Q for Primer (sales tax and contractors)

300 Mercer,

Good question:

We do have to pay sales tax when buying materials. We do not charge sales tax on labor if the project is considered a capital improvement:
What is a capital improvement?

A capital improvement is any addition or alteration to real property that meets all three of the following conditions:

It substantially adds to the value of the real property or appreciably prolongs the useful life of the real property.
It becomes part of the real property or is permanently affixed to the real property so that removal would cause material damage to the property or article itself.
It is intended to become a permanent installation.

We really only do full gut renovations so all our projects fall into capital improvements so we do not charge any sales tax. If we are asked to purchase the appliances for just tack on the sales tax in our price to the client

Thank you. That makes sense.

A slightly related question: as a home owner who have done capital improvement projects, what records do i need to keep, to show an increased cost basis, when I need to sell?

Believe all receipts and/or payment record. I keep a spreadsheet as well. Some payments were cash but a very small percentage such as tips to workers and super. I add it as well. Not sure if the coop maintenance is deductible while you did not occupy. When you sell, you just need to declare the cost basis in the appropriate form and the rest is for if you get audited.