Plumbing and HVAC Contractors: Your Guide to Resale Certificates and Tax Savings

Plumbing and HVAC contractors deal with some of the most expensive individual components in the construction trades. A single HVAC system can cost $5,000 to $12,000 in equipment alone. A commercial water heater runs $2,000 to $5,000. High-efficiency furnaces, boilers, ductwork, copper piping, and premium fixtures all carry substantial price tags.

At sales tax rates of 6% to 10%, the tax on these purchases adds up to hundreds, sometimes thousands, of dollars per job. Understanding how resale certificates work for plumbing and HVAC contractors can protect your margins and keep you competitive.

Plumbing and HVAC Supplies

How Much Can Plumbing and HVAC Contractors Save?

The savings depend on your material costs and your state's tax rate. Here are realistic examples from common plumbing and HVAC jobs.

HVAC Installation Example

Plumbing Job Examples

A plumbing contractor completing 40 to 60 jobs per year with an average material cost of $3,000 per job is looking at $8,400 to $18,000 in annual sales tax, all of which can potentially be avoided with a properly used resale certificate.

Use our savings calculator to estimate your specific savings based on your volume and local tax rate.

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Which Plumbing and HVAC Materials Qualify

The general rule is that materials which become part of the customer's property through installation may qualify for tax-exempt purchase, depending on your state. Here is a breakdown by category.

HVAC Materials

• Major equipment: Furnaces, air conditioners, heat pumps, boilers, mini-split systems, package units
• Ductwork: Sheet metal duct, flex duct, duct board, fittings, transitions
• Controls: Thermostats, zone controllers, dampers
• Refrigerant lines: Copper line sets, insulation
• Ventilation: Exhaust fans, HRVs, ERVs
• Accessories: Condensate pumps, drain lines, plenums, filter racks

Plumbing Materials

• Fixtures: Sinks, faucets, toilets, bathtubs, showers, garbage disposals
• Water heaters: Tank and tankless units, both gas and electric
• Piping: Copper pipe, PEX, CPVC, PVC, cast iron, galvanized steel
• Fittings: Elbows, tees, couplings, valves, unions, adapters
• Drain/waste/vent: DWV pipe, fittings, cleanouts
• Water treatment: Softeners, filtration systems, expansion tanks
• Gas piping: Black iron pipe, CSST, gas valves, connectors

What Does NOT Qualify

These items are for your business operations and are taxable regardless of your certificate:

• Pipe wrenches, soldering equipment, and hand tools
• Drain cameras and inspection equipment
• Vacuum pumps, manifold gauges, and recovery machines
• Work vans and trailers
• Safety equipment and PPE
• Office and administrative supplies
• Fuel and vehicle maintenance

The "Installed vs. Resold" Distinction

This is the single most important concept for plumbing and HVAC contractors to understand. How your state classifies your work determines whether you can use a resale certificate for materials.

When You Are a "Consumer" of Materials

In most states, when a plumbing or HVAC contractor installs materials into real property (a building or structure permanently affixed to land), the contractor is considered the end consumer of those materials. Under this treatment:

• You pay sales tax when you purchase materials
• You do not charge the customer separate sales tax on materials
• Your invoice reflects a total price for the completed work
• You cannot use a resale certificate for installed materials

This is the default rule in the majority of states, including California, Texas, Florida, New York, and many others.

When You Are a "Reseller" of Materials

In some states, or under certain contract structures, plumbing and HVAC contractors are treated as resellers of the materials they install. Under this treatment:

• You purchase materials tax-free using your resale certificate
• You charge the customer sales tax on the materials portion of the invoice
• You remit that collected sales tax to the state
• Your invoice separately itemizes materials and labor

Why the Distinction Matters

Getting this wrong creates real financial exposure:

• Buying tax-free when you should not: You owe back taxes plus penalties and interest
• Paying tax when you could buy exempt: You are overpaying and reducing your margins unnecessarily
• Not collecting tax from customers when required: You are personally liable for the uncollected amount

State-by-State Rules for Plumbing and HVAC

State treatment of plumbing and HVAC contractors falls into several patterns.

Contractors Treated as Consumers (Majority of States)

In these states, plumbing and HVAC contractors generally pay tax on materials at purchase and do not separately charge customers tax on materials:

California: Contractors are consumers. Materials that become part of real property are taxed at purchase. Exception for retailers who also install (e.g., an appliance store that sells and installs water heaters).

