Publication 62, Locksmiths
Work Performed on Real Property: Houses, Stores, Office Buildings, and Apartments

This section explains the basic sales and use tax rules that apply to your locksmith jobs when you are working on real property, such as houses, apartment buildings, stores, and office buildings. For more information, see Regulation 1521, Construction Contractors, and publication 9, Construction and Building Contractors.

Are you considered a construction contractor for sales and use tax purposes?

You may install or repair locks, alarms, door hardware, safes, or other items that are attached to real property, such as houses, apartment buildings, office buildings, or stores. When you work on an item attached to real property, 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 on real property is considered a construction contract and falls under special sales and use tax rules.

Types of construction contracts

Most locksmith construction contracts fall into one of two basic categories. In a lump-sum contract, you bill your customer one set, agreed-upon amount for all charges associated with your work. In a time-and-materials contract, you bill your customer separate amounts for labor (time) and for the materials you furnish for the job.

In most situations, sales tax does not apply to the labor portion of charges included in a construction contract, whether you bill your customer one lump-sum amount or for time and materials. This rule is true when you perform work on items that are attached to the building or that are part of it, such as locks, alarm systems, and built-in safes. However, if you fabricate keys or other separate items of personal property as part of the job, your charge for that work is taxable fabrication labor (see Fabrication—making new keys and similar work), and you should itemize it on your bill.

Example: You rekey all the locks in a store and provide a master key system for them. You design a master-key system and remove and rekey all the locks using new or used cylinder pins and master-key wafers. You furnish master keys and change keys to your customer and reinstall the locks. Your charges for the work you perform on the locks are not taxable since they are attached to the building. However, tax would apply to your charges for fabricating and furnishing the keys, including your charges for the key materials. The keys are separate items of personal property and are not attached to the real property.

Service or trip charges

Service or trip charges associated with a construction contract may be taxable. For more information (see Trip and service call charges).

For more information

For more information on applying tax to labor charges, you may refer to the table and examples in the Appendix. If you need additional help determining how tax applies to your job, call our Customer Service Center at 1-800-400-7115 (TTY:711).

Applying tax to charges for materials—construction contracts

Materials are generally considered to be products that become part of the real property, such as locks, locksets, strike plates, door hardware, and electronic lock systems. When you are considered the consumer of materials furnished in a construction contract, sales tax does not apply to amounts you charge for materials.

However, when you are considered the retailer of materials furnished for a construction contract, sales tax does apply to your charges for materials.

You are considered the consumer of materials used in a construction contract when you bill your customer one combined, lump-sum amount for labor and materials. You are also considered the consumer in a time-and-materials construction contract unless you bill a separate amount for materials, and one of the following conditions exists:

The contract explicitly states that ownership of the materials transfers to the customer before they are installed.
You bill your customer an amount for “sales tax” computed on a marked-up billing for materials.

If you bill a separate amount for materials and either condition above applies, you are considered the retailer of the materials you furnish for the job, and tax applies to your charges for them.

Applying tax to purchases of materials furnished in construction contracts

When you are the retailer of materials furnished in a construction contract, you may issue a resale certificate to your supplier when you buy those materials (see Purchases for resale). When you are considered the consumer of materials furnished for a construction contract, you must pay tax to your supplier at the time of purchase. If you buy materials without paying an amount for California tax at the time of purchase, you generally must pay use tax to CDTFA based on the purchase price (see Purchases subject to use tax).

Example, locksmith-contractor considered consumer of materials

You contract with a theater owner to install panic hardware on the doors of a theater for a set price of $750. Your invoice shows one $750 charge and does not include separate amounts for materials or sales tax. You do not owe sales tax on the transaction because you are considered the consumer of all materials furnished. However, you would be required to pay an amount for tax to your supplier when you purchase materials for the contract or pay use tax to CDTFA based on the amount you paid your supplier.

Example, locksmith-contractor considered retailer of materials

You contract with an apartment building owner to install an electronic lock system. Your contract specifies that you will charge an hourly rate for labor plus amounts for materials. Your invoice shows separate charges for labor, the lock system, and sales tax. Since you have billed a separate amount for materials and charged an amount for sales tax, you are considered the retailer of the materials and must pay tax to CDTFA on your charges for them. You may issue a resale certificate to your supplier when you buy the materials you will furnish for the job.

Personal property fabricated along with work performed under a construction contract: keys and similar items

Locksmiths often fabricate and sell items of personal property, such as keys, along with the repair or installation work they perform in a construction contract. When you make and sell new items of personal property, all your charges for materials and labor related to those items are taxable (see Fabrication—making new keys and similar work). If you fabricate personal property, such as keys in conjunction with a construction contract, you should be sure to itemize and pay tax on the amounts you charge for the personal property items—including any charges for related labor or services. You may charge your customer an amount for tax equal to the amount you will owe on the sale.

Supplies

Supplies are considered to be those items you use in your business that do not become a physical part of the final products you sell. Common examples for locksmiths include cleaning solvent, rags, and steel wool. You are considered the consumer of your supplies. You should expect to pay an amount for tax to your vendor when you buy supplies. If you do not, you generally must report use tax based on their purchase price (see Purchases subject to use tax).

Revision July 2026

Publication 62, Locksmiths Work Performed on Real Property: Houses, Stores, Office Buildings, and Apartments