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Buyers Beware

October 21, 2010

As a general rule, if an installed product permanently attaches to your home, and would not be taken with you should you sell the house and move, you should not pay sales tax on that installed product.

 Some contractors take advantage of customers by charging and pocketing the sales tax as additional profit to them.

 We have provided a portion of statute 12A-1.051 so that you, as a consumer, can be informed of the law. The complete law is printed in its entirety and can be downloaded from the “FREE Information Guide” located on the Dream Doors website.

Statute 12A-1.051

  (4) General rule of taxability of real property contractors. Contractors are the ultimate consumers of materials and supplies they use to perform real property contracts and must pay tax on their costs of those materials and supplies.

 Contractors performing only contracts described in paragraphs (3)(a), (b), ©, or (e) do not resell the tangible personal property used to the real property owner but instead use the property themselves to provide the completed real property improvement.

 Such contractors should pay tax to their suppliers on all purchases. They should also pay tax on all materials they fabricate for their own use in performing such contracts, as discussed in subsection (10). They shouldcharge no tax to their customers, regardless of whether they itemize charges for materials and labor in their proposals or invoices, because they are not engaged in selling tangible personal property.

 Such contractors should not register as dealers unless they are required to remit tax on the fabricated cost of items they fabricate to use in performing contracts.

 (5) Rule for (3) (d) contractors. Contractors who perform retail sale plus installation contracts described in paragraph (3) (d) do sell tangible personal property. They should register as dealers and provide a copy of their Annual Resale Certificate (Form DR-13)

 We believe at Dream Doors that an informed consumer is a wise consumer. The old adage of ‘buyers beware’ holds especially true when dealing with contractors who install products into a home. Listed below are a series of questions that may be helpful to you in finding a legitimate contractor:

1.       Do you hold the proper licenses?

Just asking the question may not be enough. A contractor may legitimately claim to be licensed, but is it the proper one? Businesses can obtain an occupational license, yet not possess a contractor’s license needed for pulling permits. Ask to see a copy of their license, making a note exactly what type license they have. Check with the city or county to see if the license is sufficient for the type work they are proposing.

2.       Do you have workers compensation insurance, general liability insurance and proper commercial vehicle insurance?

Again, an affirmative answer may not be enough. Be specific, such as how much general liability coverage does the contractor have? If they answer 300k, and your home is worth 500k, the coverage may not be sufficient if the contractor is proven responsible for damages that exceed that amount.

3.       Is your products Florida approval rated to meet the Florida building codes, especially for those areas requiring hurricane impact glass? Does your product qualify for the Federal Energy Tax credit?

Documentation is the key. Ask for written proof showing that the product(s) you have chosen do in fact meet Florida product approvals. Ask for a copy of the manufacturer’s certification that qualifies their product for the Energy Tax credit.

 As Ronald Reagan once said, trust but verify. The more documentation you can verify, the more likely are your chances of receiving all that you bargained for.