Lucrative Bookkeeping

Florida HVAC Businesses: Are You Required to Charge Sales Tax?

Sales TAxAs with most things tax related, it depends. For Florida HVAC businesses, the realm of sales tax introduces a nuanced scenario that requires a closer look. In this guide, we’ll look at the factors that come into play, to determine whether HVAC services are taxable.

One fundamental aspect to consider is the classification of central air conditioning (A/C) units. According to the Sales and Use Tax on Construction, Improvements, Installations, and Repairs (GT-800067 R.09/14), central A/C units are deemed fixtures. This classification is crucial in determining their tax implications.

The above tax issue outlines a general principle: transactions involving items permanently installed into a structure, ones that cannot be removed without causing destruction, are classified as real property. These real property items are not subject to charging sales tax. So, when it comes to installing central A/C units, the general rule is clear – sales tax is not applicable.

Taking a closer look at the specifics, the tax issue explicitly states that contractors should not charge customers tax on materials or labor. This places the responsibility of paying the sales tax squarely on the shoulders of the contractor. It’s a critical distinction that HVAC businesses in Florida need to be aware of to ensure compliance with tax regulations.

So, who pays the sales tax then, if not the customer? The burden of sales tax falls on the contractor, who should pay sales tax to suppliers on all purchases. The contractor would then not charge the customer.

However, as with any tax-related matter, nuances exist. Depending on the type of contract, the customer may need to be charged sales tax. Generally speaking, if the contractor has any of the following pricing contracts, the above would apply: Lump sum, cost plus, fixed fee, guaranteed price, or time-and-materials real property contracts.

If, however, the contract was a retail sale plus installation contract (contracts for improvements to real property where the contractor or subcontractor lists and prices in the contract all materials to be used before the work begins), the above issue states that the customer is assuming title and risk of the loss of materials, rather than accepting only title to the completed work. In this case, the contractor should buy the materials tax-exempt for resale, and charge the customer tax on all materials.

For Florida HVAC businesses, a comprehensive understanding of sales tax is important. The distinction between fixtures and tangible personal property can impact whether sales tax needs to be collected by your  business. Therefore, staying informed and seeking professional advice when needed is always a good idea!

In conclusion, the installation of central A/C units, considered fixtures, generally exempts businesses from the obligation to charge sales tax. The contractor assumes the responsibility for sales tax on materials and labor, alleviating the burden on customers.


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