Who it’s for
Bookkeeping for Contractors
Materials bought ahead, deposits before work starts, payments that come in draws: contractor books fall behind fast. KeyLine keeps them current.
The books
Deposits, Draws and the Right Sales Tax
Sales Tax Depends on the Job
In Texas, labor on residential repair and remodeling isn't taxed, and neither is labor on new construction. Nonresidential repair and remodeling is taxed on the whole charge.
Lump-Sum or Separated
On a residential lump-sum job you pay sales tax on materials when you buy them and don't charge your customer tax. On a separated contract you buy materials with a resale certificate and charge tax on them.
Mixed Jobs
When one contract covers new construction and remodeling, and the remodeling is more than five percent of the charge, the whole charge is presumed taxable.
Materials, Deposits and Draws
All matched to your bank.
Subcontractors
Your books show who you paid and how much, which your tax preparer needs for any 1099s.
A sample
A Sample Month of a General Contractor’s Books
How we’d record one month, with each of the five things above in its place. Made-up numbers, not a real client.
One crew in March: a kitchen and a bathroom at two homes, a repair at a dental office, and a storage building.
| Entry | Amount |
|---|---|
| 1Sales Tax Depends on the Job | |
| Dental office repair, nonresidential, so taxed on the whole charge | $6,400.00 |
| Sales tax on it, 8.25 percent as an example | $528.00 |
| Kitchen remodel at a home, billed this month: residential, so no tax on the labor | $14,000.00 |
| 2Lump-Sum or Separated | |
| Kitchen, a lump-sum job: cabinets and counters bought with tax paid, $4,200 plus $346.50 | $4,546.50 |
| Bathroom, a separated contract: tile and fixtures bought tax free with a resale certificate | $3,000.00 |
| Bathroom invoice: materials $3,000 plus $247.50 tax, and labor $5,400, not taxed | $8,647.50 |
| 3Mixed Jobs | |
| Storage building and a remodel of the shop beside it, on one contract: the remodel’s $4,000 is more than five percent of it | $36,000.00 |
| So the whole charge is presumed taxable: sales tax, 8.25 percent | $2,970.00 |
| 4Materials, Deposits and Draws | |
| Kitchen deposit, March 3, matched to the bank | $6,000.00 |
| Kitchen first draw, March 20, matched to the bank | $8,000.00 |
| Dental office, paid in full and matched to the bank | $6,928.00 |
| Lumber and concrete for the storage building, on the supplier’s account | $9,800.00 |
| 5Subcontractors | |
| Electrician on the kitchen, added to the electrician’s total for the year | $1,800.00 |
| Plumber on the bathroom, added to the plumber’s total for the year | $1,200.00 |
The Month as the Books Show It
- Sales tax collected comes to $3,745.50: $528 on the dental office, $247.50 on the bathroom’s materials and $2,970 on the storage building. The kitchen’s invoices carry none.
- The kitchen’s $346.50 in tax on materials is part of what the job cost.
- Subcontractors were paid $3,000, and the books keep each one’s total for the year.
One job
One Job, Start to Finish
Sample. Not a real client.
The kitchen from the sample month, from its deposit to its final payment.
| Date | Entry | Amount | Matched to the bank |
|---|---|---|---|
| March 3 | Deposit | $6,000 | Matched to the bank |
| March 5 | Materials, bought ahead and paid out, tax included | $4,546.50 | Matched to the bank |
| March 20 | First draw | $8,000 | Matched to the bank |
| April 10 | Second draw | $8,000 | Matched to the bank |
| April 28 | Final payment | $4,000 | Matched to the bank |
These sales tax points come from the Texas Comptroller. This isn’t tax advice: for your own business, read the Comptroller’s page below or ask your CPA.
- Texas Comptroller, Publication 94-116, Real Property Repair and Remodeling, read September 30, 2026
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