Washington contractor tax

How sales tax generally works on Washington construction jobs.

For custom construction performed for a property owner, Washington generally treats the prime contractor's work as a retail sale.

Prime contractors generally collect sales tax on the total contract price

Washington Department of Revenue guidance says a general or prime contractor performing custom construction for a property owner is generally subject to the retailing B&O classification and collects retail sales tax on the total contract price.

Itemizing labor, materials or other components on the invoice does not generally remove those amounts from the taxable selling price for custom construction.

Use the rate for the construction location

Retail construction services are sourced to the location where the construction takes place. That means the applicable combined state and local rate is generally the rate at the job site, not simply the contractor's office address.

Practical rule: look up the tax rate for the actual job location, then enter the DOR rate into the calculator exactly as displayed. A DOR rate of 0.089 means 8.9%.

Washington DOR rate lookup

Example

If the pre-tax contract amount is $18,500 and the job-site rate is 8.9%, estimated sales tax is $1,646.50 and the customer total is $20,146.50.

That sales tax is collected from the customer and remitted under the applicable Washington reporting rules; it is not contractor revenue for margin purposes.

Important: public road construction, federal government contracting, speculative building, exemptions and other project types can follow different rules. Confirm the classification before relying on this general treatment.

Primary references: WA DOR Construction Tax Matrix and WA DOR Custom Construction Guide.