and supplies and the performance of construction cleanup, as well as between custom prime contractor and speculative builder.

In WAC 458-20-172, language states in part, “The retail sales tax applies upon the sales to such contractors of equipment and supplies used or consumed in the performance of such contracts and which are not resold as a component of the work.”

This refers to tools and supplies used or consumed in performance of the contract and which are not resold as a component of the work. All contractors owe either sales tax or use tax on their tools and supplies regardless of what type of construction they are engaging in.

Furthermore, WAC 458-20-172 also discusses the performance of construction cleanup (not about tools and supplies). The taxability of construction cleanup is dependent on whether this service is performed for

•  a custom prime contractor which can provide their reseller permit and not have to pay sales tax on the cleanup charges, or

•  a speculative builder which owes sales tax on the construction cleanup charges and cannot use a reseller permit to avoid paying sales tax.