Publication 35, Interior Designers and Decorators
Improvements to Real Property
Interior decorators often contract with customers to make improvements to real property as part of a job. This page is a general guide to applying tax for those types of charges. For more information, you may obtain a copy of Regulation 1521, Construction Contractors, and publication 9, Construction and Building Contractors.
You may be a construction contractor for sales and use tax purposes
As an interior designer or decorator, you may furnish, install, or repair carpeting, other floor coverings, shutters, blinds, wall mirrors, custom cabinets, plumbing fixtures, and other items that are attached to real property such as houses, apartment buildings, office buildings, mobilehomes with permanent foundations, or stores. When you buy items that will be attached to real property and install them yourself or pay a contractor to install them, you are generally considered a construction contractor for sales and use tax purposes, even if you do not hold a contractor’s license. Any work you perform as a construction contractor falls under special sales and use tax rules, explained in this section.
Please note: If you only supervise the work of a contractor who bills your client directly, you are not considered a construction contractor for that job.
Fixtures vs. materials—what’s the difference?
Fixtures are accessories to a building that do not lose their identity when installed. Examples include:
- Air conditioning units
- Awnings
- Prefabricated: cabinets, counters, or lockers
- Furnaces
- Heating units
- Shutters
- Blinds
- Plumbing fixtures
- Garbage disposal units
- Lighting fixtures
If you furnish and install fixtures, tax will apply to your charges for the fixtures but not to your charges for installation.
Materials are generally considered to be products that lose their identity and become an integral and inseparable part of the real estate when installed. Examples include:
- Carpet
- Padding
- Flooring
- Adhesive
- Wallpaper
- Paint
- Sizing
- Molding
Whether tax applies to your charges for materials in a construction contract depends on the terms of the contract, as explained in Types of construction contracts.
Types of construction contracts
Most construction contracts fall into one of two basic categories. In a lump-sum contract, you generally bill your client one set, agreed upon amount for all charges associated with the work. In a time and materials contract, you generally bill your client separate amounts for labor (time) and for materials and/or fixtures you furnish.
Lump-sum contracts
In a lump-sum construction contract, you are the consumer of materials used in improving the real estate. Consequently, you should not charge your client amounts for sales tax. Instead, your purchase of the materials is taxable. If you do not pay an amount for tax at the time of purchase, you must pay use tax to us (see Purchases subject to use tax).
Example: You contract with a client to furnish and install 100 square yards of wall-to-wall carpeting for a lump-sum amount of $1,600, which includes all your charges for the job. Your direct costs are:
| Details of Cost | Cost |
|---|---|
| Acme Carpet Mills: 100 square yards of carpeting @ $8.00 per square yard | $800.00 |
| Expert Installers Inc.: Install 100 square yards of carpet @ $3.00 per square yard, including labor, padding, and tackless strip | $300.00 |
You are the consumer of the carpet and should pay an amount for tax to Acme Carpet Mills on the $800 carpet purchase price. The installer is the consumer of padding, strip, and any other materials used and should pay an amount for tax on these materials to its supplier. Your total $1,600 charge to your client is not taxable.
Time and materials contracts
You are also considered the consumer of materials in a time and materials construction contract unless you bill a separate amount for materials and:
- The contract explicitly states that ownership of the materials transfers to the client before they are installed, or
- You bill your client an amount for sales tax on your invoice.
If you bill a separate amount for materials and either condition above applies, you are considered the retailer of the materials you furnish, and your charges for them are taxable.
Example: Using the amounts in the previous example, but with a time-and-materials contract, your direct costs remain $1,100. You bill your client as follows:
| Details of Cost | Cost |
|---|---|
| 100 square yards of carpeting @ $12.00 per square yard | $1,200.00 |
| @ $12 per square yard | + $99.00 |
| Sales tax @ 8.25% ($1,200 × 8.25%) | + $400.00 |
| Total | = $1,699.00 |
Notes
- Please note: Even though this and other examples show tax calculated at a rate of 8.25 percent, you should use the rate in effect at your business location. For more information, see California City and County Sales and Use Tax Rates for current tax rates.
You are considered the retailer of the materials (carpet) since you have added an amount for tax on an itemized, marked-up billing for materials. You, therefore, owe tax of $99 on your $1,200 material charge. Since you are a retailer of materials, you may issue a resale certificate to your supplier, Acme Carpet Mills.
Labor charges—work performed on real property
Generally, sales tax does not apply to the labor portion of charges for work performed on real property. This is true when you perform work on items that are attached to the building or are part of it, such as carpets, built-in appliances, or indoor swimming pools. However, if you fabricate separate items of personal property or fixtures as a part of the job, such as shutters or throw rugs made from carpet scraps, your charge for that work is taxable fabrication. You should itemize the charge on your invoice.
Common interior decorator issues—work performed on real property
Sale and installation of cabinets
You may contract with a client to install cabinets in a home, store, office, or other building. For sales and use tax purposes, some cabinets are considered materials and others are considered fixtures. Each cabinet in a project must be evaluated individually.
Custom cabinets
Cabinets are considered custom and treated as materials if you incur less than 90 percent of the direct cost of related labor and materials in the fabrication and installation of the cabinet before the cabinets are attached to your client’s building. The application of tax to your charges for materials depends on how you contract with your client, as explained on the previous page.
Prefabricated cabinets
Cabinets are considered prefabricated and treated as fixtures if you incur at least 90 percent of the direct cost of labor and materials in the fabrication and installation of the cabinets before they are attached to your client’s building. In this case, you are considered to be the retailer of the cabinets, and tax will apply to your charges for them. Installation charges are not taxable.
Sale and installation of blinds and shutters
Certain window coverings—including interior wood shutters, miniblinds, vertical blinds, honeycomb blinds, Roman shades, and Venetian blinds—are considered fixtures, and your sale of them is taxable. However, hardware items attached to a building in order to hang window coverings, such as brackets, rods, and tracks, are considered materials. The application of tax to their purchase or sale depends on whether you are a consumer or a retailer for that particular construction contract. The sale and installation of draperies is not a construction contract.
Subcontracted work on real estate
Your charges to your client for subcontracted improvements to real property (the subcontractor furnishes and installs materials/fixtures) are generally not taxable because the contractor is responsible for reporting the tax. When the subcontractor is the retailer of materials and fixtures furnished in a construction contract, he or she owes tax to us on the sale. If your client pays the subcontractor directly, the subcontractor may charge your client an amount for tax on charges for materials and fixtures. If you pay the subcontractor yourself, you may be charged an amount for tax. You cannot give the subcontractor a resale certificate for materials or fixtures furnished in a construction contract (see Purchases, Resale Certificates, and Use Tax).
Example: You have a contract to furnish a master bathroom. As part of the job, you subcontract with a tile installer who furnishes and installs 400 square feet of marble tiles for a total, nontaxable lump-sum charge of $8,000. You do not owe tax on the amount you charge your client for this work. The contractor is the consumer of the tile used on the job and, therefore, must pay tax to his supplier or to us.
You subcontract another portion of the job to a plumber who furnishes and installs a new sink, toilet, and whirlpool tub. The plumber charges you $750 for installation labor, $3,200 for the fixtures, and an amount for sales tax on the fixtures. The plumber owes sales tax on the $3,200 fixture charge and may bill you for tax. You may not issue a resale certificate to the plumber. Again, you do not owe tax on the amount you charge your client for this work.
Revision July 2026