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bobbygedd
11-13-2001, 08:20 AM
bid on a job the way i always do, eight 6-7ft white pine. $$$$$$ well, im doing the job tommorow(wed) , and the customer requested a break down for tax purposes. ive never had to do this. i need to list cost of materials, and then labor separatly. problem is that if i only paid $60 each for the pine, i dont need the customer to know that the cost of pickup, delivery and instalation is $1200. can i do this: since i bought the pine wholesale, can i mark them up to say $120 a peice, then list the remaining expence as pickup delivery, instalation? thanx for any advice

SprinklerGuy
11-13-2001, 08:31 AM
Those types of clients are a PITA! Is it really any of their business? I always feel bad justifying my way of doing business to them. I usually mark the plants or parts up double and do what you said, the rest is labor,delivery,pickup, overhead and profit. I always think they are going to have a fit. So, make sure you get paid first then produce this invoice!!!! Tell them though that this will cause you hardship and you don't like to do it.

bobbygedd
11-13-2001, 08:46 AM
actually, we have done some work for her in the past, shes no problem. here is the deal: she lives alone, very wealthy, this is a new home($600,000), she needs alot more work done too, ill give her anything she wants, just dont know how to word this one.

SCL
11-13-2001, 09:07 AM
This happens all the time on commercial bids for the taxes. Mark up your trees to what they are worth. Doesn't matter what YOU paid. 6' to 7' pines you could take up to $200 if you want. Break the rest out and realize that most people understand that you have a business to run. The ones that P & M about your making money are the ones you'll have problems with the whole time you do the job, even if you low ball.

kutnkru
11-13-2001, 09:09 AM
Bob what I would do is similar to what Tony suggested. I would mark the trees up to $150 ea. and with 6 trees this tallys you to $900. I would then mark down a $100 delivery fee and label your workmanship at $200.

This will make all your numbers seem appropriate with a modest fee for installation and Im sure she will be glad to have you back. ;)

If they try to request receipts or anything like this just tell them that you have an account with the nursery and you are always billed monthly which consists of multiple jobs and arent able to do it for this reason. Thats why her bill is as a low as it is because you are passing the savings on to her. :D

Good Luck.
Kris

bobbygedd
11-13-2001, 10:10 AM
very good idea, im going with it, thanks to all

Stonehenge
11-13-2001, 11:51 AM
I think the ideas presented here a great. I have a follow-up question though. If this is a residence, what are the tax ramifications of a breakout of materials and labor?

I'm not aware of any, sounds like just a way to pick apart the bid.

bobbygedd
11-13-2001, 12:03 PM
homeowner claims that she just bought the house, and her accountant can write off home improvements

Stonehenge
11-13-2001, 01:20 PM
So, which part, materials or labor, doesn't count toward the home improvement?

bruces
11-13-2001, 02:30 PM
There are absolutely no tax ramifications of the improvements if this is a personal residence until she sells the property, and then only if the gain is over 250k, or 500k if married.

As far as a breakout of materials and labor, it shouldn't matter, the labor is as much a part of the improvement as the materials so the breakout should not matter.

She is either feeding you a line or doesn't have a clue what she is talking about.

Improvements to a residence are never deductible until sale unless it is partially used for business.

Stonehenge
11-13-2001, 02:58 PM
Bruces -

That's what I was driving at, too. Sounds like she made up a reason why she needs the breakdown.

Now let's see if she questions the breakdown. If she does, BG it's time to pack your bags.

thelawnguy
11-13-2001, 04:25 PM
Originally posted by bobbygedd
homeowner claims that she just bought the house, and her accountant can write off home improvements

She's just fishing. Since the tax breakdown excuse is either just a way to find your costs or some sort of scam on her part against uncle Sam, why not just ask her how she would like you to break it down, since you dont normally quote estimates that way and wouldnt know where to start...

Lanelle
11-13-2001, 09:09 PM
The reason we often break down materials and labor is for the proper sales tax calculation. In Virginia, the labor is not taxable so people don't want to pay extra sales tax for labor when legally they only should owe for the materials. Yes, we mark up the materials and then figure the sales tax on that amount. On a large job this saves the client a decent amount of money.

BRL
11-13-2001, 10:55 PM
Lanelle's got it. Here in NJ if you do a Capital Improvement to the property, the customer does not have to pay sales tax on the labor. The contractor still pays the sales tax to their suppliers for any materials purchased for that project. So you can give the customer one total lump sum with no sales tax charged because the contractor has already paid the sales tax due on the materials (as long as the ST-8 is properly signed). The contractor provides a NJ Tax Form ST-8 for the customer & contractor to sign, certifying that the job is a capital improvement to the property (contractor has to keep this record for 3 years). You do not have to break down the invoice for the purposes of this relieving of the tax liability. However, if that's what the customer with potentially lots more work needed wants, I would break it down for her. But I wouldn't put down $60.00 for the trees (cost) I would put down my price to sell them, and the customer doesn't need to see my invoices from my suppliers.