Texas: Contractors are consumers of materials incorporated into real property. However, separated contracts (where materials and labor are itemized separately) may allow the customer to purchase materials directly and pay the tax themselves.

Florida: Contractors pay tax on materials. Real property improvements are treated as the contractor consuming the materials.

New York: Complex rules. Capital improvements to real property are generally exempt from sales tax when billed to the customer, but the contractor must pay tax on materials. Repairs to real property are taxable services where materials may be resold.

Illinois, Ohio, Pennsylvania, Georgia, North Carolina: Generally follow the contractor-as-consumer model for real property improvements.

Contractors Who May Act as Resellers

Arizona: Prime contractors are subject to transaction privilege tax on the gross income from contracting. Materials can be purchased tax-free with a resale certificate if the contractor is paying the contracting classification tax.

New Mexico: Gross receipts tax applies to contractors. Contractors can buy materials tax-free with a nontaxable transaction certificate and pay gross receipts tax on the total contract amount.

Mississippi: Contractors may purchase materials for resale and collect tax from customers on the materials portion.

Nebraska: Contractors can register as "retail contractors," buying materials tax-free and collecting sales tax from customers on materials.

States with No Sales Tax

Oregon, Montana, New Hampshire, Delaware: No general sales tax, so the issue does not arise for in-state work. (Alaska has no state sales tax but some local jurisdictions impose one.)

Managing Certificates for Plumbing and HVAC Businesses

Set Up Accounts with All Suppliers

Plumbing and HVAC contractors typically buy from specialty distributors like Ferguson, Winsupply, Johnstone Supply, RE Michel, and local supply houses. Submit your resale certificate when opening each account. Confirm that the exemption is active before your first purchase.

Separate Qualifying and Non-Qualifying Purchases

Use your accounting software to categorize purchases:

• Tax-exempt materials: Fixtures, piping, equipment, and fittings going into customer jobs
• Taxable purchases: Tools, equipment, office supplies, vehicle expenses, and anything for business use

Many contractors use job-costing software (like QuickBooks, Jobber, or ServiceTitan) that can track materials by job and tax status.

Handle Multi-State Work Carefully

Plumbing and HVAC contractors who work near state borders or take jobs in multiple states need certificates for each state. The rules may differ; you might be a consumer in one state and a reseller in the neighboring state. Keep a matrix of:

• States where you hold certificates
• The rule in each state (consumer vs. reseller)
• Expiration and renewal dates
• Which suppliers have each certificate on file

Document the "Installed" Connection

For every tax-exempt material purchase, you should be able to show:

1. What was purchased
2. Which customer job it was used on
3. That the material was actually installed (not kept for personal use or used on your own property)

This job-level documentation is what auditors look for. Without it, they may reclassify exempt purchases as taxable.

Common Scenarios and How to Handle Them

Scenario 1: You Sell a Water Heater Over the Counter

A homeowner walks into your shop, buys a water heater, and takes it home to install themselves. This is a straightforward retail sale. You would have purchased the water heater tax-free with your resale certificate and collect sales tax from the customer at the point of sale. This applies in virtually every state.

Scenario 2: You Install a Furnace in a Home

You purchase a furnace and install it in a customer's home. In most states, you are the consumer. You pay tax when you buy the furnace and do not charge separate tax to the customer. In reseller states, you buy tax-free and charge the customer tax on the furnace.

Scenario 3: Warranty Replacement Parts

You replace a defective part under warranty. If the manufacturer provides the part at no charge, there is no tax issue. If you purchase the replacement, the same rules apply as any other installed material.

Scenario 4: Service Call with Minor Parts

You replace a $15 capacitor during a service call. Even small parts follow the same rules as major equipment. The dollar amount does not change the tax treatment.

Start Saving on Plumbing and HVAC Materials

Whether you specialize in residential service calls or large commercial installations, the tax on materials is a significant expense. A resale certificate, used correctly and in compliance with your state's rules, can save your business thousands of dollars every year.

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Questions about how resale certificates apply to plumbing or HVAC work in your state? Contact our team for guidance.

Related Articles

• Construction Materials Sales Tax: The Complete Guide - Full breakdown of lump-sum vs. separated contracts and how they affect your material taxes.
• Do Subcontractors Need a Resale Certificate? - If you work under a GC, the rules may differ. Learn when subs can buy materials tax-free.
• How a Resale Certificate Helps Contractors Win More Bids - Use your tax savings to lower bids and win more jobs.
• Contractor License Requirements by State - Verify your plumbing or HVAC license requirements alongside your resale certificate.