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California Contractor Finance

Business Tax and Bookkeeping Basics for New California Contractors

Build the books around jobs and filing accounts. A clean bank feed is not enough. You need job profitability, tax obligations, payroll liabilities, and supporting records.

Contractor bookkeeping should answer two questions every week: which jobs made money, and which collected dollars do not belong to the business because they are owed for taxes, payroll, suppliers, or subcontractors?

Separate the business from the owner

Use dedicated business banking and a business card. Record owner contributions and draws separately from revenue and expenses. Reconcile bank and credit-card accounts every month so missing, duplicated, and personal transactions do not contaminate job results.

Build contractor-specific accounts

Track revenue by service or project type and separate direct job costs from overhead. Direct costs commonly include field labor, payroll burden, materials, subcontractors, permits, equipment, disposal, and job-specific rentals. Overhead includes office payroll, software, general marketing, rent, and professional services.

Use job costing on every project

Assign estimates, purchase orders, time, materials, subcontractor bills, approved change orders, invoices, collections, and callbacks to the job. Compare estimated and actual gross profit before closing it. This reveals bad estimating, unbilled changes, field inefficiency, and material leakage.

Register only the tax accounts that apply

CDTFA administers multiple permits and accounts. It says a seller's permit is required when a business is engaged in business in California and sells or leases taxable tangible personal property at retail. Contractor transactions can involve different tax treatments, so describe the actual contracts and materials to CDTFA or a California tax professional.

Account-specific rule: Do not assume another contractor's seller's permit or filing frequency applies to you. Register the correct activity and follow the schedule assigned to that account.

Create a tax calendar

Record each agency, account number, filing frequency, period end, due date, payment method, preparer, and confirmation number. CDTFA maintains a current sales and use tax filing-date page. A separate payroll calendar is needed once the company becomes an employer.

Keep source documents

  • signed contracts, estimates, and change orders;
  • customer invoices, payments, credits, and refunds;
  • supplier receipts, purchase orders, and subcontractor invoices;
  • time records, payroll reports, and worker documentation;
  • permits, bond and insurance records, mileage, and equipment logs;
  • filed returns, payment confirmations, and agency notices.

Weekly close routine

  1. Reconcile incoming payments to invoices.
  2. Code every purchase and assign job costs.
  3. Review unbilled work and unsigned changes.
  4. Confirm payroll and subcontractor documents.
  5. Move tax and payroll reserves to designated accounts.
  6. Review receivables, payables, cash, and job margins.
  7. Back up records and resolve uncategorized items.

Frequently asked questions

Is CDTFA registration free?

CDTFA states that online registration for its permits, licenses, and accounts is free. Taxes, filing duties, and professional setup costs are separate.

Can bookkeeping software decide California tax treatment?

No. Software records the treatment selected. Use agency guidance and qualified advice to configure it correctly.

What report matters most?

Use profit and loss, balance sheet, cash flow, receivables, payables, and job-profitability reports together. One report cannot show the full operation.

General bookkeeping information, not tax or accounting advice. California tax treatment depends on the transaction. Confirm it with CDTFA and a qualified professional.