California Contractor Invoice Guide: CDTFA Rules, District Taxes & Time-and-Materials (2026)

*Last reviewed: September 2026 by the DoxMitra Tax Compliance Team*

California has some of the most nuanced contractor sales tax rules in the United States, administered by the California Department of Tax and Fee Administration (CDTFA). The complexity stems from California's treatment of contractors as both consumers AND retailers depending on the type of property they work with — and from the patchwork of local district taxes that can dramatically change the rate you should be charging.

This guide is a comprehensive reference for California contractors in 2026.

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The CDTFA Contractor Framework: Three Property Categories

California treats contractor work differently depending on whether you are working with materials, fixtures, or machinery/equipment. These three categories have distinct tax treatments.

1. Materials (lumber, concrete, rebar, paint, wiring, pipe)

Contractors are treated as the consumer of materials

You pay sales tax when you purchase materials from your supplier

You do NOT separately charge the customer sales tax on materials under a lump-sum contract

Under a time-and-materials contract, you act as a retailer and collect sales tax from the customer on the sales price of the materials (typically cost + markup)

2. Fixtures (water heaters, HVAC units, chandeliers, cabinets that become part of the property)

Contractors are always treated as retailers of fixtures

You must collect sales tax from the customer on the retail selling price of the fixture

This rule applies regardless of whether the contract is lump-sum or time-and-materials

Official source: CDTFA Publication 9 — Tax Tips for the Construction Industry

3. Machinery and Equipment (not permanently affixed to real property)

Treated as tangible personal property

Sales tax applies to the selling price

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Lump-Sum vs. Time-and-Materials: The Critical Choice

| Contract Type | Materials | Fixtures | Labor |

|---|---|---|---| | Lump-Sum | You pay tax at purchase. No separate tax line on customer invoice for materials. | Charge customer tax on retail price. | Non-taxable if separately stated. | | Time-and-Materials | You charge customer tax on materials (cost + markup). | Charge customer tax on retail price. | Non-taxable if separately stated. |

Example — Plumber (lump-sum, residential): You quote a customer $1,800 to replumb a bathroom. You paid $400 in materials (including $32 in sales tax at purchase). You bill the customer $1,800 as a single price. No tax line appears on the customer's invoice for materials.

However, if you installed a new water heater for $450 (retail), you must add a separate line: "Water heater (fixture) — $450 + $41.63 sales tax (9.25% district rate)."

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California District Tax Rates — The Hidden Complexity

California's base state rate is 7.25%, but most Californians pay significantly more due to district taxes imposed by cities, counties, and transit authorities.

| City / Area | 2026 Combined Rate |

|---|---| | Los Angeles (City) | 10.25% | | San Francisco | 8.625% | | San Jose | 9.375% | | San Diego | 7.75% | | Sacramento | 8.75% | | Fresno | 8.35% | | Oakland | 10.25% | | Long Beach | 10.25% | | Anaheim | 7.75% | | Riverside | 8.75% |

Critical rule: The applicable district rate is determined by the location where the sale occurs or where the property is delivered. For contractors, use the job-site address to determine the correct combined rate.

Always verify the current rate at the CDTFA Tax Rate Lookup before invoicing, as rates can change quarterly.

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Installation Labor — Non-Taxable If Properly Stated

California's treatment of labor is more contractor-friendly than many other states: installation labor is generally non-taxable for real property improvement work, regardless of whether the property is residential or commercial.

However, to protect this exemption, labor must be separately stated on the invoice. If you bundle labor and materials into a single line item, CDTFA may treat the entire amount as taxable.

Exception — Fabrication labor: If you manufacture or fabricate something (e.g., custom metal ductwork in your shop, custom cabinetry in your warehouse), the fabrication labor is taxable. Only installation labor at the job site is exempt.

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### Trade-Specific Invoice Requirements#### Plumbers

List water heaters, tankless units, and similar high-value fixtures separately from materials

Collect tax on fixture retail price

Labor on installation: non-taxable if itemized separately

Time-and-materials: collect tax on materials + markup at job-site district rate

*Recommended:* California Plumber Invoice Generator | California Plumber Receipt Generator

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Electricians

Lighting fixtures, breaker panels, switchgear: treated as fixtures — collect tax at retail

Wire, conduit, wire nuts, electrical boxes: materials — pay tax at purchase (lump-sum) or collect from customer (time-and-materials)

Installation labor: non-taxable if separately stated

EV charger installations: the charger unit is a fixture — taxable at retail selling price

*Recommended:* California Electrician Invoice Generator

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HVAC Contractors

HVAC units (AC, furnace, heat pump, mini-split): fixtures — taxable at retail selling price

Refrigerant, filters, belts: materials — taxable

Installation and commissioning labor: non-taxable if separately stated

Maintenance contract labor: generally non-taxable if separately stated

*Recommended:* California HVAC Invoice Generator

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Roofers

Roofing materials (shingles, underlayment, flashing): materials — pay tax at purchase under lump-sum

Time-and-materials roofing jobs: collect tax on materials + markup from customer

Labor: non-taxable if separately stated

Skylights: may be treated as fixtures — consult CDTFA guidance

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Seller's Permit and Resale Certificates

If you operate in California and sell fixtures to customers (making you a retailer of those fixtures), you must hold a CDTFA Seller's Permit. You can register for one at no cost at CDTFA Online Registration.

When purchasing fixtures you intend to resell to a customer, you may provide your supplier with a California Resale Certificate (CDTFA-230) to purchase those items without paying sales tax at purchase. You will then collect tax from the customer at the retail selling price.

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### Compliant California Contractor Invoice Structure

Every California contractor invoice should include:

1. Contractor Name, Address, and CDTFA Seller's Permit Number (if applicable)

2. California Contractor License Number (CSLB) 3. Client Name and Job-Site Address (with city for district rate verification) 4. Contract Type: Lump-sum or time-and-materials 5. Itemized Labor Lines (clearly labeled "Installation Labor — Non-taxable") 6. Itemized Materials Lines (for time-and-materials contracts: include tax at district rate) 7. Fixture Lines (separately stated with tax at district rate) 8. Tax Subtotal showing rate and taxable base 9. Sequential Invoice Number and Date

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E-E-A-T Note: Using Authoritative Sources

The CDTFA's Publication 9 — Tax Tips for the Construction Industry is the primary official guidance for California contractors. For rate verification, use the official CDTFA Rate Lookup Tool. These should be reviewed annually as district rates change.

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### Generate Compliant California Documents

• California Plumber Invoice Generator

California Electrician Invoice Generator

California HVAC Invoice Generator

California Roofer Invoice Generator

California Handyman Estimate Generator