Effective March 1, 2025, Suffolk County increased its local sales and use tax rate from 4¼% to 4⅜%. This change will impact all taxable sales and uses within the county, including those related to construction materials and services. Construction businesses must comply with the new rates to avoid potential errors or penalties.
Key Details of the Sales Tax Rate Increase
- New Sales Tax Rate (state and local): 8¾% (for taxable sales and uses in Suffolk County, including materials and services)
- Previous Rate (state and local): 8⅝% (for taxable sales and uses in Suffolk County)
The updated rate applies to all taxable sales and uses in the county, except for residential energy sources and services. This includes purchases of materials used in construction projects and certain contractor services. The updated tax rates are reflected in the Sales Tax Rates by Local Taxing Jurisdiction on the New York State Department of Taxation and Finance website.
How This Impacts Construction Projects
- Material Purchases
Construction businesses purchasing materials in Suffolk County will now pay the updated sales tax rate. As of March 1, 2025, purchases of tangible personal property (e.g., construction materials) will be subject to the new rate of 8¾%. Contractors should adjust their budgeting and invoices accordingly to account for the higher tax rate on materials. - Contractor Services and Labor
The updated sales tax rate also applies to certain construction services, including labor, depending on the specifics of the project and contract terms. It’s important to review your contracts to determine how these changes will affect the overall cost to your clients. - Pre-Existing Contracts
There is an important exception for contractors with pre-existing lump sum or unit price construction contracts entered into before December 17, 2024. These contracts are still subject to the previous sales tax rate of 8⅝% on purchases made before March 1, 2025. However, purchases made on or after March 1, 2025, will be taxed at 8¾%. Contractors who paid the additional ⅛% on purchases after March 1, 2025, may request a credit or refund of the extra tax paid, but this only applies to materials used directly in the performance of the contract. For full details on how to apply for a credit or refund, refer to Tax Bulletin Contractors – Sales Tax Credits (TB-ST-130) on the New York State Department of Taxation and Finance website.
What Construction Businesses Need to Do
- Update Budgets and Pricing
With the new tax rate in effect, construction businesses must update their project budgets and cost estimates to reflect the higher sales tax. This will ensure that your pricing is accurate and that you are fully prepared for the increased costs of materials and services. - Revise Invoices
Starting March 1, 2025, apply the updated 8¾% sales tax rate on all invoices for work performed in Suffolk County. This will help avoid discrepancies with your clients and ensure your financial records are accurate. - Review Contracts
Contractors should carefully review all ongoing construction contracts, particularly those signed before December 17, 2024. If your business is subject to the transition rules for pre-existing contracts, be sure to track purchases accordingly and consider requesting a credit or refund if applicable.
Special Transitional Provisions
Sales and use tax on taxable sales and uses made on or after March 1, 2025, will be taxed at 8¾% unless specifically exempted. The New York State Department of Taxation and Finance has provided transitional provisions for sales tax rate changes, detailed in Tax Bulletin Transitional Provisions for Sales Tax Rate Changes (TB-ST-895). This publication outlines how contractors and other businesses should report taxable sales during the transition period, especially for purchases made before and after the rate change.
Where to Find More Information
To access up-to-date information on the Suffolk County sales tax rate increase and how it may affect your construction business, visit the official New York State Department of Taxation and Finance website at https://www.tax.ny.gov/. The site provides detailed sales tax rate publications, instructions on how to report taxable sales and uses, and information on transitional provisions.
If you have any questions or need tax support, please contact your Grassi construction advisor.
