My First Flip

[Connie Ly]

Hello everyone. I am doing my first flip and confused with the taxes. My general contractor said he will be my sub contractor and be able to get all work done with his professionals. I have questions:

1) a sub contractor isn't the same as a general contractor is it? He also said I do not have to pay taxes now if I issue him a W-9? How does this work? 

2) Do I pay for taxes for the services rendered now or later come tax time? If I pay taxes now and I have to pay for excise taxes when I sell... seems like a lot of taxes?

Sorry to be so naive! Thank you!

[Patrick Liska]

ADDING to my post, just did some research, Washington is Different than New Jersey in that matter, here is an article you should read : https://salestaxhelp.com/wp-content/uploads/2011/1...

and these two paragraphs from it :

The following states regard contractors as retail sellers of installed materials rather than consumers: Arizona, Hawaii, New Mexico and Washington.

 Washington: Prime contractors owe sales tax on their gross contract prices. Subcontractors must obtain resale certificates or copies of reseller permits from their prime contractors to avoid being held responsible for the tax. Apart from the sales tax, contractors also owe “business and occupation” (“B & O”) taxes on their gross receipts. Prime contractors owe retail B & O taxes; subcontractors owe wholesale B & O taxes.

there is also this from the Department of Revenue: http://dor.wa.gov/content/doingbusiness/businessty...

Purchases for Resale: Purchases for resale are purchases of items or services which will be resold without intervening "use as a consumer." Retail sales tax or use tax is not paid on purchases for resale. Contractors purchasing items for resale must give the vendor a reseller permit to avoid paying sales tax. If sales tax is paid, the contractor may claim a "tax paid at source" deduction (WAC 458-20-102).

make sure he claims this so that items are not double taxed, if he buys material and its taxed, he should not tax you again for that same product he can claim " tax paid at source " and just pass the final cost that he bought it at to you.

He is trying to pull one over on you - be the customer, let him deal with all the taxes and re-sale certificates