According to my accountant, when I was making capital improvements to my house, she informed me that there was no reason for me to track these costs becaues there are no tax write offs for it (like bruces said).

mattingly
11-14-2001, 12:15 PM
I'd label it as such

8 6-7' White Pines $120.00/each
Subtotal $960.00
Labor 30.00/each
Subtotal $240.00

Tax $57.60

Total $1257.60

I know you have the tax included in yours but that is something you really ought to look to pass along.

BRL
11-14-2001, 10:30 PM
Mattingly,
In case I didn't explain it right, the tax for materials is paid by the customer (passed along). The contractor needs to include that as part of his\her costs when making the price for the job. The way you wrote that would not be correct because in reality he is only paying $28.80 in sales tax to NJ. Separately stating that $57.60 is going to NJ when only $28.80 went there is probably tax fraud (not that anyone would catch that, but you never know). Using your example I would write it as $127.20 per tree (2x the cost).

GroundKprs
11-14-2001, 11:21 PM
In Indiana (and many other states), if you wanted to test the legitimacy of a landscaper, you would simply ask for an itemized statement, materials and labor. Most all contractors of all types bill in this manner, and the legitimate ones charge sales tax on the materials. In IN, you are only allowed to charge a lump sum without itemizing to the final user if your cost of materials is less than 10% of the lump sum figure, and you pay the tax on your cost. Any higher than that and the state wants their cut of the markup.

So someone wanting to verify that you are not black market (a "scrub", in LawnSite terminology), may just want to base their judgement of your business on whether you can bill in a businesslike manner. Lot easier than asking for insurance certification, nursery dealer license, state registered retail merchant certificate, property tax key #, federal ID #, etc.

In this NJ case, the lady has a legitimate request to save the sales tax on labor, and maybe also do the legitimacy test on the contractor at the same time.

Stonehenge
11-15-2001, 08:31 AM
The posts in this thread have really illustrated to me how varied the laws are state to state. Wisconsin has both a sales tax and a use tax. We pay a use tax on any materials we use for projects where sales tax isn't charged to the customer. All projects where sales tax is applicable, we charge it, then don't pay a use tax.

The use tax never sees the customer. It wasn't intended for them. But we pay it. And because it's a cost to us, we have to pass it on to them, but it's baked into the price, where sales tax is always a separate item. So when we put in a patio and 2 shrubs, people always ask - 'Why is there only $4 sales tax on this $8,000 project?' The fun part is when they ask 'The other company we talked to said that if we signed up for the patio now, they'd pay the sales tax.'

Things get hairy when we talk about what gets charged sales tax and what doesn't, but thankfully some of my fellow scapers here successfully sued the state and got one screwball tax law changed this year, so it's easier than it used to be.

So the legitimacy test doesn't even really exist here. The laws you speak of Grndkprs just don't exist in WI.

KerryB
11-15-2001, 09:10 AM
In North Carolina we do not have to pay sales tax for our materials(plants that is).
Nurserys do not charge sales tax either.
I agree there is no tax right off for capitol improvements until sale of house. She must use the cost of the improvements to add to her base cost of property. The entire bill not just part of it.
So itemize for her but never show her your costs its none of her business.

Andrew Hardscape
11-15-2001, 01:49 PM
Yeah sounds like this woman is pretty smooth!

Breakdown for tax purposes! Give me a break!

So when we write off the cost of that new skidsteer I guess we need to contact the manufacturer to get the cost of parts and the labor cost for OUR tax purposes! No?

I have clients that will ask once in a while what the materials cost. I'm very straight forward, I tell them I can't discuss that with them. I tell them how our recovery system works and explain how our mark up system works, and that if they are driving at trying to determine certain things, that it will not work, because the pricing changes to refelect the cost / hr after all direct expenses. 99.5% of them understand. If they have issues with that, then that may be a sign that you do not need to deal with them.

Itemized Statement?? NO Problem!

(10) 24" Burning Bush
(11) 3.5" Oct Glory Maple
(51) 5' Leyland Cypress
(6) cu yds dbl shredded mulch

Total: $1,100.00

Theres your itemized statement! :blush:

MD's Finest (http://www.outdoorfinishes.com)

KerryB
11-15-2001, 03:36 PM
Sounds kinda low to me. lol

brentsawyer
11-15-2001, 06:32 PM
50% laobr, that is what nurseries do, that is what you should do.

$100/Tree
$50/Labor Tree plus tax if required
Add in more detail e.g. Warranty, delivery, etc. to sweeten the appearance.

That is as straight up as you can get and pretty much standard if this is what you are satisfied with profit wise.

TSS
12-06-2001, 03:18 PM
I also live in Indiana and from what I was told if you buy something at wholesale (plants & trees) and have a mark up on the product you have to charge the customer sales tax. Due to the fact that the state will recieve more in sales tax after your mark up than when you purchased it from a wholesale co. Except on job materials and labor.

scottt
12-06-2001, 03:38 PM
:eek: $50 labor on a $100 dollar tree. I would never do that. I wouldn't do it for any less than $100 labor. Closer to $150.