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Texas Sales Tax & Construction – Understanding Contract Types!

Updated: Nov 6, 2023

We are focusing on construction in Texas in this tax tip. One of the first things business owners must do when determining their sales and use tax responsibilities is understand the laws, rules, and definitions of the jurisdiction where they are doing business and how they apply to them. If you are a contractor or subcontractor with construction projects in Texas, there are several factors that you must determine to understand your sales and use tax responsibilities. One of these factors is contract type.

Key Takeaways:

  1. There are two types of contracts in Texas: lump sum contracts and separated contracts.

  2. These terms are defined by the Texas Comptroller of Public Accounts (i.e., the taxing authority in Texas).

  3. Understanding these defined terms and categorizing your contract correctly is one of the first steps towards helping determine  your sales and use tax responsibilities.

  4. Other determining factors include project type, entity type and property type.


Our mission to provide a resource so business owners, accountants and bookkeepers can understand sales & use tax compliance. We know that sales and use tax laws are not the easiest to understand. Our focus is on empowering you with a framework and general understanding, so you know what questions to ask and where to go to get the information you need to stay on the right side of sales and use tax compliance.


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