If you do not separately state the transaction privilege tax on your customer's invoice or contract, you may FACTOR the tax for purposes of reporting the tax to the state and cities.
Tax Factors for Construction Contractors
Factoring is a mathematical process that extracts the tax from the seller’s taxable receipts, when a tax amount was not separately identified to the purchaser. This method of tax computation is usually employed when the seller wishes to charge the purchaser a flat amount. While the prime contractor has the option of separately charging the tax, it is often more convenient to charge a flat price and factor the tax later. Any prime contractor may opt to factor transaction privilege tax and county excise tax.
Tax Factoring for Retail and Other Non-Prime Contractors
Factoring is a mathematical process that calculates the tax from the seller’s receipts, when a tax amount was not separately identified. This method of tax computation is commonly employed when the seller wants the total charge to the purchaser to be a flat amount. Examples of common factoring situations include a vendor at a sporting event that charges a dollar for a soft drink, and an artisan that charges ten dollars for a handcrafted item at an Arts and Crafts Festival. While both sellers have the option of separately charging the tax, it is a convenience to both the seller and the purchaser in such situations to charge a flat amount.