Stop guessing on lump-sum vs. separated contracts. This is your one-stop resource with a quiz, a foundational guide, a visual reference map, and curated links to official resources.
Our downloadable Visual Map (Cheat Sheet) and a link to ask Justin, our AI sales tax assistant, are waiting for you below the quiz and just after the article.
Think you’ve got a handle on it? These rules can be tricky. Take this quick quiz to learn your rules, or verify the rules you already know.
This quiz walks you through the Four Questions That Guide Everything to give you your specific tax rules, step-by-step.
This guide is designed to walk you through the fundamentals of Texas sales tax for contractors. We’ll cover the core questions that determine every outcome, point out common “gotchas,” and provide links to more in-depth official resources along the way if you want to dig deeper on a specific topic.
Texas sales tax rules for contractors can feel like they were written by Pinky and the Brain at the end of another failed episode. Overly complex. Full of tiny details. Designed to take over your day… and leave you wondering what went wrong.
But here’s the good news: this isn’t a problem unique to you. Construction is complicated. So complicated, in fact, that the Texas Comptroller’s office built an entire YouTube playlist just for contractors. (Not exactly the “special” you were hoping for—but helpful.)
👉 Consider this article your map and quick reference guide for navigating Texas contractor sales tax.
For any construction project in Texas, your sales tax responsibility depends on four simple (but critical) questions:
Keep these four answers in mind—because they drive every other rule.
Quick rules to remember:
If Your Project Is… | Lump-Sum Contract | Separated Contract |
New Residential Construction | Pay sales tax on materials to your supplier. Don’t charge the customer. | Collect sales tax from the customer on materials. Give your supplier a resale certificate. |
Residential Repair/Remodel | Same as above: pay tax to supplier, no tax to customer. | Collect tax from customer on materials, resale cert to supplier. |
New Commercial Construction | Same again: you pay supplier, customer not charged. | Collect tax from customer on materials, resale cert to supplier. |
Commercial Repair/Remodel | Collect tax from customer on the entire bill (labor + materials). Resale cert to supplier. | Same: full tax collected on total bill, resale cert to supplier. |
Some services that are normally taxable are not taxed when part of a new residential build.
Think: 🌱 landscaping, 🐜 pest control, 🗑 waste removal, 🧹 janitorial, 📏 surveying.
👉 Use an exemption certificate with your service provider.
⚠️ Applies only to new residential construction, not commercial or remodels.
💡 If you’ve already been paying sales tax on these for new builds, you may be able to claim it back on your next return (look-back period up to 4 years).
Working for exempt organizations flips the rules.
✅ You collect an exemption certificate from them.
✅ That allows you to give your suppliers exemption certificates for:
🚫 But here’s the tripwire: Machinery and equipment are not covered. If you buy or rent them for the job, you still pay sales tax.
Knowing the rules is half the battle. Filing on time is the other.
Think of it this way: the state is paying you a small “thank you” for doing their collecting.
Getting sales tax right isn’t just about memorizing rules—it’s about how your QuickBooks file is set up.
Each product, service, and customer needs to be marked correctly as taxable or not. When your system is set up right, the sales tax often calculates itself.
But if your file isn’t structured properly? That’s when “gotchas” turn into penalties, stress, and sleepless nights.
If reading this makes you wonder whether your setup is tangled, you’re not alone. Most contractors don’t get this right without help—and it’s not their fault.
That’s why I offer the Fit Call + File Peek™.
It’s not a sales pitch. It’s a second set of eyes.